Athabasca Oil to sell up to C$600 million; Dundee REIT may sell deal; market tone 'softer'

By Cristal Cody

Prospect News, Nov. 5 - Canada's high-yield market is expected to see potential deals over the short holiday week, according to informed bond sources.

Athabasca Oil Corp. started a roadshow on Monday for an offering of up to C$600 million of senior secured second-lien notes due 2017.

The deal is expected to price late in the week, an informed source said.

The Canadian bond markets will close early on Friday and close on Nov. 12 for Remembrance Day. The U.S. markets are open for a regular session on Friday but will close on Nov. 12 for Veterans Day.

A Canadian high-yield issuer in the mining sector also is rumored to be considering a deal, according to another bond source.

"The market's going good," one high-yield source said.

In Canadian investment-grade activity, Dundee Real Estate Investment Trust may be in the market with new debenture deals.

DBRS on Monday assigned a BBB (low) rating to Dundee REIT senior debentures.

Mario Barrafato, chief financial officer, said by e-mail the company "obtained the rating for potential new issuances" but that it also should "cover the debentures we assumed in the acquisition of WRK REIT."

Dundee REIT on Monday announced that third-quarter investment properties revenue rose to C$187.3 million in the period ended Sept. 30 from C$109.2 million in the same period last year. Quarterly funds from operations rose to C$72.88 million, or 72 cents a share, from C$42.83 million, or 68 cents a share, in the same period a year ago.

The company will hold an investor conference call on Tuesday.

More details emerged on Monday from National Bank of Canada's U.S. offering of $750 million of 1.45% five-year notes that priced late on Friday.

Corporate tone was weaker on the day, while bonds closed slightly better.

The Markit CDX Series 18 North American investment-grade index firmed 1 basis point to a spread of 97 bps.

The Markit CDX Series 18 North American high-yield index rose to 99.53 from 99.48.

"The market in general is a little softer today," a source said.

Government bonds traded flat to moderately higher on weaker domestic data ahead of the U.S. presidential election on Tuesday. Canada's 10-year note yield fell 1 bp to 1.76%. The 30-year bond yield closed 1 bp lower at 2.35%.

Statistics Canada said building permits dropped 13.2% in September, following a 9.5% increase in August.

Athabasca starts roadshow

Athabasca Oil (DBRS: B) announced on Monday that it plans to sell up to C$600 million of senior secured second-lien notes due 2017.

The company started a roadshow on Monday for the notes and pricing is expected later in the week, an informed bond source said.

The Rule 144A-, Regulation S-eligible notes will be offered on a private placement basis in Canada.

TD Securities Inc. and GMP Capital Inc. are the lead managers.

The company said that in conjunction with the note offering it also is negotiating about C$150 million of senior secured first-lien revolving credit facilities with a syndicate of financial institutions.

Athabasca Oil said the "current market presents the company with a favorable opportunity to seek debt financing and reduce the company's overall cost of capital."

The company has no outstanding debt.

Proceeds from the private placement and the credit facilities will be used for general corporate purposes, including to advance the company's thermal oil projects and to develop its light oil assets.

Athabasca Oil is a Calgary, Alta.-based based oil sands developer.

National Bank of Canada eyed

National Bank of Canada sold $750 million of 1.45% five-year notes on Friday to yield 75 bps over Treasuries, a source close to the trade said.

The notes (Aa2/A/) were priced at 99.89 to yield 1.473%. There is no call option.

Bookrunners were Citigroup Global Markets Inc., J.P. Morgan Securities LLC, National Bank of Canada Securities and Wells Fargo Securities LLC.

The bank and financial services company is based in Montreal.

Andrea Heisinger contributed to this review

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