Week sees C$3 billion-plus of new bonds; Mattagami Energy eyes deal; Russel Metals lower

By Cristal Cody

Prospect News, April 13 - April continues to see a rapid uptick in new bond offerings with seven provincial, investment-grade and high-yield issuers tapping the Canadian bond markets over the week.

In the corporate markets, Royal Bank Of Canada (Aa1/AA-/DBRS: AA) priced C$1.5 billion of 2.58% five-year deposit notes, Brookfield Office Properties Inc. sold an upsized C$150 million of 4% senior notes due April 16, 2018 (/BBB-/DBRS: BBB) and AltaGas Ltd. (/BBB/DBRS: BBB) sold C$200 million of 4.07% eight-year medium-term notes on Tuesday.

Russel Metals Inc. broke a long dry stretch in Canada's high-yield space on Thursday after it priced C$300 million of 10-year senior notes.

"There's clearly demand and just not enough product," a high-yield bond source said.

Market activity on Friday was mostly light.

"We have seen no further issuance today. It's very quiet again on the back of [the] negative equity market tone," a bond source said.

Some deal activity is expected in the week ahead.

Lower Mattagami Energy LP will update bond investors on Monday ahead of its next installment of a capital markets bond issuance program with a roadshow expected to follow, a source said.

An offering is "subject to market conditions, but you may expect a transaction on the back of the roadshow," the source said.

Also coming up, BAA Airports Ltd., owner of six airports in the United Kingdom including London's Heathrow Airport, plans to hold an investor roadshow in Toronto on Monday and Montreal on Tuesday.

Bank of America Merrill Lynch, CIBC World Markets Inc. and RBC Capital Markets Corp. are hosting the roadshow.

A transaction likely will follow depending on market conditions, a source said.

Investment-grade bonds traded mostly wider on the day. The Markit CDX Series 18 North American investment-grade index eased 5 basis points to a spread of 102 bps.

Russel Metals' notes were "not trading well" on Friday, a bond trader said.

Government bonds rose in trading, sending yields down across the curve. Canada's 10-year note yield fell 6 bps to 1.99%. The 30-year bond yield dropped 5 bps to 2.55%.

Lower Mattagami on road

Lower Mattagami Energy will update bond investors on Monday ahead of its next installment of a capital markets bond issuance program, a source said.

Following the investor update, the company is expected to hold a roadshow for a new offering.

CIBC World Markets and BMO Capital Markets Corp. are the managers.

Last year, Lower Mattagami Energy priced C$475 million in a two-part private placement sale of senior bonds (A2/DBRS: A) on May 12, 2011.

The company sold C$225 million of 4.331% series 2011-3 notes due May 18, 2021 at par, or a spread of 111.6 bps over the Government of Canada benchmark, tighter than guidance of 114 bps.

In the second tranche, the company sold C$250 million of 5.139% series 2011-4 bonds due May 18, 2041 at par, or a spread of 152 bps over the government benchmark.

Lower Mattagami Energy announced last year that it plans a total of C$1.9 billion of project financing to fund the redevelopment and expansion of four hydroelectric generating stations on the lower part of the Mattagami River in northeastern Ontario.

The company, part of Ontario Power Generation Inc., is a hydroelectric generator located on the Mattagami River.

Russel Metals trade near par

Russel Metals notes due 2022 traded back to par offered on Friday, a trader said.

The company sold C$300 million of the 10-year senior notes (Ba1) at par to yield 6% on Thursday.

The notes were quoted on Friday "offered at par," a trader said, noting the paper was "not trading well as it was priced too tight."

The notes broke at 100.5 bid, 100 offered after pricing on Thursday and traded later in the day at 100 bid, 100.375 offered.

The Mississauga, Ont.-based company is one of the largest metal distribution and processing companies in North America.

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