Noranda on tap; Algonquin Power holds non-deal roadshow; price chatter out on Trader deal

By Cristal Cody

Prospect News, July 15 - The Canadian primary market picked up with potential corporate deals in the works for the week ahead, according to informed bond sources.

Algonquin Power & Utilities Corp. (/BBB-/) held a non-deal roadshow luncheon in Toronto on Friday, while Noranda Operating Trust plans to hold a roadshow for a C$90 million offering of 51/2-year senior notes (DBRS: BB) in the July 18 week.

Meanwhile, price chatter was out on Trader Corp.'s planned U.S. offering of $275 million senior secured notes due 2018, according to a market source.

In the secondary market, Royal Bank of Canada's five-year notes firmed 2 basis points on the day.

Also in trading, OPTI Canada Inc.'s subordinated notes moved upward yet again in response to a production update published Thursday. The senior notes, however, were holding steady.

Government bonds rallied across the curve as investors moved into safer securities on Friday. Statistics Canada said that manufacturing sales fell 0.8% to C$46 billion in May. Canada's 10-year note yield fell to 2.87% from 2.96%. The 30-year bond yield fell 6 bps to 3.34%.

Price chatter on Trader notes

Price chatter is around a 10% yield on Trader's planned $275 million offering of senior secured notes due 2018, according to a market source.

The company started a roadshow on Tuesday for the sale of the seven-year notes (B3/B), and pricing is expected late in the week of July 18.

RBC Capital Markets is the bookrunner.

The Rule 144A and Regulation S for life notes have three years of call protection. A special call provision enables the issuer to redeem 10% of the issue annually at 103 during the non-call period.

The notes include a three-year 35% equity clawback and a 101% poison put.

Proceeds will be used to fund the acquisition of the company by Apax Partners.

Etobicoke, Ont.-based Trader is a print and online media publisher in the automotive, real estate, merchandise and employment sectors.

Noranda sets roadshow

Coming up, Noranda Operating Trust plans to hold a roadshow for a C$90 million offering of 51/2-year senior notes, according to an informed bond source.

The roadshow begins in Toronto on Tuesday and ends on Thursday in Montreal for the senior notes due December 2016.

CIBC World Markets Inc. and Scotia Capital Inc. are the bookrunners.

The notes are guaranteed by Noranda Income Fund, Canadian Electrolytic Zinc Ltd., Noranda Income LP and NILP General Partner Ltd. N-Zinc Ltd. is a special guarantor.

The notes have a change-of-control put at 101%.

Proceeds will be used to repay debt outstanding under the bridge facility and for general corporate purposes.

Noranda Operating Trust is owned by Toronto-based Noranda Income Fund and has a 75% interest in the Noranda Income LP, which owns the Canadian Electrolytic Zinc metal processing facility in Quebec.

Algonquin Power gives update

In other bond activity on Friday, Algonquin Power & Utilities held a non-deal roadshow luncheon in Toronto to update investors on the company's recent activities, an informed bond source said.

"We'll see what comes of that," the source said.

Algonquin Power is an Oakville, Ont.-based open-ended investment trust that owns and operates electric utilities in North America.

RBC tighter

In secondary trading, the Royal Bank of Canada's 2.3% notes due 2016 firmed to 86 bps offered on Friday, a trader said.

"They've improved a basis point or two from where they came," the trader said.

The Toronto-based investment bank priced $1.25 billion of the notes (Aa1/AA-) at a spread of Treasuries plus 88 bps on Wednesday.

OPTI heads higher

A trader said OPTI Canada's second-lien notes were "a smidge better" at Friday's close.

He said the 8¼% and 7 7/8% notes due 2014 were up "a point or so" at around 47.

He said the 9% notes due 2012 and the 9¾% notes due 2013 were unchanged at around 102 bid, 102½ offered.

The second-liens still trade flat, or without accrued interest.

On Thursday, the Calgary, Alta.-based oil-sands producer provided an update on its Long Lake joint venture project with Nexen Inc. In the statement, OPTI said its costs for the first two quarters of 2011 increased from the year before but that it had achieved C$2 million positive net field operating margin in the second quarter.

In the first quarter, OPTI posted an C$8 million operating margin loss.

Also, bitumen production at the plant was up to 27,900 barrels per day, a nearly 2,500-barrels-per-day improvement over the first quarter.

Still, the company warned that it would likely not meet its forecast of 38,000 barrels per day to 45,000 barrels per day.

"Through operational experience gained over time, we have improved our understanding of the Long Lake reservoir," OPTI said in a press release out Thursday. "With this experience, we recognize that a portion of our initial 90 well pairs will not meet production expectations. We are addressing this primarily by the accelerated development of well pads."

As of June 30, the company had C$189 million in cash and cash equivalents, as well as $73 million of restricted cash held in an interest reserve account tied to its $300 million of first-lien notes.

The operational update comes on the heels of the announcement that OPTI filed for creditor protection in Canada on Wednesday.

A 30-day grace period implemented due to a missed coupon last month would have expired Friday, which would have meant a default for the company.

Stephanie N. Rotondo contributed to this review

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