Industrial Alliance Insurance sells C$200 million notes; Canadian primary market slows

By Cristal Cody

Prospect News, Dec. 7 - Industrial Alliance Insurance & Financial Services Inc. tapped the Canadian high-grade bond markets on Wednesday with the sale of C$200 million subordinated debentures.

Institutional investors purchased about C$175 million of the deal, and retail investors purchased C$25 million, a source said.

A trickle of deals have priced over the week so far. FortisBC Energy Inc. was in the market on Tuesday with C$100 million of 4.25% 30-year debentures, and Royal Bank of Canada sold C$1.5 billion of five-year senior deposit notes on Monday.

Talisman Energy Inc. raised C$200 million in a sale of preferred stock on Monday.

New offerings are expected to continue to wind down as the holidays near.

"Minimal issuance" is likely for Thursday and Friday, one source said.

"Next week will be the last week corporate borrowers will look at the market for potential issuance," the source said. "Then everyone will wrap up the year."

Looking ahead, issuers such as Toronto-based electric utility Hydro One Inc. and issuers in the telecom sector are expected to be in the investment-grade market with larger borrowing programs in the new year, an informed source said.

On Wednesday, the financial markets stayed mostly quiet with bonds unchanged to mixed on the day, a source said. Attention continues to stay on Europe and whether a debt resolution will emerge from the European Union summit meeting later this week.

"The market tone overall drifted lower today," a corporate bond source said. "Major investment-grade index spreads are holding in. Spreads are firm, given the lack of issuance and the up and down through the equities markets throughout the day."

The Markit CDX Series 17 North American high-grade index firmed 2 basis points to a spread of 120 bps on Wednesday.

Government bonds rallied a second day across the curve. The 10-year note yield fell to 2.05% from 2.12%. The 30-year bond yield dropped 6 bps to 2.62%.

Economic data was light on the day. Canada will release third-quarter labor figures on Friday.

In other activity, the Bank of Canada auctioned C$3.5 billion of 1% bonds due 2014 at 100.134 on Wednesday.

Industrial Alliance prices

In the primary market on Wednesday, Industrial Alliance Insurance & Financial Services priced C$200 million of subordinated debentures (/A/DBRS: A) at 99.991 to yield 4.752%, or a spread of 335 bps over the Government of Canada benchmark, according to a bond source.

The securities are due Dec. 14, 2021 but are callable after five years. The notes have a 4.75% coupon until 2016 and then pay three-month Canadian Dealer Offered Rate plus 320 bps.

RBC Capital Markets Corp. and TD Securities Inc. were the lead managers. Co-managers included BMO Capital Markets Corp., Scotia Capital Inc., CIBC World Markets Inc., National Bank Financial Inc. and Casgrain & Co. Ltd.

The life and health insurance company is based in Quebec City, Quebec.

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