Sydney Airport sells Maple bonds; Quebec reopens long bonds; Canada Housing launches add-on

By Cristal Cody

Prospect News, June 14 - The Canadian bond markets picked up on Tuesday with a Maple deal from Sydney Airport Finance Co. Pty. Ltd. of Australia following a reopening from the Province of Quebec.

A few bond offerings in the corporate and government markets also are in the pipeline, informed sources said.

Canada Housing Trust launched a reopening of its 2.75% mortgage bonds due June 15, 2016 to raise C$6 billion, an informed bond source said Tuesday.

In the corporate bond market, Trader Corp. is expected to bring an issue.

"After the CMBs price tomorrow, we do expect things to be relatively busy," a bond source said. "A number of corporate deals are in the pipeline and potentially a few provincial issuers."

Because Quebec came with a reopening of its long bonds on Monday, it is expected to "take a pause" from the market for a bit, a source said.

Other companies that are expected to bring bond deals include Calgary, Alta.-based CCS Corp. and Husky Injection Molding Systems Ltd.

In the secondary market, Armtec Holdings Ltd.'s bonds fell another 3½ points on the bid side ending the day.

The high-yield market, though, overall was a "little bit firmer today," a bond source said. "There's a better tone. I'm cautiously optimistic. It's still pretty weak market conditions."

Provincial bond spreads "have been fairly stable," a government bond source said. "Spreads are in about a [basis point] on the day in 10s and longs and unchanged in fives."

Sino-Forest Corp. got a boost in trading following the company's earnings conference call on Tuesday. Though the company reported a swing to loss, it also addressed the recent fraud accusations made by Muddy Waters Research and said that its largest shareholder was still in its corner.

Meanwhile, OPTI Canada Inc.'s bonds inched up as well. The debt has been moving modestly higher since late last week ahead of a Wednesday coupon.

Canadian government bonds were mixed as Treasuries dropped on the move into stocks. Canada's 10-year bond yield fell 2 bps to 3.07%. The 30-year bond yield rose 3 bps to 3.5%.

Sydney Airport prices

Sydney Airport priced an upsized C$225 million of Maple bonds due June 27, 2018 at 99.996 to yield 4.602% on Tuesday, an informed bond source said.

The senior notes (Baa2//BBB) priced at a spread of 190 bps over the Canadian bond curve.

Sydney Airport held a roadshow the previous week and launched the deal at C$200 million. Previous estimates pegged the deal size at C$300 million to C$500 million.

Scotia Capital Inc. and Bank of America Merrill Lynch were the bookrunners.

The airport is majority owned by infrastructure fund MAp Group Ltd. and affiliates.

Quebec sells add-on

The Province of Quebec (Aa2/A+/DBRS: A) sold C$500 million in a reopening of its 5% bonds due Dec. 1, 2041 at 110.749 to yield 4.359%, an informed bond source said Tuesday.

The bonds priced at a spread of 89 bps over the Government of Canada benchmark bond.

National Bank Financial Inc. was the bookrunner.

In the secondary market, the bonds traded unchanged at 89 bps.

Quebec previously reopened the issue on May 18 to sell an add-on of C$550 million at a spread of 91 bps over. The total outstanding now is C$7.5 billion.

Canada Housing launches

Canada Housing Trust launched a reopening of its 2.75% mortgage bonds due June 15, 2016 to raise C$6 billion, an informed bond source said Tuesday.

The bonds (Aaa/AAA/DBRS: AAA) are expected to price Wednesday on talk of 25 bps over the Government of Canada benchmark bond.

CIBC World Markets Inc. is the lead manager. Co-managers are BMO Capital Markets Corp., RBC Capital Markets Corp. and TD Securities Inc.

Canada Housing originally sold C$6.25 billion of the notes on March 17 at a spread of 26.5 bps over the government benchmark.

Canada Housing Trust is a unit of Canada Mortgage and Housing Corp. Canada Mortgage and Housing is a provider of mortgage loan insurance, mortgage-backed securities and housing finance programs.

Trader Corp. in market

Trader Corp. is expected to be in the Canadian market with a bond offering, an informed bond source said Tuesday.

"Nothing on size, just speculation," a high-yield bond source said.

