H&R REIT taps retail market; corporate bonds end stronger; primary to stay active Friday

By Cristal Cody

Prospect News, Oct. 27 - The Canadian bond markets stayed quiet through most of Thursday while investors digested reports of a European debt resolution, until late afternoon when H&R Real Estate Investment Trust tapped the retail market for C$100 million of senior debentures.

Stocks rallied on the news that European leaders had reached a deal to raise the bailout fund. More details, though, are not expected until November.

It seemed most bond issuers were "waiting for everything to settle down and find out exactly where the cards fall before they go out and do a deal," a source said. "It's too volatile right now to do anything."

H&R REIT's deal came late in the day.

"Size is not final," a source said Thursday.

The deal is targeted to retail investors, and sizing will be finalized on Friday, the source said.

Also on Friday, Sherritt International Corp. is expected to sell C$300 million of seven-year senior notes (DBRS: BB) after a two-day roadshow.

Cara Operations Ltd. also was expected to sell C$75 million of senior second-lien guaranteed notes this week after wrapping a roadshow the previous week.

"No news," one syndicate source said Thursday on timing.

The Canadian dollar-denominated sector of the forward calendar is notably active with C$550 million coming from three issuers, a sellside source observed on Thursday.

The biggest is Sherritt International's offering via joint bookrunners GMP Securities and National Bank Financial. Scotia Capital is the co-manager.

The Toronto-based miner and refiner's debt refinancing deal is big, in terms of the Canadian market, according to the banker who keeps an eye on high-yield primary market activity which takes place north of the 49th Parallel.

Sherritt could price on Friday but may need another day or two to get the book completely built, the source added.

Also, GreenField Ethanol Inc. is in the market with a C$175 million offering of five-year senior second-lien notes (/B+//DBRS: B). The deal is expected to price after the roadshow ends on Wednesday.

Both deals from GreenField Ethanol and Cara are being led by Scotia Capital, and both are likely to come in the week ahead, the banker said.

Corporate bonds traded stronger over the day on Thursday.

The Markit CDX Series 17 North American high-grade index firmed 13 basis points to a spread of 113 bps.

Canadian government bonds continued losses and stocks rallied on the European news. The 10-year note yield closed up 8 bps to 2.48%. The 30-year bond yield rose to 3.13% from 3.05%.

"Rates are up about 15 [bps] to 20 [bps] across the curve," a bond source said earlier in the day. "Tens and 30s are most impacted. Not much change on the front end of the curve."

H&R REIT sells debentures

Late afternoon, H&R Real Estate Investment Trust sold C$100 million of 4.9% senior debentures (DBRS: BBB) at par.

The series E debentures due Feb. 2, 2018 priced at a spread of 295.6 bps over the Canadian bond curve, an informed bond source said.

The deal, targeted to retail investors, still has room to grow, and sizing will be finalized on Friday, the source said.

CIBC World Markets Inc. and RBC Capital Markets Corp. were the bookrunners.

The proceeds will be used to repay bank debt, to fund future property acquisitions and for general trust purposes.

H&R REIT last was in the market with a debt sale on Jan. 20, 2011 of 4.778% series D senior debentures due July 27, 2016, priced at a spread of 208.2 bps over the Government of Canada benchmark.

Downsview, Ont.-based H&R REIT owns office, single-tenant industrial and retail properties.

Paul A. Harris contributed to this review

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