VW Credit Canada, Enbridge Income Fund sell notes, Canada's Talisman Energy upsizes issue

By Cristal Cody

Prospect News, Nov. 8 - VW Credit Canada, Inc. and Enbridge Income Fund priced high-grade debt in the Canadian market on Monday to robust demand ahead of additional sales by other issuers expected on Tuesday, sources said.

"It's remained positive and supportive of new issuance," a source said. "It's a little softer but investors still have an appetite for new issue supply, and new issues continue to go well."

In the United States, Canada's Talisman Energy, Inc. sold an upsized $600 million of 3.75% senior notes due 2021, a source said late in the day.

New corporate offerings are expected to price in Canada on Tuesday during the short holiday week, a source said. The bond markets are closed on Thursday, and Friday is expected to be quiet amid new economic data.

"Tomorrow is expected to see some new issuance, but with Remembrance Day and an early close on Wednesday, that's likely it for the rest of the week," a source said. "The remainder of November should be busy."

Canadian high-yield debt was mostly quiet on the day, one source said.

"It's pretty much unchanged," the source said. "People are still digesting earnings. Everything's either holding firm or slightly higher. In Canadian high yield, it feels a little bit short in inventory on the dealer side."

The new 10.125% senior notes due 2015 that Toronto-based Livingston International Inc. priced a week ago firmed "a touch better" in trading on Monday, up a point from Friday's quote of 102.5, the source said.

Government bond yields rise

Canadian government bond yields rose in line with U.S. Treasuries on weaker economic data and Federal Reserve officials' comments evaluating the effectiveness of quantitative easing, said RBC Capital Markets Corp. fixed income strategist Kam Bath.

The Canadian 10-year note yield rose to 2.888% from 2.86%. The two-year note yield eased to 1.526% from 1.48%.

U.S. Treasuries slipped, sending short-dated yields up slightly as the government auctioned $32 billion of three-year debt. The yield on the 10-year Treasury note rose 2 bps to 2.55%. The two-year Treasury note yield added 3 bps to 0.4%.

In economic data, Canadian housing starts fell 9.2% in October to a seasonally adjusted annual pace of 167,900, the most since April 2009, according to Canada Mortgage and Housing Corp.

"They were softer than expected," Bath said. "But the yields are higher in line with the U.S. following the sell-off after the strong payroll report last week and some hawkish comments from Fed officials [that] weighed on the front end of it."

Trading was mostly quiet in Canadian government bonds ahead of the government's auction of C$3 billion of two-year notes planned for early Wednesday. Demand is expected to go well, "given the interest in the Canadian dollar recently," Bath said.

VW Credit tightens from talk

In the Canadian high-grade market, VW Credit Canada sold C$550 million of 2.55% three-year notes, a source connected with the offering told Prospect News on Monday.

"The deal went extremely well," the source said. "They did two days of investment banking last week and built a strong demand for the name."

The notes due Nov. 18, 2013 priced at 99.871, or a spread of 88 bps over the Canadian government curve, to yield 2.595%. The offering priced tighter than price talk of 90 bps.

"A well-oversubscribed book" allowed the issuer to price the offering 2 bps tighter that guidance, the source said.

The lead bookrunners were TD Securities Inc. and HSBC Securities (Canada) Inc.

The notes are guaranteed by parent company Volkswagen AG.

In secondary trading, the notes continued to perform well, a source said.

"They're around 5 basis points tighter today," the source said.

VC Credit Canada is the Quebec-based financial service provider for Volkswagen Group Canada dealerships.

Enbridge sells 10-years

Earlier in the day, Enbridge Income Fund sold C$100 million of 10-year senior medium-term notes (DBRS: BBB), according to a source.

The 4.85% notes are due Nov. 12, 2020 and priced at 99.906 to yield 4.862%, or 195 bps over the Canadian government benchmark.

The bonds were primarily sold to retail investors, the source said.

CIBC World Markets Inc. was the lead bookrunner for the deal.

Proceeds will be used to repay debt, including loans under the fund's credit facilities.

Calgary, Alta.-based Enbridge Income Fund is an unincorporated open-ended trust that focuses on energy infrastructure assets.

Talisman Energy prices

In the United States, Talisman Energy priced an upsized $600 million of 3.75% senior notes due 2021 on Monday at a spread of Treasuries plus 128 bps, an informed source said late in the day.

The size had initially been $500 million.

The notes (Baa2/BBB) sold at 99.242 to yield 3.839%.

Active bookrunners were Citigroup Global Markets Inc. and J.P. Morgan Securities LLC. Passive bookrunners were RBC Capital Markets Corp. and RBS Securities Inc.

Proceeds are going toward general corporate purposes, including capital expenditures and repayment of debt.

The upstream oil and gas company is based in Calgary, Alta.

Andrea Heisinger contributed to this review

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