DirectCash sells C$125 million in inaugural issue; TransAlta taps market; Vermilion flat

By Cristal Cody

Prospect News, Aug. 2 - DirectCash Payments Inc. sold its first bond on Thursday tighter than guidance following a roadshow earlier in the week.

"Obviously the lower the rate, the better, but where we ended up at 8 1/8% was a very attractive rate for the company, and bondholders have a significant amount of upside," DirectCash Payments president and chief executive officer Jeffrey Smith said in an interview.

DirectCash priced C$125 million of seven-year senior notes (B3/B/) at par to yield 8 1/8% on Thursday, tighter than yield talk of 8¼%.

The deal was "well oversubscribed, pretty much double oversubscribed so it was very well received," Smith said. "We had a substantial number of investment groups, as well as a lot of interest in Canada and the U.S. There were U.S. buyers - that was good to see."

In other primary activity in Canada, TransAlta Corp. raised C$150 million in an offering of cumulative redeemable rate reset first preferred shares.

Vermilion Energy Inc.'s 6½% senior notes due 2016 stayed tight but unchanged in secondary trading following the company's weaker second-quarter earnings release on Thursday, a source said.

Corporate bonds ended weaker on the day.

The Markit CDX Series 18 North American investment-grade index eased 3 basis points to a spread of 109 bps.

The Markit CDX Series 18 North American high-yield index fell to 96.67 from 97.20.

Government bonds traded higher following the lack of action by the European Central Bank. Canada's 10-year note yield dropped 4 bps to 1.67%. The 30-year bond yield closed 5 bps lower at 2.25%.

DirectCash tighter than talk

DirectCash Payments sold C$125 million of the notes due Aug. 8, 2019 on a private placement basis in Canada and in the U.S. markets under Rule 144A.

BMO Capital Markets Corp. was the lead manager.

DirectCash sold the notes in conjunction with a C$65 million offering of common shares that closed on Monday.

Proceeds from the notes and the common shares will be used to reduce the company's outstanding senior and bridge debt from the acquisitions of Customers Ltd. in Australia and InfoCash Holdings Ltd. in the United Kingdom.

Calgary, Alta.-based DirectCash is a provider of ATMs, debit terminals and prepaid products.

TransAlta sells C$150 million

TransAlta said on Thursday that it sold C$150 million of cumulative redeemable rate reset first preferred shares (Ba2/P-3/DBRS: Pfd-3) to yield a 5% annual dividend for the initial period ending Sept. 30, 3017.

The company sold 6 million shares of the series E stock at C$25.00 per share.

CIBC World Markets Inc., RBC Capital Markets Corp. and Scotia Capital Inc. were the lead managers.

The deal includes an over-allotment option of C$75 million, or 3 million shares.

The dividend rate will reset every five years at a rate equal to the five-year Government of Canada bond yield plus 365 bps.

Holders will have the right to convert their shares into series F cumulative redeemable floating-rate reset first preferred shares on Sept. 30, 2017 and on Sept. 30 every five years thereafter. Series F shareholders will be entitled to receive cumulative quarterly floating dividends at a rate equal to the three-month Government of Canada treasury bill yield plus 365 bps.

Proceeds from the sale will be used to partially fund capital projects, for other general corporate purposes and to reduce short-term debt.

TransAlta is a Calgary, Alta.-based power company.

Vermilion unchanged

In the secondary market, Vermilion Energy's 6½% senior notes due 2016 traded unchanged on Thursday at 105 bid, a bond source said.

The company sold C$225 million of the notes (/BB-/DBRS: BB) at par on Feb. 3, 2011.

Vermilion Energy said on Thursday that second-quarter earnings dropped to C$37.82 million, or 39 cents a share, from C$81.43 million, or 90 cents a share, in the same period a year ago. Revenue fell to C$246.54 million in the quarter ended June 30 from C$278.3 million in the year-ago period.

Vermilion Energy is a Calgary, Alta.-based oil and gas producer.

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