BCE reopens preferreds; Canadian markets wind down; New Year high-yield deals in the works

By Cristal Cody

Prospect News, Dec. 12 - Canadian financial markets opened the week fairly quiet on Monday as stocks soured on the lack of a resolution to European's financial woes, sources said.

An offering in Canada's preferred stock market priced on Monday. BCE Inc. sold C$250 million, or 10 million shares, in an add-on to its 4.15% series AK cumulative redeemable first preferred stock that first priced in June.

Corporate bond spreads on Monday "widened a touch, but at this time of year activity is very thin," a bond source said. "The markets are winding down. This is probably the last true trading week left."

Primary activity likely will be light over the week, sources noted.

"There might be a couple small deals, but all the major stuff is pretty much over and done with," the source said. "There are Christmas parties and meetings with clients that fill up the calendar for all of next week."

The main offering this week is expected from Canada Housing Trust, which plans to sell five-year fixed-rate Canada Mortgage Bonds. No sale size details were available.

In Canada's high-yield bond market, activity also was thin over the day, a syndicate source said.

"We don't expect we'll see a deal this year. There's nothing in the market at the moment," the source said.

But the high-yield space should heat up at the start of the year.

"We are working on something for the New Year, but it won't be launched until later in January," the source said.

2012 primary calendar eyed

At least a couple other issuers also may be putting together offerings following Scotia Capital Inc.'s late November high-yield conference, according to a source.

Government bonds traded higher on a flight-to-safety bid after Moody's Investors Service said it will review the credit ratings of European countries. Market observers noted not much help emerged from Friday's European Union summit meeting.

Canadian government bond yields fell 2 basis points to 4 bps on the day.

Government bonds were "pretty good today based on a reversal of fortunes in the equity markets," a Canadian bond analyst said.

The 10-year note yield dropped 3 bps to 2.01%. The 30-year bond yield fell 4 bps to 2.61%.

Canadian bond yields saw "new lows today" in reaction to the European debt crisis, following fresh record low yields in five-year, 10-year and 30-year bonds on Thursday, the analyst said.

Statistics Canada said on Monday that Canada's net foreign debt dropped C$31.8 billion to C$189.5 billion at the end of the third quarter, led by the depreciation of the Canadian dollar against major foreign currencies.

During the quarter, the Canadian dollar lost 8.0% against the U.S. dollar, 5.3% against the British pound, 11.7% against the Japanese yen and 0.4% against the euro.

BCE reopens preferreds

In its new offering in Canada on Monday, BCE sold C$250 million, or 10 million shares, in an add-on to its series AK cumulative redeemable first preferred stock.

The company sold the 4.15% preferred stock at C$25.00 per share.

The preferred stock pays a fixed quarterly cash dividend of C$0.25938 through the initial fixed rate period ending Dec. 31, 2016. The dividend rate will reset on Dec. 31, 2016 and every five years thereafter at 188 bps over the five-year Government of Canada bond yield.

RBC Capital Markets Corp., BMO Capital Markets Corp. and TD Securities Inc. were the lead managers.

The deal includes an over-allotment option of C$30 million, or an additional 1.2 million shares.

The preferreds are redeemable by BCE on or after Dec. 31, 2016.

Proceeds from the sale will be used for general corporate purposes.

BCE initially sold C$345 million, or 13.8 million shares, of the series AK preferreds to yield a 4.15% annual dividend for the initial five-year fixed-rate period in a deal that closed on July 5.

BCE is the parent company of Montreal-based Bell Canada, Canada's largest telecommunications company.

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