RBC Capital Markets Corp. is the bookrunner.

Proceeds will be used to fund the company's sale from its parent company, Montreal-based Yellow Media Inc., to London-based private equity group Apax Partners.

Etobicoke, Ont.-based Trader Corp. is a print and online media publisher in the automotive, real estate, merchandise and employment sectors. Yellow Media said the real estate and job businesses are excluded from the deal.

Armtec falls

Armtec's 8 7/8% senior notes due Sept. 22, 2017 dropped to 90.00 bid, 94.00 offered on Tuesday, a high-yield bond source said Tuesday afternoon.

The bonds were quoted on Monday at 93.5 bid, 95.5 offered.

Standard & Poor's and DBRS lowered the company's debt ratings on lower first-quarter earnings results. In addition, Armtec suspended its quarterly dividend.

Armtec is a Guelph, Ont.-based manufacturer and marketer of industrial infrastructure products and engineered construction solutions.

Sino-Forest higher post-call

Sino-Forest was again a "popular name," a trader said, following the company's earnings conference call on Tuesday.

The trader said the bonds ended "a few points better," the 6¼% notes due 2017 around "61-ish" and the 10¼% notes due 2014 at 68 bid, 69 offered.

Another trader saw the company's 10¼% notes due 2014 up 2 points on the day, at 68 bid, while seeing its 6¼% notes due 2017 1½ points higher, at 61 bid.

He saw "lighter volume" in its 9 1/8% notes that are scheduled to come due on Aug. 17 - "call them two-month paper, if you will," he said - pegging those bonds up by 1 point at 91½ bid.

He meantime saw the company's 5% convertible notes due 2013 offered at 63 bid and its 4¼% convertibles due 2016 offered at 52.

At another desk, a market source saw the 101/4s ending the day at 66½ - but throwing out the several smaller late-session trades that dropped the bonds to that level, the bonds ended at 68 bid on a round-lot basis, up 2 points on the day, with $16 million having changed hands.

The 61/4s were even busier, with over $22 million having traded. Those bonds closed at 61 bid - up 1½ points from Monday's closing level, but a 5-point jump from the previous round-lot close at 56 on Friday. Most of the upside activity took part in the latter part of the day.

But even with the advances, the company's bonds still remain well below the trading levels near or even above par that they had held before the June 2 release of the Muddy Waters report, which caused the notes to swoon precipitously and which absolutely devastated its Toronto Stock Exchange-traded shares. Those shares have lost around 75% of their pre-report strength from levels above C$18.21.

On Tuesday, the shares - which on Friday had plunged more than 13% on over five times the usual volume but which then rebounded on Monday, gaining back 11% on about twice the normal activity level - returned to the downside, plummeting by C$1.62, or 32.53%, to close at C$3.36. Investors were apparently dismayed by the company's warning, delivered during the conference call, that it would take several months for an independent committee appointed to review the company's finances in the wake of the Muddy Waters report to complete its task. Volume of 16 million shares was more than four times the average daily turnover.

OPTI up ahead of coupon

OPTI Canada's debt traded up "a little bit," according to a trader.

He saw the subordinated paper - the 7 7/8% and 8¼% notes due 2014 - close around 46. Another trader also pegged the notes around 46, though he said that was in the "same sort of context" that they had been in previously.

The market is waiting to see if the Calgary, Alta.-based oilsands company will make a coupon payment on Wednesday.

"I think they do," the first trader said. At the end of the last quarter, the company had about C$300 million on the balance sheet, the trader said. He remarked that he thought the coupon totaled about C$60 million, "so they should have plenty of dough."

"[The bonds] traded off then started to rebound [recently]," the second trader said. Given such, "I would think there are more people in the camp thinking they are going to make a payment."

The company has struggled to bring its Long Lake joint venture project with Nexen Inc. up to full production due to operational issues. Earnings have disappointed time and time again, and OPTI has been reviewing its strategic alternatives since 2009, with no plan yet announced.

Late Tuesday night, the company announced that it will not make the coupon payment on its $1 billion 8¼% notes and $750 million 7.785% notes. It will make the coupon payment on its $525 million first-lien notes.

Paul Deckelman and Stephanie N. Rotondo contributed to this review

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.