Capital City Link, Toronto, Thompson Creek tap Canadian, U.S. markets; Yellow Media drops

By Cristal Cody

Prospect News, May 8 - Municipal and public-private partnership bonds headed up the pricing action in Canadian bond markets on Tuesday.

Capital City Link General Partnership raised C$534.8 million in the offering of long bonds.

The city of Toronto priced C$300 million in a reopening of its 3.5% debentures due Dec. 6, 2021.

In the U.S. high-yield market, Thompson Creek Metals Co. Inc. sold $200 million of seven-year senior notes (Caa2/CCC+) on Tuesday.

Market tone remained "negative just on concerns of Europe," a bond source said. "Provincial spreads were a basis point or two wider on the day."

The offering from Toronto and Capital City Link were both deal-specific and not frequent issuers.

"Even though the tone wasn't great, they were able to get it done," one source said of Toronto's reopening. "Capital City Link didn't seem to be affected by tone so much."

The corporate supply in Canada remains light, though the calendar is filling up with roadshows.

"Corporate supply versus last year, from January to April, non-financial corporate supply is down 50% year over year," a bond source said on Tuesday. "That's a significant jump. Canadian companies have a very strong balance sheet and [that's] one of the reasons we have reduced supply. All of these things have combined to really help credit spreads stay stable."

Trading activity was moderate on the day, a source said.

Yellow Media Inc.'s senior notes (BB+/BB) traded lower following Monday's dismal first-quarter earnings report, though the bonds are higher than a month ago, a source said on Tuesday.

Government bonds rallied on the flight to safer-haven debt over the twist in European political events.

Canada's 10-year note yield fell 5 basis points to 1.97%. The 30-year bond yield dropped 4 bps to 2.51%.

"The [Canadian] government long bond was up today by 85 cents and was up by a dollar at one point today, so we're really seeing a flight to quality," a source said. "However, the effect is being muted on the credit market. Spreads are holding in really almost unchanged from before all this political chaos."

Corporate bonds ended slightly weaker. The Markit CDX Series 18 North American investment-grade index rose 1 bp to a spread of 101 bps after easing 4 bps the previous day.

Capital City Link sells bonds

Capital City Link General Partnership sold C$534.8 million of 4.386% 34-year senior bonds (DBRS: A) at 100.004 to yield 4.386% on Tuesday, a bond source said.

The amortizing bonds due March 31, 2046 priced at a spread of 187 bps over the Canadian bond curve.

CIBC World Markets Inc. and National Bank Financial Inc. were the lead managers.

The special-purpose entity was formed to design, build, finance, operate and maintain the final northeast leg of Anthony Henday Drive in Edmonton under a 34.5-year project agreement with the Province of Alberta.

Toronto adds C$300 million

The city of Toronto priced C$300 million in a reopening of its 3.5% debentures due Dec. 6, 2021 at 101.503 to yield 3.315% on Tuesday, a bond source said.

The debentures (DBRS: AA) priced at a spread of 143.5 bps over the Government of Canada benchmark.

RBC Capital Markets Corp. was the lead manager.

Toronto sold C$200 million of the debentures on Nov. 22, 2011 at 99.891 to yield 3.513%, or 141 bps over the Canadian government benchmark. The total outstanding now is C$500 million.

Thompson Creek prices

Thompson Creek Metals priced a $200 million issue of seven-year senior notes (Caa2/CCC+) at par to yield 12½% on Tuesday, according to a market source.

The yield printed 12.5 bps beyond the wide end of price talk that had been set in the 12% area.

J.P. Morgan Securities LLC, Deutsche Bank Securities Inc. and RBC Capital Markets are the joint bookrunners.

Proceeds will be used to fund construction of the Mt. Millgan copper-gold mine and for working capital.

The issuer is a mining company based in Vancouver, B.C., and Littleton, Colo.

Yellow Media drops

Yellow Media's bonds dropped in secondary trading after the company reported first-quarter revenue that fell more than expected.

The company's stock plunged 40% to 6 cents on the day.

Yellow Media's 7.3% notes due 2015, 5¼% notes due 2016, 5.85% notes due 2019 and 7¾% notes due 2020 all traded at 54 bid on Tuesday, still higher than the 49 bid seen on the bonds on April 5, a source said.

Yellow Media on Monday reported a loss of C$2.9 billion in the first quarter ended March 31. The company has about C$1.5 billion of debt outstanding.

Montreal-based Yellow Media is the largest directory publisher in Canada.

Paul A. Harris contributed to this review

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