AltaLink Investments prices C$200 million deal; corporates, including high yield, weaken

By Rebecca Melvin

New York, May 31 - AltaLink Investments LP priced a new issue of C$200 million 3.674% seven-year senior notes at par on Thursday.

The notes priced at a spread of 220.1 basis points over the Government of Canada benchmark and were not heard to have traded in the aftermarket, a syndicate source said.

There were no other corporate bond market pricings, and the provincial market was also quiet as activity wound down for month end, sources said.

June 1 is a large coupon date and marks a short season of coupon payments, so market players are anticipating a flurry of issuance and secondary market activity on the back of more funds being available to investors.

"Liquidity has been pretty poor and there was better selling," a bond specialist said of Thursday's session.

Overall spreads came back in some, ending little changed to slightly lower after being wider on weak tone in the early going, sources said.

The high-yield bond market was said to be lower by about 0.25 point, a trader said.

He noted that Connacher Oil and Gas Ltd.'s 8½% and 8¾% senior secured notes due 2019 were both trading in slightly in an essentially uneventful session.

Tone improved around midsession on positive headlines coming out of Europe, sources said. The European Department of the International Monetary Fund reportedly started discussing a contingency plan for Spain. And there was talk about guaranteeing deposits, a market source said.

"Tone has turned around to a little better," the source said. But flows were light.

He described market tone as "sluggish," although benchmark bonds remain well bid with rates at record lows.

Government bonds ticked slightly higher with the Canadian two-year paper yielding 1.068% late Thursday, from 1.115% late Wednesday. The 10-year note was yielding 1.748%, from 1.797%, and the 30-year bond was yielding 2.29% Thursday, from 2.33% late Wednesday.

Looking ahead, market players anticipate some type of issuance soon from Quebec City-based Cominar Real Estate Investment Trust, which has an informational roadshow underway.

Cominar has filed a shelf registration that gives the company the right to issue up to $700 million over the medium term.

"They will probably look to raise some financing shortly," a market source said.

The company has embarked on the roadshow with BMO Capital Markets Corp. and National Bank Financial Inc.

Canada mortgage bonds are also expected to issue in quarterly reopenings around mid-June and financing related to the sale of Scotia Plaza, the headquarters of Scotia Capital Inc., which is holding a roadshow for the deal, are also expected to boost activity.

"With a few corporate roadshows and the June 1 coupon date, as well as a number of maturities, we will see a lot of cash coming into the market, and we expect that issuers will try to take advantage of the cash coming into the market," the market source said.

In the upcoming month, the new issue and secondary market should be "relatively frothy," he said.

Meanwhile, for the immediate future, the market will be eyeing Friday's release of U.S. non-farm payrolls. Economists expect a gain of 155,000 new jobs in May, while the unemployment rate should remain steady, at 8.1%. But analysts suggest the U.S. labor market may be losing its momentum after the number of Americans applying for unemployment benefits rose for the fourth-straight week and a reading of private sector jobs showed hiring rose at a very modest pace this month.

AltaLink quiet after pricing

Calgary, Alta.-based AltaLink, the privately owned electric power transmission company that transmits 60% of Alberta's power, priced C$200 million of bonds around noon Thursday, but no trades were seen in the aftermarket.

The paper was priced at a spread that was plus 220 bps versus the benchmark curve.

AltaLink's new issue carries a 3.674% coupon for the seven-year senior notes that priced at par.

The notes due June 5, 2019 (BBB/BBB-) priced at a spread of 220.1 bps over the Government of Canada benchmark, which is a 3.75% note due 2019.

RBC Capital Markets Corp. was lead manager with BMO Capital Markets Corp. as co-lead.

Scotia Capital Inc. National Bank Financial Inc., TD Securities Inc. and Casgrain were also in the syndicate.

The notes, which are expected to settle June 5, are callable three months before maturity at par.

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