Cenovus sells $1.25 billion notes; books fill up for Canada Housing bonds; Postmedia flat

By Cristal Cody

Prospect News, Aug. 14 - Cenovus Energy Inc. brought a U.S. dollar-denominated $1.25 billion offering of notes on Tuesday, while Germany's KfW sold C$100 million of notes in the euro market.

Primary activity in Canada is expected on Wednesday after Canada Housing Trust No. 1 launched a C$3.25 billion offering of fixed- and floating-rate mortgage bonds, an informed source said.

"Books are in very good shape," the source said. "In excess of C$4 billion right now, so it's a good start. CMB spreads on the day have been very stable."

The offering also may bring a provincial issuer out to tap the market with a 10-year note offering on Wednesday, the source said.

Provincial bond spreads traded about ½ of a basis point better in five- and 10-year maturities and were unchanged in long bonds.

Investment-grade and high-yield bond spreads stayed mostly flat on the day, sources said.

The Markit CDX Series 18 North American investment-grade index was unchanged at a spread of 103 basis points.

The Markit CDX Series 18 North American high-yield index edged lower to 97.82 from 97.83.

Postmedia Network Inc.'s 8¼% five-year junk bonds traded unchanged in the secondary market, a high-yield bond source said.

"Hasn't really traded today," the source said.

Government bonds finished lower after better-than-expected U.S. retail sales data. Retail sales edged up 0.8% in July following three months of negative figures, according to the U.S. Commerce Department.

Canada's 10-year note yield closed up 6 bps at 1.86%. The 30-year government bond yield rose 4 bps to 2.38%.

Cenovus Energy prices

Canada's Cenovus Energy priced $1.25 billion of notes (Baa2/BBB+/) in tranches due 2022 and 2042, an informed source said.

The deal had been talked between $1 billion and $1.25 billion with demand spurring the larger size.

The $500 million of 3% 10-year notes sold at 99.129 to yield 3.102% with a spread of Treasuries plus 137.5 bps. There is a make-whole call at 20 bps over Treasuries.

A $750 million tranche of 4.45% 30-year bonds priced at 99.782 to yield 4.463% with a spread of 165 bps over Treasuries. The bonds have a make-whole call at 25 bps over Treasuries.

Barclays, Deutsche Bank Securities Inc. and RBS Securities Inc. were the active bookrunners. Passive bookrunners were Bank of America Merrill Lynch and Credit Suisse Securities (USA) LLC.

Senior co-managers were BMO Capital Markets Corp., BNP Paribas Securities Corp., CIBC World Markets Corp., J.P. Morgan Securities LLC, RBC Capital Markets, LLC, Scotia Capital (USA) Inc., TD Securities (USA) LLC and UBS Securities LLC.

Co-Managers were DNB Markets, Inc., Mitsubishi UFJ Securities (USA), Inc., Mizuho Securities USA Inc., Morgan Stanley & Co. LLC and SMBC Nikko Capital Markets Ltd.

Proceeds will be used for general corporate purposes, including repayment of commercial paper.

The oil company is based in Calgary, Alta.

KfW prices C$100 million

KfW (Aaa/AAA/AAA) sold C$100 million of 1.5% medium-term notes due Aug. 22, 2016 at 99.167 on Tuesday, according to a bond source.

RBC Capital Markets was the lead manager.

The issue is guaranteed by the Federal Republic of Germany.

The offering priced under KfW's euro medium-term note program.

KfW is a German government-backed bank based in Frankfurt.

Canada Housing launches

Canada Housing Trust (Aaa/AAA/DBRS: AAA) plans to price at least C$3.25 billion in two tranches of bonds on Wednesday, an informed source said.

On Tuesday, Canada Housing Trust launched C$2.25 billion of fixed-rate bonds due Dec. 15, 2022 on guidance of 56 bps over the Government of Canada benchmark.

The trust also launched a C$1 billion reopening of its floating-rate notes due Sept. 15, 2017. The notes are trading at 100.05, or 10 bps over the three-month Canadian Dealer Offered Rate. The trust first sold the five-year floaters in a C$2.5 billion offering on May 16 at par to yield 11 bps over the three-month CDOR.

BMO Capital Markets is the bookrunner. Joint lead managers are CIBC World Markets, RBC Capital Markets and TD Securities.

The deal is expected to price on Wednesday.

The trust is a unit of Canada Mortgage and Housing Corp., which provides financing, mortgage loan insurance, mortgage-backed securities and housing policy and programs.

Postmedia flat

In the secondary market, Postmedia Network's 8¼% senior secured first-lien notes due Aug. 16, 2017 traded flat at the 101 bid, 101.5 offered area, unchanged from Friday's gains, a bond source said on Tuesday.

Postmedia sold C$250 million of the five-year notes (Ba3/B+/) at par on Thursday.

The company, a subsidiary of Postmedia Network Canada Corp., is a Toronto-based newspaper publisher.

Andrea Heisinger contributed to this review

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