Nova Scotia prices add-on; Total Capital Canada sells notes; Yellow Media bonds weaken

By Cristal Cody

Prospect News, June 28 - Canada's provincial bond markets saw one deal from the Province of Nova Scotia, while Total Capital Canada Ltd. priced an offering under its euro medium-term note program.

The provincial bond market in Canada is the only one to see any activity of late and is likely to stay so during the short holiday week, sources said.

The Province of Ontario is expected to be back in the market soon, one provincial bond source said. If any deals are brought, it likely will be on Wednesday, according to sources. Canada's bond markets will close early on Thursday and be closed on Friday for Canada Day, while the U.S. markets will be closed on Monday for Independence Day.

The corporate market remained quiet on Tuesday, sources said.

"There was no corporate issuance last week and there hasn't been any yet this week," one bond source noted. "It seems like the corporate markets are going through a soft patch. Investors seem to be happy to be on the sidelines for corporate deals and are just waiting for new issue supply.

"There's the feeling that investors think credit spreads are going to widen on the back of all this Greek volatility, but that hasn't happened - corporate spreads are in 1 basis point to 2 bps on the day."

The corporate bond market is "absolutely dead," an informed bond source said. "The problem is this is a typical holiday week."

In trading, Yellow Media Inc.'s medium-term notes have "continued to struggle a little bit," according to the corporate bond source. "That's been about the only thing active in the marketplace. The stock continues to go down and the bonds have been discounted a little bit every day."

There was also no word yet on the outcome of Nortel Networks Corp.'s patent auction. Still, a trader said the company's bonds were "well bid for."

In provincial secondary trading, the long bonds of Nova Scotia reopened firmed to 89.5 bps over the government benchmark.

The Nova Scotia bonds came at about 6.5 bps back of the Province of Ontario's 4.65% bonds due June 2041, a source said. Ontario's long bonds were quoted at 83.5 bps earlier on Tuesday. The province (Aa1/AA-/DBRS: AA) reopened the bonds on May 18 at 84 bps.

"Spreads are in on the day, a basis point across the curve," the provincial bond source said. "They were in half a basis point this morning and in a half basis point more since that deal came."

Canadian government bonds fell and yields crept up as investors sought riskier assets after concerns over Greece's debt situation eased. The 10-year note yield rose 7 bps to 2.98%. The 30-year bond yield rose 4 bps to 3.46%.

Nova Scotia taps market

In the lone deal in Canada on Tuesday, the Province of Nova Scotia (Aa2/A+/DBRS: A) sold C$300 million in a reopening of its 4.4% bonds due June 2042 at 101.046 to yield 4.338%, an informed bond source said.

The notes priced at a spread of 90 bps over the Government of Canada benchmark.

Scotia Capital Inc. was the lead manager.

The province initially priced C$300 million in the issue on May 26 at 99.631 to yield 4.422%, or a spread of 91 bps over the government benchmark. The total outstanding is C$600 million.

Total Capital Canada prices

In a European offering, Total Capital Canada priced NOK 600 million of 4% five-year euro medium-term notes (Aa1/DBRS: AA) on Tuesday, according to informed bond sources.

The notes due July 7, 2016 priced at 101.314.

Deutsche Bank AG and TD Securities Inc. were the lead managers.

The notes are guaranteed by parent oil company Total SA, based in Courbevoie, France.

Yellow Media drops

In the secondary market, Yellow Media's investment-grade bonds have dropped C$2.00 to C$3.00 over the past week, an informed bond source said.

The 5.71% notes due 2014 traded Tuesday at 92.5, and the 6½% notes due 2013 traded at 92.5.

"They're all actively being discounted," the source said.

Yellow Media's stock also fell another 11 cents, or 4.44%, on Tuesday to C$2.28. The stock hit a record low on Monday after Credit Suisse and RBC Capital Markets analysts lowered their price targets for the company, which makes Yellow Pages directories.

Montreal-based Yellow Media is expected to close soon on the sale of its division, Trader Corp., in an effort to lower debt.

No winner yet for Nortel

Nortel Networks had yet to disclose the winner of its patent portfolio auction as of press time.

The auction began Monday. Potential bidders included Google Inc., Apple Inc., Research in Motion Ltd., Ericsson SA and RPX Corp.

Intel Corp. and Microsoft Corp. were also whispered to be taking part in the sale.

A trader said that Nortel's bonds were "quiet but well bid for."

He pegged the 10 1/8% notes due 2013 and the 10¾% notes due 2016 at 951/4, up a quarter.

The Toronto-based telecommunications products company filed for Chapter 11 protections in January 2009. Since then, the company has sold off assets to pare down and pay off creditors.

Catalyst flat

A trader saw Catalyst Paper Corp.'s bonds pretty much ending the day where they started, seeing the Richmond, B.C.-based paper manufacturer's 11% senior secured notes due 2016 at 85 bid, 86 offered, while its 7 3/8s were at 61 bid, 63 offered.

"It was just quoted, no activity," the trader said.

Activity down in Sino-Forest

A trader saw not much activity in the various embattled bonds of Sino-Forest Corp. He pegged the Canadian-Chinese timber company's 4¼% busted convertible notes due 2016 at 43 bid, 45 offered, while its 5% busted converts due 2013 were at 47 bid, 49 offered.

Among the company's straight bonds, its 9 1/8% notes scheduled to come due on Aug. 17 were seen unchanged around 85 bid, its 10¼% notes due 2014 at 52 bid and the 6¼% notes due 2017 at 47 bid, 48 offered, also unchanged.

He said he "didn't see a whole lot of [activity] - I saw some markets in them, but not a whole lot. So I don't know how active they were today."

The bonds have been hammered savagely down to present levels over most of the past month, along with the company's Toronto Stock Exchange-traded shares, since the release on June 2 of a scathingly negative research report from Muddy Waters LLC, a Hong Kong-based investment company run by short-seller Carson Block, which accused Sino-Forest of fraudulent dealings and likened its capital raising to "a ponzi scheme." The Mississauga, Ont.-based company, which buys and sells timber in China, has denied the charges.

Paul Deckelman and Stephanie N. Rotondo contributed to this review

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