Daimler Canada, Toronto Airports, Ontario, Quebec sell bonds; Canadian Pacific firms

By Cristal Cody

Prospect News, Nov. 29 - Issuers that included Daimler Canada Finance Inc., Canadian Pacific Railway Co., the Greater Toronto Airports Authority and the provinces of Quebec and Ontario poured into the Canadian corporate and provincial bond markets on Tuesday, with the Province of Ontario selling C$1 billion in a reopening, its largest offering ever domestically, informed bond sources said.

"The equity markets are up; corporate bond markets feel good," a source said. "From an investor's perspective, we haven't had that much issuance here lately in Canada, so there's enough cash floating around to take this down."

Manulife Financial Corp. also tapped the preferred stock markets for C$200 million on Tuesday.

Pricing on the Province of Quebec's deal was considered fair, one source said.

"The Quebec deal sold out immediately and Ontario did their largest bond deal in history in Canada, and that deal also went premium," the source said.

Canada's bond markets have picked up in activity over the last two sessions, and primary activity is expected to stay active, a source said.

"Banks are coming out of earnings on the 1st, so there will probably be some more issuance later this week if the markets can hang in," the source said.

In other activity on Tuesday, high-yield issuers and investors were busy at Scotia Capital Inc.'s high-yield conference that featured issuers including Canadian Satellite Radio, Cascades Inc. and Newalta Corp.

No immediate deals are expected from the conference, an informed source said.

"Probably not this year, but a couple of those are potential issuers - guys that haven't issued debt in the Canadian market," the source said.

In the secondary market, the Greater Toronto Airports Authority's notes ended unchanged while Canadian Pacific Railway's Canadian and U.S. bonds traded tighter, sources said.

Provincial bonds traded in about 1½ basis points going out.

Daimler Canada taps market

Daimler Canada Finance (A3/BBB+/DBRS: A) priced an upsized C$300 million of 3.02% notes due Jan. 7, 2015 at 99.995 to yield 3.021% on Tuesday, a bond source said.

The deal, upsized from C$200 million, priced on guidance at a spread of 185 bps over the Government of Canada benchmark.

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

In the secondary market, the notes soon firmed about 1½ bps and traded "back to issue" by late afternoon, a source said.

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

Canadian Pacific prices

Canadian Pacific Railway sold C$125 million of 5.1% medium-term notes due Jan. 14, 2022 on Tuesday, following the sale of $500 million in two tranches of U.S. dollar-denominated bonds the previous day, an informed bond source said.

Canadian Pacific sold the notes (DBRS: BBB) at 99.717 to yield 5.137%. The notes priced within talk at a spread of 290 bps over the Government of Canada benchmark.

TD Securities Inc. was the lead manager.

The proceeds will be used for a voluntary prepayment this year to the company's Canadian defined benefit pension plans.

In the secondary market, the notes were about 3 bps tighter going out, a source said.

The Calgary, Alta.-based railroad operator is a subsidiary of Canadian Pacific Railway Ltd.

Canadian Pacific Railway also sold $500 million of notes (Baa3/BBB-) in two tranches late on Monday, a market source said.

A $250 million tranche of 4.5% 10-year notes priced at 98.151 to yield 4.731% with a spread of Treasuries plus 275 bps.

The second part was $250 million of 5.75% 30-year bonds sold at 97.584 to yield 5.922% with a spread of 300 bps over Treasuries.

Both tranches have a make-whole call at Treasuries plus 45 bps and feature a change-of-control put at 101% if the company is downgraded to below investment grade.

J.P. Morgan Securities LLC was the bookrunner. The joint lead manager was TD Securities (USA) LLC.

Co-managers were Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, RBC Capital Markets LLC, BMO Capital Markets Corp., CIBC World Markets Corp., National Bank of Canada Financial Inc. and Scotia Capital (USA) Inc.

Proceeds are being used to fund a voluntary prepayment of future pension contributions to the Canadian defined benefit pension plan.

Those notes traded in the U.S. markets more than 10 bps better, a trader said.

The 10-year notes firmed to 262 bps bid, 257 bps offered, and the long bonds traded in to 282 bps bid, 277 bps offered.

Toronto Airports prices

Also in the market, the Greater Toronto Airports Authority priced C$400 million of 4.53% 30-year medium-term notes (DBRS: A) at 99.886 to yield 4.537% on Tuesday, according to a bond source.

The series 2011-2 notes due Dec. 2, 2041 priced at a spread of 183 bps over the Canadian government benchmark.

BMO Capital Markets Corp. was the lead manager.

Proceeds will be used to repay part of the C$500 million series 2002-1 MTNs that mature on Jan. 30, 2012 and for general corporate purposes.

In the secondary market, the notes closed wrapped around the issue price, a source said.

"They started a couple tighter and ended up unchanged on the day," the source said.

Greater Toronto Airports Authority operates the Pearson International Airport.

Ontario prices C$1 billion

In Canada's provincial market on Tuesday, the Province of Ontario (Aa1/AA-/DBRS: AA) sold C$1 billion in a reopening of its 4.65% benchmark bonds due June 2, 2041 at 116.632 to yield 3.717%, a bond source said.

The bonds priced at a spread of 99.5 bps over the Government of Canada benchmark.

TD Securities Inc. was the lead manager.

The province last reopened the issue on Oct. 12 with the offering of C$750 million priced at 114.273 to yield 3.839%, or a spread of 98.5 bps over the Government of Canada benchmark.

Quebec sells C$500 million

The Province of Quebec (Aa2/A+/DBRS: A) also came with an offering of C$500 million in 3.5% notes due Dec. 1, 2022 at 100.6 to yield 3.434%, a bond source said.

The notes priced at a spread of 115 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the lead manager.

Manulife sells preferreds

In other activity on Tuesday, Manulife Financial (/BBB/DBRS: Pfd-2) announced that it sold C$200 million, or 8 million shares, of series 5 non-cumulative rate rest class 1 preferred stock.

The preferreds priced at C$25 per share and yield a dividend of 4.4% a year for the initial period ending Dec. 19, 2016. The dividend rate then will reset every five years at a rate equal to the five-year Government of Canada bond yield plus 290 bps.

"We issue preferred shares and other capital instruments from time to time to bolster capital, believing that this action is prudent when faced with uncertain market and economic conditions. Our capital position remains strong but we recognize that there could be pressure on our common share price and bond spreads if our capital ratios decline," Donald Guloien, president and chief executive officer of Manulife, said in the release.

RBC Capital Markets and Scotia Capital Inc. were the lead managers of the deal.

The sale includes a greenshoe of 2 million shares.

Proceeds will be used for general corporate purposes, which may include investments in subsidiaries.

Manulife Financial is a Toronto-based financial services and reinsurance group that operates in 22 countries and territories.

Andrea Heisinger contributed to this review

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.