Alberta sells C$500 million; Norbord plans $240 million deal; Canada Housing to reopen bonds

By Cristal Cody

Prospect News, June 4 - The Province of Alberta saw good demand for a C$500 million reopening of five-year notes despite a difficult market tone on Monday, an informed bond source said.

Alberta's offering was a "decent deal," the provincial bond source said. "It's bit of a tough market right now, certainly given what stocks did on Friday. Spreads here in the provincial market widened between 2 and 3 basis points across the curve in all names on Friday."

Provincial bond spreads were seen going out flat on Monday.

The deal calendar in the provincial market likely will stay light over the week, depending on market conditions, a source said.

"We've been fairly active for the last couple of weeks," the source said. "Market tone is a little better than it was at the end of last week. We need probably a couple more days of relative calm before we see anything."

The market is looking forward to a big offering next week from Canada Housing Trust, which plans to reopen its 2.05% Canada Mortgage Bonds due June 15, 2017.

In Canada's high-yield market, Norbord Inc. plans to hold a roadshow for a U.S. dollar-denominated $240 million offering of senior notes in Toronto through this week, a bond source said on Monday.

Government bonds sold off on Monday ahead of the Bank of Canada's interest rate decision on Tuesday. Canadian long bond yields hit record lows on Friday in response to flat Canadian GDP data and weak U.S. job data.

"Today's move is a reversal of that flight-to-quality risk aversion trade as much as the realization that the Bank of Canada is not going to be dovish at this point," a Canadian government bond strategist said.

"They were quite hawkish previously," the source said. "We think they're going to have to moderate that tone a lot, but the market is pricing in rate cuts now. We sold off today."

On Monday, Canada's two-year note yield ended the day 10 bps higher at 0.98%. The 10-year note yield rose 6 bps to 1.69%. The 30-year Canadian bond yield edged up 1 bp to 2.23%.

Alberta sells C$500 million

In the day's primary action, the Province of Alberta (Aaa/AAA/DBRS: AAA) sold C$500 million in a reopening of its 1.75% five-year notes at 100.652 to yield 1.614%, a bond source said.

"It was a tougher market to do a deal right now, but the deal did quite well," the source said. "If you have to pick up a name in the five-year curve right now, you picked the right name given it's a triple A credit."

The notes due June 15, 2017 priced at a spread of 48 bps over the Government of Canada benchmark.

CIBC World Markets Inc. was the lead manager.

The province originally sold the issue on May 24 in a C$500 million offering of notes priced at 99.449 to yield 1.865%, or 47 bps plus the government benchmark. The total outstanding is C$1 billion.

Canada Housing to reopen

Looking ahead on the primary calendar, Canada Housing Trust (Aaa/AAA/DBRS: AAA) is expected to sell C$5 billion to C$5.5 billion in a reopening of its 2.05% Canada Mortgage Bonds due June 15, 2017, a bond source said.

The deal is expected to launch on June 12 and price on June 13.

Canada Housing Trust first sold the issue on March 15. The trust priced C$5 billion of the series 46 five-year bonds at 99.912 to yield 2.068%, or a spread of 39 bps over the Government of Canada benchmark.

The trust is a unit of Canada Mortgage and Housing Corp., which provides financing, mortgage loan insurance, mortgage-backed securities and housing policy and programs.

Norbord plans $240 million

Norbord announced it will price in a private placement $165 million of senior secured notes (Ba2/BB-/DBRS: BB) that will rank pari passu with the company's existing senior secured notes due 2017 and will sell $75 million of senior unsecured notes (B2/B+/DBRS: B) directly to an institutional investor.

The deal, however, is not "classified as a traditional private," a bond source said.

The company will conduct an investor conference call on Wednesday.

Pricing is subject to market and other conditions.

CIBC World Markets Inc. is the lead manager of the syndicate.

The notes are Rule 144A eligible.

Proceeds will be used to refinance the company's $240 million of 7¼% debentures due July 1, 2012.

Norbord is a Toronto-based manufacturer of wood panels.

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