Canadian market snaps up auto deals from Toyota, Honda; Canada Housing sells C$5.5 billion

By Cristal Cody

Prospect News, Feb. 15 - Toyota Credit Canada Inc. brought an upsized C$400 million of five-year medium-term notes and Honda Canada Finance Inc. raised an upsized C$300 million of three-year floating-rate notes on Wednesday, informed sources said.

Toyota Credit's deal had more than 40 buyers on the book, one source said.

"Not surprising to see some auto issuance right now," a source said.

On Thursday, BMO Capital Markets Corp. will hold an auto finance investor conference with a number of issuers, including Toyota Credit Canada and Honda Canada Finance scheduled to present, the source said.

Also in the market, Canada Housing Trust sold C$5.5 billion in reopenings of two tranches of Canada Mortgage Bonds, an informed bond source said.

Though issuance has remained steady over the week, market tone was weaker on Wednesday.

Investment-grade bonds widened. The Markit CDX Series 17 North American high-grade index eased 3 basis points to a spread of 101 bps.

"Things opened up positively, but then things deteriorated throughout the day as more negative U.S. numbers were coming out and there was more uncertainty toward Greece," a source said. "Tone deteriorated throughout the day, but these corporate issues were able to get priced, no problem."

Government bonds were mostly flat. Canada's 10-year note yield fell 1 bp to 2.01%. The 30-year bond yield was unchanged at 2.59%.

Canada Housing prices

On the government side, Canada Housing Trust (Aaa/AAA/DBRS: AAA) sold C$5.5 billion in two add-ons to Canada Mortgage Bond issues on Wednesday, an informed bond source said.

The trust sold C$3 billion, upsized from C$1 billion, of the series 44 five-year floating-rate notes at 100.37 with a coupon of 20 bps over the Canadian Dealer Offered Rate.

"Books were north of C$4 billion," a syndicate source said. "It priced tighter than where it launched. It's relatively cheap compared to their fixed-asset swap levels."

In the second tranche, Canada Housing sold C$2.5 billion of the 2.65% series 45 10-year fixed-rate bonds to yield 2.486%, or a spread of 48 bps over the Government of Canada benchmark.

Canada Housing Trust launched the offering on Tuesday.

CIBC World Markets Inc. and BMO Capital Markets were the lead managers.

Proceeds will be used to acquire insured residential mortgages.

Canada Housing was in the market last on Dec. 15 with the sale of C$5.5 billion of 1.85% Canada Mortgage Bonds due 2016, priced at a spread of 36 bps over the Government of Canada benchmark.

In the secondary market, the new 10-year bonds traded at issuance but likely will widen ½ bp based on the trust's older 10-year notes trading going out at 48.5 bps, a source said.

The floating-rate notes also traded wrapped around issuance.

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.

Toyota Credit Canada upsizes

Toyota Credit Canada priced an upsized C$400 million of 2.45% medium-term notes (Aa3/AA-/DBRS: AA) at 99.991 to yield 2.452% in a private placement on Wednesday, informed sources said.

The notes due Feb. 27, 2017 priced at a spread of 103 bps over the Canadian bond curve.

The deal was launched at C$250 million in size at 105 bps, plus or minus 2 bps.

BMO Capital Markets, CIBC World Markets, RBC Capital Markets Corp. and TD Securities Inc. were the managers.

The notes were seen trading about 2 bps tighter in the secondary market, a source said.

The Markham, Ont.-based issuer is a subsidiary of Toyota Motor Corp.

Honda Canada sells floaters

Honda Canada Finance raised an upsized C$300 million of three-year floating-rate notes at par on Wednesday, a syndicate source said.

The notes priced at a spread of 95 bps over the Canadian Dealer Offered Rate. The deal was upsized from C$250 million.

BMO Capital Markets was the bookrunner. CIBC World Markets, RBC Capital Markets and TD Securities were the co-managers.

The company is an affiliate of Honda Motor Co., Ltd.

Power Corp. of Canada active

Power Corp. of Canada tapped the Canadian market on Wednesday with an offering of C$150 million of preferred stock to yield 5.6%.

The company sold 6 million shares of series G non-cumulative first preferred stock at C$25.00 per share.

BMO Capital Markets, RBC Capital Markets and Scotia Capital were the lead managers.

The deal includes an over-allotment option of 2 million shares, or an additional C$50 million.

Proceeds will be used to supplement the company's financial resources and for general corporate purposes.

The Montreal-based company is a holding company with interests in financial services, communications and other business sectors in North America, Europe and Asia.

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