Athabasca Oil sells record junk bond deal; Ainsworth Lumber plans roadshow; Paramount flat

By Cristal Cody

Prospect News, Nov. 9 - Athabasca Oil Corp. sold a record C$550 million five-year senior secured second-lien notes (/B/DBRS: B) in Canada's high-yield market on Friday, informed sources said.

"It's the largest oil and gas single-B deal ever done in Canada," a source close to the sale said. "We upsized from the launch of C$450 [million] this morning to C$550 [million]. We had pretty good retail demand as well.

"We look at this as extremely positive from a Canadian high-yield perspective."

The offering initially was estimated at up to C$600 million.

The Regulation S and Rule 144A-eligible deal was well-subscribed in the Canadian market, the source said.

No trading was seen in Athabasca's notes in the Canadian markets, which closed early and saw light secondary activity, sources said.

The bond markets in Canada and the United States will close on Monday for holidays.

Primary activity for the week ahead is expected across the municipal and corporate sectors from issuers including the City of Toronto and Canada Housing Trust.

"The U.S. market is still more attractive to banks, so we probably won't see as much as we normally see, but we should see some small issues next week," an informed source said.

More deals also are expected from Canadian issuers in the high-yield sector.

Ainsworth Lumber Co. Ltd. plans to sell $350 million of five-year senior secured notes.

A high-yield offering may be in the works, though nothing is imminent, according to sources, from Paramount Resources Ltd. after the company on Thursday filed a C$500 million preliminary prospectus that includes debt securities, class A common shares, subscription receipts, warrants and units.

Paramount Resources was last in the Canadian markets with a debt offering in January 2011.

The company's 8¼% senior notes due 2017 traded unchanged on the day, according to a trader.

"There wasn't really anything trading today," a high-yield bond source said. "It was just a little bit weaker but not a whole lot - down a quarter point or so on the week."

The Canadian investment-grade market stayed quiet on Friday.

"It was an early close and a long weekend," one bond source said. "We were a little weaker just when the I.G. market went wider, so ours went wider."

The Markit CDX Series 18 North American investment-grade index eased 3 basis points on Friday to a spread of 107 bps.

The Markit CDX Series 18 North American high-yield index fell to 97.85 from 98.10.

Government bonds ended mostly unchanged. Canada's two-year note yield rose 1 bp to 1.09%. The 10-year note yield ended flat at 1.72%.

Athabasca sells C$550 million

Athabasca Oil on Friday sold C$550 million of five-year senior secured second-lien notes (/B/DBRS: B) at par to yield 7½%, compared to guidance in the low 7% area, an informed source said.

The notes due Nov. 19, 2017 priced at a spread of 619.7 bps over the Government of Canada benchmark.

The deal was upsized from the morning's launch of C$450 million, a source close to the sale said.

The offering initially was estimated at up to C$600 million.

The Rule 144A- and Regulation S-eligible issue was offered on a private placement basis in Canada. The notes also saw retail demand.

TD Securities Inc. and GMP Capital Inc. were the lead managers.

Proceeds from the offering and negotiation of about C$150 million of senior secured first-lien revolving credit facilities will be used for general corporate purposes, including to advance the company's thermal oil projects and develop its light oil assets.

Athabasca Oil is a Calgary, Alta.-based oil sands developer.

Ainsworth on tap

Ainsworth Lumber plans to market a $350 million offering of five-year senior secured notes on a roadshow set to take place during the week ahead, according to a syndicate source.

An investor call is scheduled for Tuesday.

The roadshow wraps up on Thursday, and the deal is set to price thereafter.

Bank of America Merrill Lynch is the bookrunner for the Rule 144A for life deal.

BMO Securities, CIBC World Markets, HSBC, RBC Capital Markets, TD Securities and Scotia Capital are the co-managers.

The notes come with two years of call protection and feature a 101% poison put.

Credit ratings in the single B range are expected.

Proceeds, along with proceeds from a rights offering, a standby purchase and cash on the balance sheet, will be used to repurchase and/or redeem the company's existing notes and term loan.

Ainsworth is a Vancouver, B.C.-based manufacturer of engineered wood products.

Paramount Resources flat

Paramount Resources' 8¼% senior notes due 2017 (Caa1/B+) traded flat wrapped around 106 bid in the secondary market, a trader said on Friday.

The company first sold C$300 million of the notes on Nov. 30, 2010 at par and reopened the issue on Jan. 28, 2011 to sell C$70 million at 103.

Calgary, Alta.-based Paramount Resources is an oil and natural gas exploration, development and production company.

Paul A. Harris contributed to this review

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