Quebec sells $900 million in two offerings; Trilogy Energy bonds rise; Connacher lower

By Cristal Cody

Prospect News, Dec. 18 - Canadian deal action on Tuesday centered on two offerings in the provincial market, while secondary markets saw a pick-up in high-yield trades, bond sources said.

The Province of Quebec sold C$500 million of its existing 3% medium-term notes due Sept. 1, 2023 and C$400 million in a reopening of its 4.25% notes due Dec. 1, 2021 on Tuesday.

In Canadian corporate markets, new deal activity waned with the rest of the week expected to be quiet, according to bond sources.

"We're not expecting any new issues now," a syndicate source said. "We think that's it."

Secondary activity was stronger on the day and bonds came in, market sources said.

The Markit CDX Series 18 North American investment-grade index firmed 3 basis points to a spread of 89 bps.

The Markit CDX Series 18 North American high-yield index rose to 102.06 from 101.49.

"Definitely some year-end trading going on with lower quality names, triple Cs," a high-yield trader said. "Generally, the market's up this week."

Trilogy Energy Corp.'s 7¼% senior notes due 2019 are up more than 2 points since the issue priced earlier in the month.

Connacher Oil & Gas Ltd.'s notes traded stuck in the low 70s area as investors react to the lack of a joint venture or sale of the company after it held a strategic review over the year, bond sources said.

Standard & Poor's downgraded the company's corporate and existing bonds ratings on Dec. 6.

Also in the secondary market, Athabasca Oil Corp.'s 7½% senior secured second-lien notes due 2017 traded "just above par" on Tuesday, a trader said.

Canadian government bond yields rose 1 bp to 2 bps across the curve, while U.S. Treasury bond yields traded up 3 bps to 5 bps.

Canadian government bond markets have been "a little insulated," Mark Chandler, head of Canadian fixed income and currency research at RBC Capital Markets Corp., said on Tuesday.

"Generally, it's a risk-on sort of move," he said. "I wouldn't say today is all about the central bank buying, but mostly about the impact in the U.S. if they do get a fiscal cliff agreement."

U.S. lawmakers continue to negotiate a resolution to $600 billion in spending cuts and tax hikes that are set to go into effect in 2013.

Canada's 10-year note yield rose 2 bps to 1.85%. The 30-year bond yield edged up 1 bp to 2.41%.

Quebec sells C$500 million

The Province of Quebec (Aa2/A+/DBRS: A) sold C$500 million in an add-on to its 3% medium-term notes due Sept. 1, 2023 at 99.39 to yield 3.067%, according to an informed source.

The notes priced at a spread of 111.5 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the bookrunner.

The province last reopened the issue on Dec. 5 when it sold C$500 million of the notes at 100.143 to yield 2.984%, or a spread of 119 bps over the Government of Canada benchmark.

The total outstanding is C$1.5 billion.

Quebec reopens 4.25% notes

In the C$400 million offering of its existing 4.25% notes due Dec. 1, 2021, Quebec sold the issue at 111.461 to yield 2.793% on Tuesday, according to an informed source.

The notes priced at a spread of 105.5 bps over the Government of Canada benchmark.

National Bank Financial was the bookrunner.

The province last reopened the issue a year ago on Nov. 8, 2011 in a C$500 million offering that priced at 109.31 to yield 3.161%, or a spread of 100 bps over the benchmark.

The total outstanding is C$6.4 billion.

Trilogy Energy better

Trilogy Energy's 7¼% senior notes due 2019 (/B/DBRS: B) traded on the day at 102.25 bid, a trader said.

The company sold C300 million of the seven-year notes at par on Dec. 6.

Trilogy Energy is a Calgary, Alta.-based petroleum and natural gas-focused energy corporation.

Connacher lower

Connacher Oil & Gas' 8¾% senior notes due 2018 (Caa2/B+/) traded going out on Tuesday at 71 bid, 73 offered, a trader said.

The company sold C$350 million of the six-year notes on May 20, 2011 at par.

Connacher Oil & Gas is a Calgary, Alta.-based integrated oil company.

Athabasca flat

Athabasca Oil's 7½% senior secured second-lien notes due 2017 (/B/DBRS: B) traded just above par in the Canadian secondary market on Tuesday, a trader said.

The company sold C$550 million of the five-year notes at par on Nov. 9.

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

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