Canada Housing Trust, Brookfield, Trilogy Energy prep offerings; Ontario paper firms

By Cristal Cody

Prospect News, Dec. 4 - Canadian market activity quieted on Tuesday following nearly two weeks of steady issuance in the corporate and provincial markets, sources said.

The lack of primary action on Tuesday gave everyone a "day to regroup," one bond source said.

Details of new provincial and municipal bond offerings from the Province of Ontario, Hydro-Quebec, the City of Toronto and the Province of New Brunswick emerged on Tuesday.

Ontario sold C$1 billion in a reopening of its 1.9% five-year notes that included a C$600 million carve-out for one investor, while Hydro-Quebec raised C$500 million in a reopening of its 5% debentures due Feb. 15, 2050.

New Brunswick brought a C$150 million reopening of its 3.55% bonds due June 3, 2055, and Toronto sold C$300 million of 3.8% 30-year debentures.

Toronto's offering "had been expected so the deal went very, very well," one syndicate source said.

Additional new issuance in the provincial markets is likely over the next week, sources said.

"There is the potential for Quebec to reopen their 10-year they launched last Friday," one source said. "Think that's it for the balance of the week. We've had a fairly busy issuance calendar over the last two weeks so it might be time for the market to have a bit of a breather."

The Province of Quebec (Aa2/A+/DBRS: A) sold C$500 million of 3% medium-term notes due Sept. 1, 2023 at a spread of 119.5 basis points over the Government of Canada benchmark on Friday.

"Quebec is now a big borrower and their budget increased this year's borrowing requirement, so they're going to need a lot of money," another provincial bond source said.

In addition, "Ontario is always a big borrower" and may be in the market with another deal in the coming days, the source said.

Coming up, Canada Housing Trust is expected to sell C$5 billion to C$5.5 billion in a reopening of mortgage bonds the week of Dec. 10, an informed source said on Tuesday.

In the high-yield bond markets, Brookfield Residential Properties Inc. began a roadshow for its U.S. dollar-denominated $400 million offering of eight-year senior notes, according to a syndicate source.

Trilogy Energy Corp. continued its roadshow for C$250 million of seven-year senior notes (/B/DBRS: B) on Tuesday, a source said.

"We're expecting that to come at the end of the week or early next week," the source said.

Bond spreads were flat to weaker on the day.

The Bank of Canada kept its overnight lending rate at 1% on Tuesday as expected and was "pretty much a non-event," a bond source said.

The Markit CDX Series 18 North American investment-grade index ended unchanged at a spread of 100 bps.

The Markit CDX Series 18 North American high-yield index rose to 99.95 from 99.75.

Provincial five- and 10-year notes traded flat.

In the secondary market, Ontario's reopened notes firmed 1 bp, a source said.

"There's a little selling pressure on the long end," the source said. "Long provincial spreads widened by a basis point or so today and we widened 1½ basis points yesterday."

Spreads are expected to improve in the next couple of weeks on a limited supply of new provincial deals.

"We've had a lot of coupon money in Dec. 1, Dec. 2, so there are investors with a lot of cash at the moment, so we're fairly optimistic we'll see some spread performance," the provincial bond source said. "On Dec. 15, we have a Canada Housing Trust maturity for C$19 billion and a coupon payment on Dec. 15 as well, so there's a lot of cash out there and a lot of cash coming on Dec. 15."

Government bonds were mixed on Tuesday. Canada's 10-year note yield closed unchanged at 1.70%. The 30-year bond yield rose 1 bp to 2.30%.

Canada Housing to reopen bond

Canada Housing Trust (Aaa/AAA/DBRS: AAA) is expected to sell C$5 billion to C$5.5 billion in a reopening of its 1.7% mortgage bonds due Dec. 17, 2017 the week of Dec. 10, an informed source said on Tuesday.

The offering likely will price on Dec. 13, the source said.

The trust first sold C$5 billion of the Canada mortgage bonds on Sept. 19 at 99.777 to yield 1.745%, or a spread of 34 bps over the Government of Canada benchmark.

The trust is a unit of Canada Mortgage and Housing Corp., which provides financing, mortgage loan insurance, mortgage-backed securities and housing policy and programs.

