Alberta sells C$600 million, funding almost complete; Standard Life prices; junk bonds up

By Cristal Cody

Prospect News, Sept. 17 - The Province of Alberta surprised the market on Monday with a C$600 million reopening of its 2.55% 10-year notes, an offering that nearly completes its funding requirements, an informed source said.

Alberta's notes were "a little slower to sell than recent provincial deals but ended up clearing nicely," the source said.

"It's just a slower Monday morning backdrop and the fact that Alberta is well ahead of plan so far," the source said. "They're not even halfway through the fiscal year and now with the proceeds of this issue, they've done about 90% of their requirement."

Primary activity for the week is expected mostly in the government and provincial sectors, according to bond sources.

Coming up on Tuesday, Canada Housing Trust (Aaa/AAA/DBRS: AAA) plans to launch the quarterly offering of Canada Mortgage Bonds. The trust, a unit of Canada Mortgage and Housing Corp., is expected to price C$5 billion to C$5.5 billion of bonds due Dec. 15, 2017 on Wednesday.

"There's definitely less on the calendar this week," a source said. "There could be some corporate drive-by issuance by corporates looking to take advantage of the stable market tone, but we do expect it to be quieter than the last couple of weeks."

In other market activity, details of Standard Life Assurance Co. of Canada's C$400 million offering of fixed-to-floating rate subordinated debentures due Sept. 21, 2022 emerged on Monday.

The debentures priced at the "tight end of guidance," a bond source said, noting the deal was "well over-subscribed, as have most corporate deals the first weeks of September."

In the secondary market, Canadian junk mining paper continues to trade stronger, a bond source said.

Allied Nevada Gold Corp.'s bonds are up 2.25 points from a week ago.

In other trading, Trident Exploration Corp.'s notes gained 4½ points from the previous week.

Connacher Oil & Gas Ltd.'s bonds and Baytex Energy Corp.'s senior debentures also are trading higher.

Corporate bonds ended the day slightly weaker. The Markit CDX Series 18 North American investment-grade index eased 2 basis points to a spread of 85 bps.

The Markit CDX Series 18 North American high-yield index fell to 102.06 from 102.31.

Canadian government bonds closed with modest gains. The 10-year note yield fell 2 bps to 1.95%. The 30-year bond yield dropped to 2.52% from 2.54%.

Alberta sells C$600 million

In the day's offering, the Province of Alberta (Aaa/AAA/DBRS: AAA) sold C$600 million in a reopening of its 2.55% 10-year notes at 98.951 to yield 2.668%, an informed bond source said.

The notes priced at a spread of 72 bps over the Government of Canada benchmark.

RBC Capital Markets Corp. was the lead manager.

The province first brought the issue on Aug. 23 in a C$720 million offering that priced at 99.714 to yield 2.582%, or a spread of 78 bps over the government benchmark.

The total outstanding is C$1.32 billion.

Standard Life taps market

Standard Life Assurance Co. of Canada said on Monday that it sold its first subordinated offering in Canada with a C$400 million offering of 3.938% fixed-to-floating rate subordinated debentures due Sept. 21, 2022 priced at par.

The debentures (/expected A/) came at a spread of 245 bps over the Government of Canada benchmark, tighter than guidance of 250 bps, plus or minus 5 bps, an informed bond source said.

The new issue is set at a fixed rate of 3.938% for five years and then will switch to a rate of 210 bps over three-month CDOR.

RBC Capital Markets Corp. and BMO Capital Markets Corp. were the lead managers. Co-managers were Bank of America Merrill Lynch and Casgrain & Co.

Proceeds will be used for general corporate purposes and, subject to regulatory approval, may be used to repay an existing internal debt to Standard Life plc.

Standard Life Assurance Co. of Canada is a subsidiary of Edinburgh, Scotland-based Standard Life plc, a long-term savings and investment company.

Allied Nevada Gold better

In secondary trading, Allied Nevada Gold's 8¾% seven-year senior notes rose to 105 bid, up more than 2 points from last week, a source said on Monday.

The company sold C$400 million of the seven-year notes (B3/B/) at 98.716 to yield 9% on May 18.

Allied Nevada Gold is a Reno, Nev.-based gold mining and exploration company.

Trident gains

Trident Exploration's 8¼% senior notes due April 13, 2018 climbed to 94.5 bid, up 4½ points in week-over-week trading, a bond source said.

Trident Exploration sold C$175 million of the notes (/B/) at par on April 11, 2011.

The company is a subsidiary of Trident Resources Corp., a Calgary, Alta.-based natural gas exploration company.

Connacher up

Connacher Oil's Canadian 8¾% senior notes due 2018 (Caa2/BB-/) rose to 86.5 bid, up nearly 2 points from Wednesday, a bond source said.

The company sold C$350 million of the notes on May 20, 2011 at par.

Connacher has been underway in a strategic review since it rejected an unsolicited takeover offer in December.

The integrated oil company is based in Calgary, Alta.

Baytex rises

Baytex Energy's 6 5/8% senior debentures due 2022 (B1/BB-/) rose to 106.5 bid, up nearly 1 point from a week ago, a bond source said on Monday.

Baytex Energy sold C$300 million of the series C debentures at par on July 10.

Calgary, Alta.-based Baytex is an energy exploration and production company.

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