CU, Daimler Canada, Brookfield tap markets; CU achieves record low coupon for 30-year term

By Cristal Cody

Prospect News, Sept. 5 - CU Inc. raised C$700 million in two tranches of long debentures on Wednesday, with the 30-year term securing a record low coupon in Canada, a source with the company said.

The deal was very positive, the source said.

"We're very pleased with it," the source said. "It's the lowest coupon achieved in Canada to date for the 30-year issuance and it represents the lowest long-term debt issuance that our company has participated in."

The cheaper results are a combination of still historic low Government of Canada benchmark yields "and significant demand for utility investments resulting in attractive credit spreads," the source said.

Also in the market on Wednesday, Daimler Canada Finance Inc. brought C$600 million in two tranches of notes in a private placement, an informed bond source said.

Intact Financial Corp. (Baa1//DBRS: A) also came with a C$50 million add-on to its 5.16% series 5 30-year medium-term notes late in the day.

In other action, Brookfield Office Properties Inc. sold C$200 million of preferred stock due Dec. 31, 2018.

Thursday likely will see some pricing activity as well, bond sources report.

"It just depends on who's teamed up to go tomorrow," one source said. "We expect supply over the next couple of weeks."

A busy roadshow calendar is ahead, as well, with updates planned by Aeroports de Montreal on Thursday and Friday and Holcim Finance (Canada) Inc. in the week ahead.

The Markit CDX Series 18 North American investment-grade index was flat at a spread of 101 basis points.

The Markit CDX Series 18 North American high-yield index inched up to 98.38 from 98.37.

Canadian government bonds closed lower following the Bank of Canada's decision to leave the 1% overnight rate unchanged. The 10-year note yield rose 2 bps to 1.76%, and the 30-year bond yield closed up 2 bps at 2.33%.

CU sells C$700 million

CU raised C$700 million in two tranches of long debentures (/A/DBRS: A) on Wednesday, a source close to the sale said.

The company priced C$500 million of 3.805% debentures due Sept. 10, 2042 at par to yield a spread of 147 bps over the Government of Canada benchmark.

In the second tranche, CU sold C$200 million of 3.825% debentures due Sept. 11, 2062 at par to yield 149 bps over the Canadian government benchmark.

RBC Dominion Securities Inc., BMO Nesbitt Burns Inc., TD Securities Inc. and Scotia Capital Inc. were the lead managers.

Proceeds will be used to finance capital expenditures, to repay existing debt and for other general corporate purposes of ATCO Electric Ltd. and ATCO Gas and Pipelines Ltd.

Alberta-based CU holds rate regulated utility operations in pipelines, natural gas and electricity transmission and distribution and is a subsidiary of Canadian Utilities Ltd., which is part of the ATCO Group of Companies.

Daimler Canada prices

Daimler Canada Finance (A3/A-DBRS: A) sold C$600 million in two tranches of notes in a private placement on Wednesday, an informed bond source said.

In the first tranche, Daimler Canada priced C$200 million of two-year floating-rate notes at par to yield 69 bps over the three-month Canadian Dealer Offered Rate.

Daimler Canada sold C$400 million of 2.33% three-year fixed-rate notes in the second tranche at 99.997 to yield 2.331%, or a spread of 113 bps over the Canadian bond curve.

RBC Capital Markets Corp., Scotia Capital and TD Securities were lead managers. CIBC World Markets Inc. and HSBC Capital (Canada) Inc. were co-managers.

The Ontario-based company is the Canadian financing arm for Daimler AG.

Brookfield sells preferreds

Brookfield Office Properties said on Wednesday that it sold C$200 million of cumulative class AAA rate reset preference shares to yield 4.6% annually for the initial period ending Dec. 31, 2018.

Brookfield Office Properties sold 8 million shares of the series T preferred stock (/BB+/P-3/DBRS: Pfd-3) at C$25.00 per share.

CIBC World Markets, RBC Capital Markets, Scotia Capital and TD Securities were the lead managers.

The deal includes an option to upsize by an additional C$50 million, or 2 million shares.

The preferred shares will be listed on the Toronto Stock Exchange.

After the initial maturity, the dividend rate will be reset every five years at a rate equal to the five-year Government of Canada bond yield plus 316 bps.

Holders of the shares will have the right, at their option, to convert their shares into series U cumulative class AAA preference shares on Dec. 31, 2018 and on Dec. 31 every five years thereafter. The series U shares will yield cumulative quarterly floating dividends at a rate equal to the 90-day Government of Canada Treasury bill yield plus 316 bps.

Proceeds from the offering will be used to redeem Brookfield Office Properties' 6% series F cumulative class AAA preference shares and for general corporate purposes.

Toronto-based Brookfield is a Canadian real estate investment trust that owns, develops and manages office properties in the United States, Canada and Australia.

Roadshows scheduled

Aeroports de Montreal (A1//DBRS: A) is expected to kick off a two-day roadshow on Thursday, a market source said.

The Greater Montreal airport authority will be in Montreal and Toronto to update investors during the roadshow, currently classified as a non-deal update.

CIBC World Markets and RBC Capital Markets are the hosts.

Aeroports de Montreal manages the Trudeau and Mirabel airports.

Holcim Finance update

In the week ahead, Holcim Finance (Canada) (Baa2/BBB/) plans to hold a non-deal roadshow in Toronto on Sept. 11 and Montreal on Sept. 12 to update investors, a bond source said on Wednesday.

CIBC World Markets and HSBC Capital (Canada) are the roadshow hosts.

The cement company is a subsidiary of Concord, Ont.-based Holcim (Canada) Inc. and Swiss-based Holcim Group.

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