Brookfield starts roadshow

Brookfield Residential Properties began a roadshow on Tuesday for a $400 million offering of eight-year senior notes, according to a syndicate source.

The deal is set to price during the Dec. 10 week.

Credit Suisse Securities (USA) LLC, Citigroup Global Markets and J.P. Morgan Securities LLC are the joint bookrunners.

The Rule 144A for life notes will become callable in three years at par plus 75% of the coupon.

The notes feature a three-year 35% equity clawback and a 101% poison put.

The Calgary, Alta.-based land developer and homebuilder plans to use the proceeds to refinance debt.

Trilogy Energy deal ahead

Trilogy Energy as previously reported is expected to continue the roadshow for a C$250 million offering of seven-year senior notes (/B/DBRS: B) through Thursday, a source said.

The notes have been talked to yield in the low to mid 7% area.

The roadshow will continue in Toronto on Wednesday and finish in Boston on Thursday.

Pricing is expected late in the week or early in the upcoming week, the source said.

The Rule 144A-eligible notes will price as a private placement.

Scotia Capital Inc., RBC Capital Markets and BMO Capital Markets Corp. are the joint bookrunners.

The issue is guaranteed by the company's restricted subsidiaries.

The notes will be non-callable for three years. The offering has a 101% change-of-control put and a Canadian call at 100 bps over the Government of Canada benchmark.

The Calgary, Alta.-based petroleum and natural gas-focused energy corporation plans to use the proceeds for a non-permanent repayment of debt under Trilogy's existing credit facility, capital expenditures and general corporate purposes.

Ontario raises C$1 billion

The Province of Ontario's 1.9% notes due 2017 that reopened on Monday traded 1 bp tighter at 55 bps bid on Tuesday, a source said.

The province (Aa2/AA-/DBRS: AA) sold C$1 billion of the five-year notes at 100.176 to yield 1.861%, or a spread of 56 bps over the Government of Canada benchmark.

The deal included a C$600 million carve-out for one investor, which left C$400 million for the syndicate, the source said.

CIBC World Markets Inc. was the lead manager.

The province first sold the issue on Jan. 17, 2012 in a C$1.25 billion offering at 99.744 to yield 1.948%, or a spread of 58.5 bps over the government benchmark.

The issue last was reopened on Oct. 25 in a C$1 billion offering that priced at 99.672 to yield 1.971%, or a spread of 52.5 bps over the Government of Canada benchmark. The total outstanding is C$4.25 billion.

New Brunswick sells add-on

The Province of New Brunswick (Aa2/A+/DBRS: A) priced C$150 million in a reopening of its 3.55% bonds due June 3, 2055 at 101.748 to yield 3.471%, according to a bond source.

The series HG bonds priced at a spread of 116 bps over the Government of Canada benchmark.

TD Securities Inc. was the lead manager.

The province sold C$165 million in two offerings of the bonds in January. The total outstanding is C$315 million.

Hydro-Quebec prices

Hydro-Quebec raised C$500 million in a reopening of its 5% debentures due Feb. 15, 2050 that settled on Tuesday, according to a bond source.

The series JN debentures (Aa2/A+/DBRS: A) priced at 130.962 to yield 2.504%, or a spread of 119.5 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the lead manager.

Hydro-Quebec originally sold the debentures on Jan. 15, 2009. The issue last was reopened on July 19 to sell C$500 million. The summer add-on priced at 132.648 to yield 3.444%, or a spread of 117.5 bps over the Government of Canada benchmark.

The total outstanding is C$6 billion.

Hydro-Quebec is a Quebec government-owned electric power generator and distributor.

Toronto sells C$300 million

The City of Toronto (Aa1/AA/DBRS: AA) sold C$300 million of 3.8% 30-year debentures at 99.662 to yield 3.819%, a bond source said on Tuesday.

The debentures due Dec. 13, 2042 priced at a spread of 151 bps over the Government of Canada benchmark.

Scotia Capital was the lead manager.

The city had been expected to price C$300 million to C$400 million in the offering first reported on in early November.

Paul A. Harris contributed to this review

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