Bond markets active on deals from Canada Safeway, Pembina Pipeline; Perpetual Energy drops

By Cristal Cody

Prospect News, March 24 - Canada Safeway Ltd. and Pembina Pipeline Corp. contributed to the week's busy trend in corporate bond sales in Canada on Thursday.

Still, secondary trading volume remained thin as spring break continues, a source said.

Trading was stronger in the investment-grade markets on the surge in new deals, while high-yield bonds were flat to slightly weaker, sources said.

Perpetual Energy Inc.'s 8.75% notes due 2018 (B3/B-/) traded Thursday at 100 bid, 101 offered, from 100.125 bid, 101.125 offered the previous day, a source said. The Calgary, Alta.-based oil and gas company sold the notes on March 10 at par.

Canadian government bonds fell on the short end of the curve as investors sought riskier assets. The two-year note yield rose 3 basis points to 0.71%, and the 10-year note yield rose to 1.71% from 1.68%. The 30-year bond yield was flat at 3.75%.

U.S. Treasuries also ended Thursday weaker, sending yields up. The 10-year note yield rose 6 bps to 3.4%. The 30-year bond also was softer, sending the yield up 4 bps to 4.48%.

"On the longer end you're having the flight-to-quality bid evaporating," said Mary Ann Hurley, a fixed income trader for D.A. Davidson & Co. "Stocks are higher, oil is a little bit lower, the market seems to be discounting what's going on in Europe and the situation in Japan remains very grave but the reactors are not melting down."

Canada Safeway taps market

Canada Safeway, a Calgary, Alta.-based unit of Safeway Inc., priced C$300 million of 3% senior notes due March 31, 2014 at 99.917 to yield 3.029% on Thursday, an informed source said.

The notes (/BBB/DBRS: BBB) priced at a spread of 89.5 bps over the Government of Canada benchmark.

The bonds are guaranteed by Safeway. The issue has a Canada call at 24 bps over the government benchmark.

BMO Capital Markets Corp. and TD Securities Inc. were the lead managers.

Safeway operates more than 1,700 stores across the United States and Canada.

Pembina Pipeline prices

In its debut Canadian public bond deal, Pembina Pipeline (/BBB+//DBRS: BBB) sold an upsized C$250 million of 4.89% medium-term notes due March 29, 2021 at par on Thursday, sources said.

The offering was increased from C$200 million.

The notes priced 2 bps tighter than guidance at a spread of 166.3 bps over the Government of Canada benchmark, or 158 bps versus the Canadian bond curve.

"Today marks Pembina's first Canadian public note offering," Peter Robertson, Pembina's chief financial officer, said in a statement. "This financing will strengthen our balance sheet as we confidently pursue our growth plans and maintain our focus on building long-term value for our shareholders.

"This note offering provides further evidence of Pembina's proven access to capital markets at attractive rates and helps ensure Pembina retains the financial flexibility required to execute its business plan."

CIBC World Markets Inc. and National Bank Financial Inc. were the lead managers.

Proceeds will be used to repay a portion of Pembina's existing credit facility and to fund growth opportunities.

The Calgary, Alta.-based company is a transportation and service provider to the energy industry in Western Canada.

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