Teck Resources sells $2 billion; Husky prices PIK toggle notes; Goldman Maple bonds firm

By Cristal Cody

Prospect News, June 29 - Canada's bond markets saw no primary activity on Wednesday, while two Canadian companies sold deals in the U.S. markets, sources said.

"We had no new corporate issues last week and we're zero for three this week and tomorrow's a half day," an informed bond source said. "It's unusual, but not unheard of to have a new corporate issue on a half day. The tone is better, so we remain optimistic."

The Canadian bond markets will close early on Thursday and be closed on Friday for the Canada Day holiday.

In the U.S. bond markets, Teck Resources Ltd. sold $2 billion of senior notes (Baa2/BBB/BBB) in three maturities late on Wednesday, an informed source said.

The bonds "priced 5 basis points tighter than initial guidance," an informed bond source said. "It was brought to market pretty quickly."

Husky Injection Molding Systems Ltd. also priced $570 million of 10.5% PIK toggle notes due 2019 at par on Wednesday, an informed bond source said.

In the secondary market, Teck's notes were seen trading 5 bps to 6 bps tighter, according to a trader.

Higher-rated investment-grade Maple bonds and financial paper traded better on the day in Canada, an informed bond source said.

Goldman Sachs Group, Inc.'s most recently priced 5% seven-year Canadian notes traded 5 bps tighter on Wednesday. The bonds had widened 40 basis points since they priced in April.

Meanwhile, the market continued to wait for word on the outcome of Nortel Networks Corp.'s recent patent portfolio auction. But the bonds remained strong, giving credence to the belief that the longer the company is quiet, the higher the potential bid price could be.

Also, OPTI Canada Inc. headed upwards, though on no credit-specific news. A trader opined that the gains were due to an increase in oil prices.

Meanwhile in trading Canadian government bonds were lower as investors moved out of safer haven debt after Greece voted yes to an austerity package as part of a new bailout plan. The 10-year note yield rose 7 basis points to 3.08%. The 30-year bond yield rose to 3.53% from 3.48%.

Asset-backed market grows

In other corporate bond news on Wednesday, DBRS released its April market report of the overview of the Canadian market, which includes asset-backed securities, commercial mortgage-backed securities, asset-backed commercial paper and structured notes.

The month of April ended with C$94.8 billion in notes outstanding in the Canadian market, up by C$1.3 billion from the previous month, DBRS said. The asset-backed notes market rose by C$1.8 billion to C$31.1 billion on a new issuance from Golden Credit Card Trust and two issuances from Master Credit Card Trust.

The asset-backed commercial paper market fell C$129.1 million, or 0.5% to C$24.1 billion in April.

Teck offers $2 billion

Teck Resources sold $2 billion of senior notes (Baa2/BBB/BBB) in three maturities late on Wednesday, an informed source said.

A $300 million tranche of 3.15% notes due 2017 were priced at 99.964 to yield 3.157% with a spread of Treasuries plus 150 basis points. The notes priced at the low end of guidance in the 155 bps area.

They have a make-whole call at Treasuries plus 25 bps.

A second tranche was $700 million of 4.75% notes due 2022 sold at 99.843 to yield 4.769% with a spread of 165 bps over Treasuries. The tranche was priced at the tight end of talk in the 170 bps area.

These notes also have a make-whole redemption at 25 bps over Treasuries.

The final part was $1 billion of 6.25% 30-year bonds priced at 99.715 to yield 6.271% with a spread of Treasuries plus 190 bps. This tranche was priced at the tight end of guidance in the 195 bps area.

The notes are callable at a make-whole of Treasuries plus 30 bps.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

Proceeds will be used for general corporate purposes including anticipated capital spending for project development in coal, copper and energy businesses, and for debt repayment.

The deal is guaranteed by Teck Metals Ltd.

In the secondary market, the tranche of 5.5-year notes firmed to 144 bps bid, 139 bps offered, a trader said.

The 10.5-year tranche tightened to 160 bps bid, 155 bps offered.

The 30-year bonds also narrowed in trading, firming at the close of the day to 185 bps bid, 180 bps offered.

The diversified resource company for mining and mineral development is based in Vancouver, B.C.

Husky prices PIK notes

Husky Injection Molding Systems priced $570 million of eight-year PIK toggle notes due 2019 at par to yield 10 ½% on Wednesday, according to a market source.

The coupon increases to 12½% if the PIK option is exercised.

Goldman Sachs & Co. was manager.

The proceeds will be used to help fund the leveraged buyout of parent company Husky International Ltd. by Berkshire Partners LLC and Omers Private Equity Inc. from Onex Corp.

Bolton, Ont.-based Husky is a supplier of injection molding equipment and services to the plastics package and product industry.

Goldman firms

Goldman Sachs' 5% senior Maple bonds due May 3, 2018 firmed 5 bps in trading on Wednesday, an informed source said.

"Some of Goldman Sachs was tighter today from last week and some of the other higher beta Maple issuers" firmed, the source said.

Goldman Sachs' seven-year notes traded Wednesday at 250 bps bid, 245 bps offered, tighter than the 255 bps bid, 249 bps offered seen on Tuesday.

Goldman (A1/A/DBRS: A) sold C$500 million of the notes on April 26 at a spread of 213 bps over the Canadian bond curve.

The financial services company is based in New York City.

OPTI rises

A market source saw OPTI Canada's 7 7/8% senior secured notes due 2014 up by 1 5/8 points on the session Wednesday to end at 41 1/8 bid.

OPTI Canada's subordinated issues gained ground, possibly due to higher oil prices, a trader said.

He said the 7 7/8% and 8¼% notes due 2014 were trading around 42.

Oil meantime gained $2.16 to end at $95.06 per barrel.

There was no fresh news out about the Calgary, Alta.-based oil-sands energy company, which earlier this month announced that it had not made a total of $71 million of scheduled interest payments due on June 15 on its $750 million of 7 7/8% notes and $1 billion of 8¼% senior secured notes due 2014. OPTI Canada said at that time that it was invoking the standard 30-day grace period stipulated in the bonds' indenture, and would work with advisors Lazard Freres & Co. LLC, Scotia Waterous Inc. and TD Securities Inc., "to review strategic alternatives available for the company to address its overall leverage position," options which might include a capital structure adjustment, which the company said may include debt-for-equity exchanges or conversions, possibly combined with raising additional capital.

Other options which may be under consideration, it said, could include capital market opportunities, asset divestitures and/or a corporate sale, merger or other business combination.

Nortel remains strong

Nortel Networks' bonds - the 10 1/8% notes due 2013 and the 10¾% notes due 2016 - "traded up" to around 96, a trader said, on "medium volume."

As of press time, the Toronto-based bankrupt telecommunications company had yet to announce the winner of an auction of its patent portfolio. The auction began Monday and bidders included Google Inc., Apple Inc., Research In Motion Ltd. and RPX Corp. Rumor has it that Intel Corp. and Microsoft Corp. might also be on the list.

The portfolio, which includes some 6,000 patents, is expected to generate as much as $1 billion. Google made the "stalking horse" bid earlier this year at $900 million. In order to win, a bidder would have to offer at least $29 million more.

Paul Deckelman , Andrea Heisinger and Stephanie N. Rotondo contributed to this review

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