RBC, Inter Pipeline, Prince Edward Island sell bonds; Precision Drilling, Noranda improve

By Cristal Cody

Prospect News, July 26 - The deal floodgates opened in Canada on Tuesday with four bond offerings in one day after a long summer drought.

Inter Pipeline Fund came first with a C$200 million sale of 3.839% seven-year senior medium-term notes. After that, Hospital Infrastructure Partners Partnership raised C$544 million in long bonds, Royal Bank of Canada sold C$350 million in a quarterly mortgage-backed securities program and the Province of Prince Edward Island brought C$100 million in a reopening of its long bonds, informed bond sources said.

"The overall market tone was decent and issuers were tired of waiting," one bond source said. "The Halton deal was kind of known, it launched yesterday and a couple of other guys just took advantage of specific demand."

Canadian issuers also were in other markets on Tuesday with bond deals. Precision Drilling Corp. sold $400 million of 6½% senior notes due 2021 at par in the U.S. high-yield market.

"It was a relatively active day for Canadian issuers," a source said.

In the secondary market, Armtec Holdings Ltd.'s bonds continued to trade below issue price as DBRS downgraded the company on Tuesday to B from BB. Also in trading, Precision Drilling's new notes were up 2 points.

In other trading, Noranda Operating Trust's notes sold on Friday traded higher this week.

Canadian government bonds were higher, sending yields down 2 basis points to 4 bps across the curve. The 10-year note yield fell to 2.89% from 2.93%. The 30-year bond yield fell to 3.36% from 3.4%.

Inter Pipeline Fund prices

Inter Pipeline Fund priced C$200 million of 3.839% seven-year senior medium-term notes (/BBB+/DBRS: BBB) at par on Tuesday, a bond source said.

The notes priced at a spread of 131 bps over the Canadian bond curve, tighter than initial guidance of 133 bps over the curve.

CIBC World Markets Inc. and TD Securities Inc. were the lead managers.

Proceeds will be used to repay a portion of Inter Pipeline's existing bank debt. After the bond sale closes, Inter Pipeline will have about $700 million of available capacity on its $750 million revolving credit facility, the company said in a news release on Tuesday.

"This amount is more than sufficient to fund the recently announced acquisition by Inter Pipeline of four petroleum storage terminals in Denmark for cash consideration of €354 million or approximately C$500 million," the company said. The acquisition is expected to close in October.

The company last was in the market on Jan. 28 with a C$325 million offering of 4.967% senior medium-term notes due Feb. 2, 2021

Inter Pipeline Fund is a Calgary, Alta.-based petroleum transportation, storage and natural gas liquids extraction business that operates in western Canada, the United Kingdom, Germany and Ireland.

Other bonds emerge

Hospital Infrastructure Partners Partnership priced C$544 million of 5.439% 33.5-year series A senior bonds (DBRS: A) at 99.999 to yield 5.439% on Tuesday, an informed bond source said.

The bonds due Jan. 31, 2045 priced on the tight end of guidance at a spread of 205 bps over the Canadian bond curve. The deal launched on Monday and was talked in the area of 210 bps over.

Scotia Capital Inc. and National Bank Financial Inc. were joint lead managers.

The partnership is a special-purpose entity contracted by Halton Healthcare Services Corp. to design, build, finance and maintain a new hospital in Oakville, Ont., under a 34-year public-private partnership agreement.

RBC brings mortgage-backeds

Royal Bank of Canada (Aa1/AA-/DBRS: AA) priced C$350 million of 2.35% mortgage-backed notes due March 1, 2016 on Tuesday, two weeks after Toronto-Dominion Bank sold C$600 million in the quarterly Canada Mortgage and Housing Corp. program.

Royal Bank of Canada sold the notes at 99.745 to yield 2.472% on Tuesday, a bond source said.

The notes priced at a spread of 58 bps over the Canadian bond curve.

RBC Capital Markets Corp. was the lead manager.

Toronto-based Royal Bank of Canada offers full-service personal and business banking, brokerage and bank-owned mutual fund services.

Prince Edward Island prices

The Province of Prince Edward Island (DBRS: A) sold C$100 million in a reopening of its 4.6% bonds due May 19, 2041 at 104.823 to yield 4.343% on Tuesday, an informed bond source said.

The bonds priced at a spread of 95.5 bps over the Government of Canada benchmark.

RBC Capital Markets was the lead manager.

Armtec downgraded

Armtec's 8 7/8% senior notes due Sept. 22, 2017 traded on Tuesday at 83 bid, 86 offered, a trader said.

DBRS said in the afternoon that it downgraded the company's credit rating, citing the deteriorating operating performance and increased debt levels.

Armtec's bonds have dropped since parent company Armtec Infrastructure Inc. reported lower first-quarter earnings, suspended the quarterly dividend and received downgraded credit ratings from Standard & Poor's and DBRS in June.

Armtec priced C$150 million of the seven-year notes on Sept. 15, 2010 at par.

Armtec announced earlier in July that it entered into a C$125 million credit facility with a Brookfield Asset Management Inc. unit.

Armtec is a Guelph, Ont.-based manufacturer and marketer of industrial infrastructure products and engineered construction solutions.

Noranda notes rise

Noranda Operating Trust's notes it sold on Friday at par are trading at 101 bid this week, a trader said.

The company sold C$90 million of the senior notes due Dec. 28, 2016 (DBRS: BB) at par to yield 6 7/8%.

Noranda Operating Trust is owned by Toronto-based Noranda Income Fund and has a 75% interest in Noranda Income LP, which owns the Canadian Electrolytic Zinc metal processing facility in Quebec.

Paul Deckelman contributed to this review

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