Scotiabank sells C$1.5 billion five-year notes, which firm in secondary; Sherritt lower

By Cristal Cody

Prospect News, Feb. 22 - Bank of Nova Scotia tapped the Canadian bond markets for C$1.5 billion of five-year deposit notes on Wednesday, a bond source said.

"This is a fairly sizable deal for Canada," the source said. "The book wasn't open for very long."

In the secondary market, Bank of Nova Scotia's notes traded tighter.

"Last I saw, it was trading about a basis point tighter," a source said.

Credit seemed "fairly strong today," a source said.

The Markit CDX Series 17 North American high-grade index was flat at a spread of 98 basis points on Wednesday.

Bonds from Sherritt International Corp. (DBRS: BB) edged lower in trading after the company reported fourth-quarter earnings, a source said.

Government bonds ended the day better as optimism over a financial bailout for Greece began to fade. Canada's 10-year note yield fell 3 bps to 2.05%. The 30-year bond yield fell 2 bps to 2.64%.

The Bank of Canada auctioned C$400 million of 1.5% real return bonds due 2044 at a median yield of 0.554% on Wednesday.

Scotiabank prices

In Canadian primary action on Wednesday, Bank of Nova Scotia (Aa1/AA-/DBRS: AA) raised C$1.5 billion from the sale of 2.598% five-year deposit notes, which priced at par, a bond source said.

The notes due Feb. 27, 2017 priced at a spread of 109 bps over the Canadian government benchmark.

Scotia Capital Inc. was the bookrunner.

The company's notes due 2015 traded about 1 bp tighter in the secondary market, a source said.

"It's being bid better at 107 [bps]," the source said.

Toronto-based Bank of Nova Scotia provides financial services in 55 countries.

Sherritt trades lower

In secondary activity, Sherritt's 8.25% debentures due 2014 were seen lower at 106.5 bid on Wednesday from Friday's quote of 107.25 bid, sources said. The notes were sold in a C$225 million offering on Oct. 18, 2007 at par.

The company's newest issue, 8% senior notes due 2018, also traded lower at 106 on Wednesday from 106.25 on Friday. Sherritt sold C$400 million of the 8% notes at par on Oct. 28.

On Wednesday, Sherritt reported C$536.8 million of fourth-quarter revenue, up from C$485.2 million reported in the same period a year ago. Fiscal year 2011 revenue rose to C$1.98 billion from C$1.67 billion in 2010.

The company's earnings fell to C$28.1 million in the fourth quarter from C$42.7 million a year ago. For fiscal year 2011, earnings were C$197.3 million, or 67 cents per share, compared to C$144.8 million, or 49 cents a share, in 2010.

Toronto-based Sherritt International produces coal, oil, gas and power and mines and refines nickel.

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