DirectCash plans roadshow; high-yield summer deals forecast; Precision Drilling lower

By Cristal Cody

Prospect News, July 25 - Primary activity stayed light on Wednesday with many out for summer vacations in the Canadian bond markets.

"It's pretty quiet," a bond source said.

Artis Real Estate Investment Trust brought an upsized C$75 million offering of preferred trust units early in the day.

Meanwhile, a Canadian dollar-denominated high-yield deal is expected to price in the week ahead from DirectCash Payments Inc., a bond source said.

The Canadian markets should see at least one more high-yield deal before the summer is out, a syndicate source said.

Another bond source also expects a couple more high-yield deals before September.

"We haven't seen a ton of issuance over the last two, three months," one source said. "This month has been pretty good with a lot of guys trying to get stuff done before everybody goes away on vacation in August. We may see one more after this DirectCash [deal] before the summer's over."

The Canadian high-yield sector likely will not see as heavy a pickup as what's forecast for the U.S. market.

"We're hearing in the U.S. that there's going to be four LBO financings in September," the syndicate source said. "We think September is going to be on fire in the U.S. In Canada, we're working with a couple of guys, going through ratings agencies. Not sure if they're going to be before Labor Day, but it won't be too far after that."

Corporate bonds traded in slightly. The Markit CDX Series 18 North American investment-grade index firmed 1 basis point to a spread of 115 bps.

The Markit CDX Series 18 North American high-yield index inched up to 95.51 from 95.49.

Precision Drilling Corp.'s senior notes due 2019 traded down a point following the company's second-quarter earnings report, a source said on Wednesday.

Government bonds ended weaker. Canada's 10-year note yield rose 1 bp to 1.59%. The 30-year bond yield closed up 2 bps to 2.22%.

Artis REIT sells units

Artis REIT sold an upsized C$75 million of cumulative rate reset preferred trust units on Wednesday to yield an annual dividend of 5.25% for the initial period ending Sept. 30, 2017.

The company sold 3 million series A units at C$25.00 each.

The deal was upsized from C$50 million.

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

The offering includes an over-allotment option of an additional 450,000 units.

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

The distribution rate will be reset on Sept. 30, 2017 and every five years thereafter at the then five-year Government of Canada bond yield plus 406 bps.

Artis REIT sold the units under a C$2 billion 25-month shelf prospectus for units, preferred units, debt securities, warrants and subscription receipts that was filed on June 15.

Proceeds will be used to fund future acquisitions, to repay debt 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.

DirectCash deal upcoming

DirectCash Payments intends to sell C$125 million of seven-year senior notes (B3/B/) the week of July 30 following a roadshow, according to a bond source.

The company announced plans on Monday to price the notes in conjunction with a C$65 million offering of common shares.

BMO Capital Markets Corp. is the bookrunner.

The notes will be offered under Rule 144A.

The deal is expected to close on Aug. 8.

The share offering includes 2.8 million common shares at C$23.35 each.

Proceeds from the notes and the common shares will be used to reduce DirectCash's outstanding senior and bridge debt from the acquisitions of Customers Ltd. in Australia and InfoCash Holdings Ltd. in the United Kingdom.

Calgary, Alta.-based DirectCash is a provider of ATMs, debit terminals and prepaid products.

Precision Drilling lower

In the secondary market, Precision Drilling's 6½% senior notes due 2019 (Ba1/BB+) dropped to 101.5 on Wednesday from where it was last seen trading at 102.5 on Friday, a bond source said.

Precision Drilling sold the notes on March 10, 2011 at par.

The company's 6½% senior notes due 2021 traded at 103 bid on the day. Precision Drilling sold $400 million of the notes at par on July 26, 2011.

Also in the secondary market, Precision Drilling's 6 5/8% notes due 2020 traded going out at 104 bid. The issue priced in a $650 million offering at par on Nov. 10, 2010.

The company reported on Wednesday that revenue improved 11% to C$382 million in the second quarter ended June 30. Quarterly earnings rose to C$18 million, or 6 Canadian cents a share, compared to C$16 million, or 6 cents a share, in the year-ago period.

Precision is a Calgary, Alta.-based equipment and services provider for the oil and gas industry.

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