Regional Municipality of Peel sells 10-year notes; Yellow Media bonds, preferreds drop

By Cristal Cody

Prospect News, Sept. 28 - The Regional Municipality of Peel in Ontario brought the "only Canada deal" on Wednesday, a day after a busy round of offerings from Hydro-Quebec, American Express Canada Credit Corp. and Manitoba Telecom Services Inc., sources said.

The Ontario municipality priced C$200 million of 3.5% 10-year notes on Wednesday.

In other bond activity, DBRS downgraded Yellow Media Inc.'s bonds to junk status on Wednesday after the company announced it will take a C$2.9 billion goodwill impairment charge in the third quarter and eliminate its dividends after October.

The telephone directory publisher's preferred shares fell more than 50% and bonds ended lower on Wednesday, sources said.

Deal activity could continue with a couple of days left in the month this week, depending on market tone, a source said.

Government bonds were mixed on the day. Canada's 10-year note yield rose 3 basis points to 2.19%, and the 30-year bond yield fell 1 bp to 2.82%.

The short end was better with the two-year note yield down 3 bps to 0.92%.

"A combination of factors helped yields pull back from earlier session highs," a bond source said. "There's apprehension of Germany's vote on the [debt bailout] expansion tomorrow. There's also some apprehension that once the month's end is out of the way, we'll see renewed pressure on risk assets."

The U.S. Treasury Department saw strong demand for its auction on Wednesday of five-year notes, which helped Canadian bonds, the source said.

"The market remained on a collective footing into month's end. It also helped [that] the U.S. five-year sale went very well," the source said.

Peel sells C$200 million

The Regional Municipality of Peel (Aaa/AAA) in Ontario priced C$200 million of 3.5% 10-year notes at 99.572 to yield 3.551% on Wednesday, an informed bond source said.

The notes due Dec. 1, 2021 were sold at a spread of 133 bps over the Canadian government benchmark.

CIBC World Markets Inc. was the lead manager.

Yellow Media falls

Yellow Media announced that it will take a C$2.9 billion goodwill impairment charge in the third quarter and eliminate its dividend after the Oct. 17 payment.

The phone directory publisher's 4.25% preferred shares were down more than 52% to C$3.31 on Wednesday, a source said.

Following the company's announcement, DBRS dropped Yellow Media's outstanding medium-term notes to BB from BBB, exchangeable subordinated debentures to B from BBB and commercial paper to R-4 from R-2 based on concern over the company's transition from print to digital.

Standard & Poor's said the ratings were unchanged.

Yellow Media is based in Montreal.

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