Canadian high-yield market heats up with Great Canadian Gaming deal; high-grade quiet

By Cristal Cody

Prospect News, July 5 - A second Canadian high-yield issuer over the shortened holiday week announced plans to bring an offering of bonds in July.

Great Canadian Gaming Corp. intends to hold a roadshow in the upcoming weeks for an offering of C$400 million of senior notes, an informed bond source said on Thursday.

On Tuesday, Golf Town Canada Inc. and Golfsmith International Holdings, Inc. woke the market with the report it will hold a roadshow for an offering of C$150 million of five-year senior second-lien notes on July 10 and July 11.

On the investment-grade side, Canadian issuers are taking a break over the holiday week, a syndicate source said on Thursday. The Canadian markets were closed on Monday for holiday, followed by the U.S. markets' closure on Wednesday for holiday.

Market activity is expected to stay quiet on Friday on the back of the U.S. Labor Department's monthly job report.

There is "nothing in the new issue space and not much in the secondary," a Canadian bond source said. "It's pretty quiet. Yesterday was very quiet. Tomorrow is non-farm payroll day, so I think a lot of people have written off this week; there are a lot of vacations. Hopefully, we'll see something Monday."

Some high-grade issuers are expected to hold roadshows in the week ahead, a syndicate source said.

"And in the investment-grade space, earnings season kicks off next week and the end of July," the source said. "Once earnings get out of the way, we might see a pickup."

The Markit CDX Series 18 North American investment-grade index eased 2 basis points from Tuesday to a spread of 109 bps on Thursday.

Government bonds were mostly unchanged. Canada's 10-year note yield rose 1 bp to 1.72%. The 30-year bond yield closed at 2.31% from 2.3% the previous day.

Great Canadian Gaming on tap

Great Canadian Gaming (Ba3) plans to hold the roadshow for its offering of C$400 million of senior notes in Vancouver, B.C., on July 11, in New York and Boston on July 12 and July 13 and in Toronto on July 16 and July 17, according to an informed bond source.

The deal will be offered in Canada via a private placement and in the United States by Rule 144A.

Scotia Capital Inc. and HSBC Capital (Canada) Inc. are the bookrunners. BMO Capital Markets Corp., CIBC World Markets Inc. and RBC Capital Markets Corp. are joint lead managers. National Bank Financial Inc. is the co-manager.

The issue's guarantors are current and future material restructured subsidiaries and certain other restricted subsidiaries of Great Canadian.

The notes due 2022 are non-callable for five years. The issue has a 101% change-of-control put, an equity claw up to 35% in the first three years at par plus the coupon and a Canada call at the Canadian bond yield plus 100 basis points.

The company said in a news release that it plans to use the proceeds to refinance its U.S. dollar-denominated $161.1 million senior secured tranche B term loans due February 2014 and $170 million senior subordinated notes due February 2015 and their related cross-currency interest rate swaps. The company will start a cash tender offer and consent solicitation for the subordinated notes.

Great Canadian Gaming also will buy back and cancel C$100 million of its outstanding shares for C$10.00 a share in an offer open until Aug. 15.

If either the tender offer or the sale of the 10-year notes is unsuccessful, the company may cancel, postpone or modify its refinancing plans.

The Richmond, B.C.-based gaming, entertainment and hospitality company has operations in Canada and the United States.

Canadian Utilities eyed

Elsewhere in the market, Canadian Utilities Ltd.'s new 4.9% series BB cumulative redeemable second preferred shares (DBRS: Pfd-2) started trading on the Toronto Stock Exchange under the symbol CU.PR.E on Thursday.

The shares closed on Thursday at C$25.27.

The company sold C$150 million, or 6 million shares, of the preferred stock (DBRS: Pfd-2) at C$25.00 per share in an offering that settled on Thursday.

RBC Capital Markets and BMO Capital Markets were the lead managers. TD Securities Inc. and Scotia Capital Inc. were the co-managers.

The company may redeem the preferred stock on and after Sept. 1, 2017 in whole or in part at C$26.00 per share in the 12 months starting Sept. 1, 2017; C$25.75 per share in the 12 months starting Sept. 1, 2018; C$25.50 per share in the 12 months starting Sept. 1, 2019; C$25.25 per share in the 12 months starting Sept. 1, 2020 and C$25.00 per share if redeemed on or after Sept. 1, 2021.

Proceeds will be used to redeem the outstanding series W cumulative redeemable second preferred shares.

Calgary, Alta.-based Canadian Utilities provides services and business solutions to utility, energy and technology companies.

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