Canada primary thin; Postmedia continues roadshow; Canadian short-dated bank paper firms

By Cristal Cody

Prospect News, Aug. 7 - The Canadian markets traded quietly on Tuesday after the long holiday weekend as desks continue to be thinly staffed.

"Pretty quiet," a syndicate source said. "This week is a traditional quiet week. The tone is good enough, so I wouldn't be surprised if we saw a deal or two, but it's a popular vacation week."

Deal volume is expected to stay light in August, sources said.

"We cracked C$8 billon in July, had a decent June," the syndicate source said. "We probably won't see more than C$2 billion or C$3 billion issuance in August. The tone is definitely there, we just need to find issuers."

Postmedia Network Inc. held a national investor call as it continued its roadshow on Tuesday for a C$250 million high-yield offering, an informed source close to the sale said.

Canadian bank paper was mostly flat with short-dated notes tighter on the day, a market source said.

The Markit CDX Series 18 North American investment-grade index ended the day at a spread of 103 basis points.

The Markit CDX Series 18 North American high-yield index closed at 97.82.

Secondary market activity is climbing on the lack of primary supply, though trading was quieter on Tuesday, bond sources said.

"Friday, I had a lot of secondary activity," one source said. "After the non-farm [report], there was better buying - people decided to put a little money to work."

The Labor Department said on Friday that 163,000 jobs were added in July, higher than the 100,000 forecast.

Canadian and U.S. government bonds ended weaker on Tuesday. Canada's 10-year note yield closed 7 bps higher at 1.84%. The 30-year bond yield rose 6 bps to 2.37%.

Postmedia to wrap roadshow

Postmedia Network continued its roadshow for C$250 million of five-year senior secured first lien notes (Baa3/B+/) on Tuesday in Boston, a source said.

The Toronto-based newspaper publisher will wrap the three-day roadshow for the notes (Baa3/B+/) on Wednesday in Toronto.

The notes due 2017 will be offered in a private placement in Canada and under Rule 144A and Regulation S.

Scotia Capital Inc. and Morgan Stanley are the bookrunners. Co-managers are BMO Capital Markets Corp., CIBC World Markets Inc. and RBC Capital Markets Corp.

The notes due 2017 are non-callable for three years.

The issue has a 101% change-of-control put and an equity claw up to 35% of the original amount per year in the first three years at par plus the coupon.

The deal includes a Canadian call at 100 basis points plus the Government of Canada benchmark and a special call up to 5% of the original amount per year in the first three years at 103%.

The bonds may be redeemed in 2015 at par plus three-quarters of the coupon, in 2016 at par plus half the coupon and thereafter at par.

Proceeds will be used to repay debt under the company's existing term loan facility.

Scotiabank better

In the U.S. secondary market, Bank of Nova Scotia's 1.85% notes due 2015 traded better at 52 bps on Tuesday from 56 bps on Monday, a source said.

The bank sold $1 billion of the notes (Aa1/AA-/) on Jan. 5 at a spread of 147 bps over Treasuries.

The Canadian bank is based in Halifax, N.S.

Royal Bank of Canada tightens

In other trading, Royal Bank of Canada's 1.45% notes due 2019 firmed 3 bps to 43 bps bid on Tuesday, a market source said.

Royal Bank of Canada sold $1.25 billion of the senior notes (Aa1/AA-/AA) on Oct. 26 at a spread of Treasuries plus 105 bps.

The financial services company is based in Toronto.

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