Russel Metals prices C$300 million high-yield notes; Quebec reopens issue; Corus weakens

By Cristal Cody

Prospect News, April 12 - The Canadian high-yield bond market reopened on Thursday after a two-month dry spell with a bought deal from Russel Metals Inc. for C$300 million of 10-year senior notes.

"We had north of C$600 million of demand," a syndicate source said. "There was close to C$100 million allocated to U.S. accounts; almost half the deal went there."

The high-yield market is expected to see at least three more deals heading into May, including one possibility before the end of April, a source said.

The Canadian high-yield market has accounted for 43 deals since 2009 with proceeds of C$9.5 billion, a bond source said.

Also in primary activity on Thursday, the Province of Quebec raised C$500 million in a reopening of its 3.5% 10-year medium-term notes.

In the secondary market, Russel Metals' notes traded higher.

Corus Entertainment Inc.'s notes are trading lower as the issue moves closer to its call date in 2013, a source said on Thursday.

Investment-grade corporate bonds tightened on the day. The Markit CDX Series 18 North American investment-grade index firmed 5 basis points to a spread of 97 bps.

Government bonds traded weaker under a risk-on sentiment. Canada's 10-year note yield rose 3 bps to 2.05%. The 30-year bond yield edged up 1 bp to 2.6%.

Russel Metals taps market

Russel Metals sold an upsized C$300 million of 10-year senior notes (Ba1) at par to yield 6% on Thursday on a private placement basis, an informed bond source said.

The notes due April 19, 2022 had more than C$600 million of demand, a source said. About 60 institutional real money accounts in Europe, Canada and the United States participated in the deal.

The deal was upsized by C$50 million.

GMP Securities LP and RBC Capital Markets Corp. were the lead managers.

The company may redeem the notes on and after April 19, 2017.

Proceeds will be used to repay debt, including to redeem all of the US$138.9 million outstanding of the company's 6 3/8% senior notes due March 1, 2014, and for working capital, potential acquisitions and general corporate purposes.

The bonds traded tighter after pricing.

"The bonds broke at par and a half, par," a source said.

Late afternoon, the bonds traded at 100 bid, 100.375 offered.

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

Quebec prices C$500 million

In the provincial market, Quebec (Aa2/A+/DBRS: A) priced C$500 million in a reopening of its 3.5% medium-term notes due Dec. 1, 2022 at 102.663 to yield 3.202% on Thursday, a bond source said.

The notes priced at a spread of 107.5 bps over the Government of Canada benchmark.

National Bank Financial Inc. and BMO Capital Markets Corp. were the lead managers.

The issue originally priced on Nov. 29 at 100.6 to yield 3.434%, or a spread of 115 bps over the Government of Canada benchmark. The total outstanding now is C$3.5 billion.

Corus edges lower

Corus Entertainment's 7¼% senior notes due 2017 traded on Thursday at 106.75 bid, slightly down from 107 bid at the start of the month, a source said.

The company sold C$500 million of the notes (/BB+/BBB) in February 2010.

The notes are callable in February 2013 and are expected to trade toward the call price of C$103.625 over the year, a source said.

Corus on Thursday reported second-quarter earnings in line with expectations of C$33.54 million compared to C$32.8 million in the same period a year ago. Revenue rose to C$205.68 million in the quarter ended Feb. 29 from C$191.08 million in the year-ago period.

The media and entertainment company is based in Toronto.

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