Enbridge, Calloway REIT, Kinross Gold tap Canada, U.S. markets; Kinross widens in trading

By Cristal Cody

Prospect News, Aug. 16 - While Canadian high-yield primary activity slows to a standstill, high-grade bond activity kicked off with two deals on Tuesday and a third mortgage bond offering in the works for Wednesday, according to bond sources.

On Tuesday, Enbridge Inc. sold an upsized C$350 million of four-year floating-rate notes, while Calloway Real Estate Investment Trust came back to the market on Tuesday to sell a total of C$90 million of 4.7% seven-year senior debentures.

"Calloway coming back for more is definitely a good signal, even though it's a small amount," a bond source said of market tone.

In the U.S. market, Canada's Kinross Gold Corp. priced $1 billion of senior notes in three parts, according to a press release and a market source.

All three tranches of bonds were seen trading wider in the secondary market, traders said.

Coming up on Wednesday, Canada Housing Trust is expected to sell two tranches in reopenings of Canada mortgage bonds on Wednesday, according to a bond source. Canada Housing Trust last was in the market in June with a five-year fixed-rate note sale.

No provincial bond offerings are expected until "at least after the CMB deal were to price," a source said.

Canadian government bonds were higher on the longer end of the curve on Tuesday. The 10-year note yield fell 2 basis points to 2.45%. The 30-year bond yield dropped 1 bp to 3.11%.

Enbridge upsizes

Enbridge priced an upsized C$350 million four-year floating-rate notes (Baa1/A-//DBRS: A) at par on Tuesday, according to a bond source.

The deal was upsized from C$200 million and priced to yield 100 bps over the three-month Canadian Dealer Offered Rate. Guidance on the notes was for a spread in the 100 bps area, plus or minus 3 bps.

RBC Capital Markets Corp. was the bookrunner. Scotia Capital Inc. was the co-lead manager.

Calgary, Alta.-based Enbridge Income Fund is an unincorporated open-ended trust that focuses on energy infrastructure assets.

Calloway REIT prices

Calloway Real Estate Investment Trust sold C$90 million 4.7% seven-year senior debentures, series G, (DBRS: BBB) at par in two transactions, a bond source said Tuesday.

The REIT sold C$75 million on Monday and another C$15 million on Tuesday of the notes due August 2018.

The notes priced at a spread of 268.6 bps over the Government of Canada benchmark in both sales, the source said.

CIBC World Markets Inc. and RBC Capital Markets were the lead managers.

Proceeds will be used to complete acquisitions of three new shopping centers anchored by a Wal-Mart Supercenter and for general trust purposes.

The Vaughan, Ont.-based REIT owns and manages retail shopping centers in Canada.

Kinross Gold taps market

Canada's Kinross Gold priced $1 billion of senior notes (Baa3/BBB-/BBB-) in three parts, according to a press release and a market source.

The $250 million tranche of 3.625% five-year notes was priced at 99.595 to yield 3.714% with a spread of Treasuries plus 270 bps. The tranche has a make-whole call at Treasuries plus 40 bps.

A $500 million tranche of 5.125% 10-year notes sold at 99.141 to yield 5.236% with a spread of 290 bps over Treasuries. There is a make-whole call at 45 bps over Treasuries.

The third part was $250 million of 6.875% 30-year bonds priced at 99.181 to yield 6.94% with a spread of 315 bps over Treasuries. The bonds have a make-whole call at 50 bps over Treasuries.

The deal was done under Rule 144A and Regulation S.

Bookrunners were Bank of America Merrill Lynch, Morgan Stanley & Co., Inc. and UBS Securities LLC.

Proceeds are being used for general corporate purposes, including funding capital expenditures.

The securities are guaranteed by Kinross' wholly owned subsidiaries.

In the secondary market, trading was seen on Tuesday in the new bonds priced on Monday. The five-year notes widened to 271 bps early in the morning, a trader said.

Another trader saw the notes late afternoon wider at 275 bps bid, 265 bps offered.

The 10-year notes firmed to 288 bps bid in morning trading but widened to 295 bps bid, 285 bps offered, the traders said.

The tranche of 30-year bonds had firmed to 310 bps, but going into the close, another trader saw the bonds weaker at 325 bps bid, 312 bps offered.

The mining and gold ore processing company is based in Toronto.

Canada Housing Trust on tap

Canada Housing Trust (Aaa/AAA/DBRS: AAA) is expected to sell two tranches in reopenings of Canada mortgage bonds on Wednesday, according to a bond source.

The offering is expected to include an add-on to the five-year floating-rate notes and a reopening of the 3.8% 10-year fixed-rate mortgage bonds.

The five-year floaters have been launched at a minimum size of C$1 billion and talked in the 99.80 area.

The offering of 10-year notes is expected to be in the C$2 billion-plus range. The 10-year notes were launched at 38.5 bps over the Government of Canada benchmark.

RBC Capital Markets, CIBC World Markets, National Bank Financial Inc. and TD Securities Inc. are the managers.

The bonds are guaranteed by the Government of Canada. The trust is a unit of Canada Mortgage and Housing Corp., which offers financing, mortgage loan insurance and mortgage-backed securities.

NewPage improves

A trader said that NewPage Corp.'s 11 3/8% senior secured notes due 2014 were going home at 81 bid, 81½ offered, which he called up about a point from the levels to which the Miamisburg, Ohio-based coated-paper manufacturer's bonds had eased on Monday.

He also saw its 10% notes due 2012 at 12 bid, 13 offered, which he called "pretty much unchanged, maybe up a half point from Monday's somewhat lower levels.

The NewPage bonds had retreated on Monday amid the company's second-quarter earnings numbers showing it still losing money, albeit less than it had a year earlier, and company warnings that it may face acceleration of some debt maturities if it does not refinance or repay its 10% notes by certain deadlines.

NewPage also formally warned in its 10-Q filing with the Securities and Exchange Commission that if the company is not able to refinance its debt or generate enough cash flow to service its obligations, it will have to restructure its debt or file for Chapter 11 bankruptcy.

Standard & Poor's also announced that it had downgraded NewPage's corporate credit and first-lien term loan ratings a notch, to CCC, and cut its second-lien notes and senior subordinated notes two notches, to CC, and put all ratings on CreditWatch with negative implications.

The ratings agency warned that NewPage could be challenged to meet its fixed charges, including more than $160 million of cash interest expense during the remainder of this year, based on lowered 2011 EBITDA expectations and the likelihood of no additional material assets sales over the upcoming months.

Catalyst Paper quiet

Catalyst Paper Corp.'s 7 3/8% notes due 2014 were at 38 bid, 40 offered, and the Richmond, B.C.-based papermaker's 11% senior secured notes due 2016 were at 69 bid, 70 offered; a trader said that there was "not much activity in those at all today. They were pretty much where they went out" on Monday.

Sino-Forest softer

A trader quoted Sino-Forest Corp.'s 10¼% notes due 2014 in a 65 to 67 trading range, while seeing its 6¼% notes due 2017, which are customarily about 10 points behind the 2014s, at the 55 to 57 range.

That's down by several points from where the bonds treaded on Monday after the Canadian-Chinese timber company reported quarterly numbers.

However, he said he "did not see that much activity in them."

The trader also saw the company's busted convertible notes end the day a few points up from recent levels, with the 4¼% notes due 2016 ending at 60 to 61, 5% notes due 2013 at 66 to 69.

However, he said he had not seen much activity in the name.

Andrea Heisinger and Paul Deckelman contributed to this review

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