Upsized Veresen tightens in aftermarket; E-L Financial to sell preferreds; provincials up

By Rebecca Melvin

New York, March 9 - Veresen Inc.'s upsized C$300 million of five-year bonds priced at 245 basis points over the Bank of Canada treasury curve and then tightened by 5 bps to 10 bps in secondary market trading action, a syndicate source said Friday.

Initially the Veresen five-year tranche was expected to be $250 million in size. Veresen's second tranche, a C$50 million 10-year bond, priced at 300 bps over the curve and wasn't seen in secondary market action due to its small size, the syndicate said.

The Calgary, Alta.-based pipeline and energy company planned to use proceeds to reduce debt, and with its upsizing and "good spread," it was deemed a success.

"There was good demand," the syndicate source said.

Elsewhere, insurance holding company E-L Financial Corp. Ltd. was in the market with an offering of C$100 million of preferred stock. The preferreds have a C$25.00 par and a 5.5% dividend.

There were no other corporate bond pricings Friday.

The Canadian provincial bond market was "kind of quiet" as well, with no new pricings, a provincial bond specialist said.

The secondary provincial market came "in" by a point or two across the curve, the specialist said, pointing to positive U.S. non-farm payrolls data as the catalyst for a firm Canadian provincial market.

U.S. employers added 227,000 jobs in February, which was better than the 200,000 additional jobs analysts expected. The unemployment rate remained unchanged at 8.3%, the U.S. Commerce Department reported.

The Canadian jobs report, to which the bond market didn't respond, was a little weaker than expected.

Provincials flat for week

For the week, the provincial bond market ended essentially unchanged after widening in the first couple of days of the week, then stalling, and then coming back in on a combination of more certainty in regard to the Greek debt swap deal, three successful provincial new issues that promoted better buys in the market, and finally the positive U.S. jobs report.

Both the five-year and 30-year provincials were about 1 bp tighter, and the 10-year was unchanged.

The new deals included C$500 million 10-year bonds priced by the Province of Quebec and C$1.4 billion in new bonds in two tranches priced by the Province of Ontario.

Canadian government bonds remained little changed to slightly lower. The two-year note yield was little changed at 1.18%, and the Canada's 10-year note yield rose slightly to 2.12%.

On Thursday, the Bank of Canada held steady on its 1% overnight lending rate target but issued a more upbeat outlook for the Canadian and global economies, which signaled a potential rate hike sooner rather than later.

Veresen tightens

Veresen's 3.95% five-year, or medium term, notes were priced at 99.942 to yield 3.963%, and the 5.05% 10-year notes, which mature March 14, 2022, priced at 99.635 to yield 5.097%, the syndicate source said.

The five-year notes, which priced at the Government of Canada plus 245 bps, which was the tight end of the marketed range, were another 5 bps to 10 bps tighter in the secondary.

"In secondary trading, there was a rally into the close and they closed fatter than issue," said a syndicate source describing action late Thursday.

Those bonds remained steady on Friday, he said.

The upsized, two-tranche deal was broadly distributed with participation from 55 investors, and unprotected orders received fills in the area of 10%.

The Veresen C$50 million of 10-year notes priced at the Government of Canada curve plus 300 bps, also the tight end of the marketed range. This tranche was in response to reverse inquiry, according to the syndicate.

DBRS Ltd. and Standard & Poor's have assigned credit ratings of BBB (high) and BBB, respectively, to the notes.

The notes were offered through a syndicate of investment dealers co-led by CIBC, TD Securities Inc. and Scotiabank, with CIBC and TD Securities as bookrunners, and including HSBC Securities (Canada) Inc., National Bank Financial Inc. and RBC Capital Markets.

Proceeds will be used to reduce Veresen's outstanding debt and for general corporate purposes.

Settlement is expected to occur Wednesday.

E-L prices preferreds

E-L Financial's C$100 million of preferred shares have a par price of $25.00 per share and a 5.5% annual dividend.

The Regulation S bought deal was brought by a syndicate led by Scotia Capital Inc. and TD Securities Inc.

Net proceeds will contribute to the corporation's capital base to supplement financial resources and for general corporate purposes.

The transaction is subject to regulatory approvals and is expected to close April 2.

Toronto-based E-L Financial is an insurance holding company.

Looking ahead

The Canadian bond market put a quiet ending to the week, and looking ahead, activity was expected to be dampened by the nation's public school break next week.

"That tends to result in quieter activity," a bond source said.

Meanwhile, the provinces are entering their budget season, and while Ontario could come out with a pre-funding issue sometime this month, it was likely that the provincial market would be mostly quiet.

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