Quebec sells C$500 million 10-year add-on, Ontario, Valeant focus deal action in U.S. markets

By Cristal Cody

Prospect News, Sept. 20 - Most of the day's pricing action was south of the border in the U.S. markets on Thursday, with one domestic offering brought by the Province of Quebec, bond sources said.

Quebec raised C$500 million in an add-on to its 3.5% 10-year medium-term notes.

In the U.S. dollar market, the Province of Ontario sold $1.25 billion of 1.65% seven-year global notes (Aa2/AA-/) in a planned benchmark-sized deal and Valeant Pharmaceuticals International Inc. restructured its $2.25 billion three-part notes offer into a two-part deal.

"Very slow, not much going on here," one Canadian bond source said.

Not much activity is expected in the Canadian markets on Friday.

Looking ahead, a deal may be in the works from Aeroports de Montreal (A1//DBRS: A), which held a roadshow earlier in the month. Moody's affirmed the Greater Montreal airport authority's A1 rating on Wednesday.

"That could be another possibility over the next couple of weeks," a bond source said.

Generally bond spreads were holding in on the day with bank and financial paper slightly wider.

"Financials are weakening on the back of global growth concerns, but otherwise, they're holding in," a source said.

Canadian government bonds rose and yields fell across the curve on Thursday. The 10-year note yield ended 2 basis points lower at 1.86%. The 30-year bond yield dropped to 2.42% from 2.46%.

Covered bond market jumps

U.S. debt markets "remain an important source of funding for Canadian financial institutions," DBRS said in a report on Canada's covered bond market on Thursday.

In 2011, there were 12 new U.S. dollar deals that totaled C$21.7 billion.

So far this year, there have been nine new U.S. dollar issuances that have reached C$49.9 billion, or 78.6% of covered bonds outstanding.

As of Aug. 31, the total amount outstanding in the market was C$63.4 billion, DBRS said.

Royal Bank of Canada sold $2.5 billion of 1.2% five-year covered bonds (Aaa/AAA) in the U.S. market on Sept. 12, making it the first Canadian issuer to tap the market since legislation was introduced to prevent the use of Canada Mortgage & Housing Corp.-insured residential mortgages as collateral.

"DBRS does not expect any new issuance backed by insured pools until Canada Mortgage & Housing Corp. guidelines are finalized," the agency said.

Quebec adds C$500 million

In Canadian deal action, Quebec brought a C$500 million reopening of its 3.5% 10-year medium-term notes on Thursday, a bond source said.

The notes due Dec. 1, 2022 priced at 105.155 to yield 2.911%, or a spread of 106.5 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the lead manager.

The province reopened the issue last on June 20 with a C$500 million add-on priced at 104.769 to yield 2.965%, or a spread of 116 bps over the Government of Canada benchmark.

The total outstanding is now C$5.5 billion.

Ontario sells $1.25 billion

In the U.S. high-grade market, Ontario sold $1.25 billion of 1.65% seven-year global notes (Aa2/AA-/) on Thursday to yield mid-swaps plus 44 bps, or Treasuries plus 55.75 bps, a source away from the trade said.

The deal had gone overnight from Wednesday when the notes were talked in the range of mid-swaps plus 40 bps to 44 bps.

Bookrunners were Bank of America Merrill Lynch, Credit Suisse Securities (USA) LLC, HSBC Securities (USA) Inc. and Scotia Capital USA Inc.

Ontario was last in the U.S. bond market with a $1 billion sale of 10-year notes on June 22.

Proceeds will be used for general provincial purposes.

Valeant restructures, prices

In the U.S. junk bond market, Valeant Pharmaceuticals priced $2.25 billion of eight-year senior notes (B1/BB-) at par on Thursday to yield 6 3/8%, in two tranches that came with identical terms but from different issuers, according to a market source.

The yield printed on top of price talk.

Valeant Pharmaceuticals International Inc. priced $500 million. Proceeds will be used for general corporate purposes, including acquisitions

VPI Escrow Corp. priced $1.75 billion. Proceeds will be used to help fund acquisition of Medicis Pharmaceutical Corp.

J.P. Morgan Securities LLC, Goldman Sachs & Co. and RBC Capital Markets were the joint bookrunners for the quick-to-market deal.

In a restructuring, the issuer abandoned a three-part structure which would have seen Valeant Pharmaceuticals International bring a $500 million add-on to its 7¼% notes due July 15, 2022, and VPI Escrow bring 7% mirror notes due 2020 and 7¼% mirror notes due 2022.

The issuer is a Mississauga, Ont.-based specialty pharmaceutical company.

Andrea Heisinger and Paul A. Harris contributed to this review

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.