Brookfield sells preferreds; Rogers Communications bonds mixed in Canada, U.S. trading

By Cristal Cody

Prospect News, Aug. 25 - Canada's corporate and provincial markets saw little activity on Thursday as investors look to U.S. Federal Reserve chairman Ben Bernanke's upcoming speech, while the preferred stock market found more deal action with a C$200 million offering from Brookfield Office Properties Inc., sources said.

"There is zero going on in the market right now," one bond source said, noting a "relatively quiet week."

"Trading activity picked up a little bit in the corporate market yesterday, but it seems a lot of people are focused on what Bernanke is going to say tomorrow in Jackson Hole [Wyo.]," the source said.

Issuance in the corporate and provincial bond markets has slacked off over the month with no new deals seen this week.

"Spreads have been widening recently, and I think there's a disconnect where issuers want to issue and where investors want to buy any issues," one bond source said. "Next week, we're expecting things to be pretty quiet as well a week before Labor Day."

In trading, bank bonds were little changed on the day as earnings season is underway.

Montreal-based National Bank of Canada said Thursday that third-quarter earnings rose to C$312 million, or C$1.84 a share, from C$271 million, or C$1.56 a share, a year ago.

Bank of Montreal reported on Tuesday that profit rose 19% to C$793 million, or C$1.27 a share.

Royal Bank of Canada will release earnings data on Friday, followed next week by the Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank.

The announcement that Warren Buffet's Berkshire Hathaway will invest $5 billion in Bank of America Corp. "helped things out a little bit," a source said. But later in the day, the markets dwindled on rumors of Germany possibly being downgraded.

The investment-grade index "opened up about 4 [bps] tighter this morning and is closing 1 wider," a source said. The Markit CDX Series 16 North American high-grade index ended the day 1 bp weaker at a spread of 126 basis points.

Corporate bond spreads were mostly flat going out Thursday. "Spreads opened a little tighter this morning, but after the markets deteriorated a bit in the afternoon, they widened out a little bit on the day," a source said. "Deposit notes are little changed. Telecoms are 5 to 10 [bps] wider and non-financials are a little wider as well."

Rogers Communications Inc.'s Canadian-dollar bonds traded on Thursday "about 15 [bps] wider," a trader said. In U.S.-dollar trading, the company's bonds were seen about 3 bps better on the day.

Provincial bond spreads were seen about ½ bp wider on the day.

In the day's data, Statistics Canada said that Canadian corporations' operating profits fell 4.9% in the second quarter to C$64 billion with 14 out of 22 industries reporting lower profits.

Government bonds rallied on the drop in equities. The yield on Canada's 10-year note fell 5 bps to 2.4%. The 30-year bond yield dropped 4 bps to 3.04%.

Brookfield taps market

In the preferred stock offering on Thursday, Brookfield Office Properties announce that it sold C$200 million of preferred stock that yields a fixed annual dividend of 5.1% for the initial period ending Sept. 30, 2016.

The 8 million shares of class AAA preferred shares, series R, priced at C$25.00 per share.

RBC Capital Markets Corp., CIBC World Markets Inc., Scotia Capital Inc. and TD Securities Inc. were the lead managers. The deal includes an over-allotment option for C$50 million of shares.

Proceeds will be added to the company's general funds and be used for general corporate purposes, including the repayment or refinancing of debt, for acquisitions, for capital expenditures and for working capital.

Toronto-based Brookfield manages more than $100 billion of property, power and infrastructure assets.

Rogers mixed in trading

Rogers Communications' Canadian dollar-denominated bonds widened in secondary trading along with other telecom paper in Canada on Thursday, while its U.S. dollar-denominated bonds firmed, according to bond sources.

The company's Canadian bonds traded about 15 bps wider on the day, a source said.

One trader said the company's 6.8% notes due 2016 (Baa3/BBB-), which priced on July 30, 2008 at a spread of 278 bps over Treasuries, traded "3 basis points better" at 107 bps bid, 97 bps offered.

The Toronto-based company provides wireless voice and data communications, cable television, internet and telephone services in Canada.

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