Primary slows as Xtreme Drilling pulls deal; investors eye Yellow Media; Baytex holds

By Cristal Cody

Prospect News, July 24 - Primary activity in the Canadian markets slowed to a summer crawl as corporate bonds drifted wider on Tuesday.

Artis Real Estate Investment Trust is expected to be in the market with a C$50 million offering of cumulative five-year rate reset preferred trust units.

In the high-yield sector, a $170 million offering of five-year first-lien notes from Xtreme Drilling and Coil Services Corp. has been pulled.

Investment-grade issuer PowerStream Inc. continued its roadshow on Tuesday in Toronto for a possible 30-year bond offering, a source said.

The Ontario electric distributor (DBRS: A) started the roadshow on Monday in Montreal.

Corporate bonds were weaker a second day. The Markit CDX Series 18 North American investment-grade index eased 3 basis points to a spread of 116 bps.

The Markit CDX Series 18 North American high-yield index dropped to 95.49 from 96.01.

New bonds from Great Canadian Gaming Corp. and Baytex Energy Corp. are holding in above issue price, a source said.

Yellow Media Inc.'s senior notes rose in light trading on Tuesday following heavy activity on Monday.

"Quiet today," a source said. "The main focus the past few days has really been Yellow Media by a lot of accounts."

Government bonds closed mostly unchanged. Canada's 10-year note yield ended flat at 1.58%. The 30-year bond yield fell 1 bp to 2.20%.

Xtreme Drilling withdraws

Xtreme Drilling and Coil Services of Calgary, Alta., stated in a July 16 press release that it does not anticipate going forward with the previously announced $170 million offering of five-year first-lien notes.

"Xtreme has finalized an additional $10 million loan with HSBC Canada," the release stated.

"The loan along with the existing facility will be used for general corporate purposes as well as to complete the remaining two XDR 500 drilling rigs that are in process and scheduled to deploy on three-year term contracts in August and October.

"After exploring the market, management determined that a combination of the existing credit facility and the new loan provides the liquidity needed at terms that are more favorable to the company."

Pareto Securities had been tapped as the bookrunner for the private debt refinancing deal, which had been talked to yield 8¾% to 9¼%.

Artis REIT on tap

In the primary market, Artis Real Estate Investment Trust announced on Tuesday that it will sell C$50 million of cumulative five-year rate reset preferred trust units.

The series A units will price at C$25.00 each and yield a dividend for the initial five-year period ending Sept. 30, 2017.

RBC Capital Markets Corp., CIBC World Markets Inc. and Macquarie Capital Markets Canada Ltd. are the lead managers.

The deal includes an over-allotment option of up to an amount equal to 15% of the number of units sold.

The series A units are redeemable by Artis on Sept. 30, 2017 and on Sept. 30 of every fifth year thereafter.

Proceeds will be used to repay debt, to fund future acquisitions and for general trust purposes.

Winnipeg, Man.-based Artis is a diversified Canadian real estate investment trust with investments in office, industrial and retail properties.

Great Canadian Gaming holds

Great Canadian Gaming's 6 5/8% senior notes due July 25, 2022 traded in the 102 area in the secondary market on Monday, a source said.

"It's quieted down since it came out," the source said.

The company sold C$450 million of the 10-year notes (B1/BB+/) on July 18 at par.

The Richmond, B.C.-based gaming, entertainment and hospitality company has operations in Canada and the United States.

Baytex flat

Baytex Energy's 6 5/8% debentures due 2022 traded mostly unchanged on the day, holding at 104 bid, 105 offered, according to a bond source.

"We're seeing a few volumes," the source said.

The company sold C$300 million of the series C debentures (B1/BB-/) at par on July 10.

Calgary, Alta.-based Baytex is an energy exploration and production company.

Yellow Media rises

Trading activity has been heavier in Yellow Media's bonds following the company's recapitalization announcement on Monday, sources said.

The company's 7.3% notes due 2015 and other debt traded higher in the 53 bid, 54 offered area on Tuesday, one source said.

"Looks like some are at 53, 55," the source said.

The notes climbed from 48 bid, 50 offered opening on Monday and went out that day at 52 bid, 54 offered.

Yellow Media said on Monday the recapitalization includes an exchange of credit facilities and medium-term notes for C$1.8 billion of debt, which will reduce its debt to C$750 million of 9% senior secured notes due in 2018 and $100 million of subordinated exchangeable debentures due in 2022.

The recapitalization is expected to close in late September.

Both DBRS and Standard & Poor's dropped the company's ratings on Monday after the announcement. DBRS downgraded Yellow Media's medium-term notes and subordinated debentures to C from CCC. S&P dropped its rating to C from CC.

Montreal-based Yellow Media is a Canadian directory publisher.

Paul A. Harris contributed to this review

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.