Cards II Trust deal attracts 30 buyers; Savanna Energy sets talk; Flint Energy eyes notes

By Cristal Cody

Prospect News, May 17 - Canadian corporate bond markets saw one deal on Tuesday from Cards II Trust, while a couple more high-yield energy bond offerings are expected, according to informed bond market sources.

Coming up on Thursday, Savanna Energy Services Corp. is expected to price C$125 million of senior notes due 2018 in the low 7% area, an informed bond source said Tuesday.

Also scheduled on the deal calendar, Flint Energy Services Ltd. started a roadshow on Tuesday for a C$200 million offering of eight-year senior notes.

Canadian high-yield energy bonds were "very well bid" on Tuesday, one source said.

In an upcoming U.S.dollar-denominated deal, Connacher Oil and Gas Ltd. intends to price $900 million equivalent of senior secured notes before the end of the present week, according to an informed source.

The Canadian corporate bond market mostly was quiet on the day, another source said.

"Corporates are relatively quiet," the bond source said. "We haven't had nearly the issuance they've had south of the border."

The U.S. high-grade market saw more than $14 billion of deals just on Tuesday.

Canada's high-grade market had a surprise bond sale on Monday from Bell Canada.

"It went fairly well but there was some selling of that bond afterwards," an informed source said Tuesday. "It tightened out initially but seems to have moved back out to issue spread."

Secondary activity mixed

In the secondary market, OPTI Canada Inc. was also softer, though there was no news to act as catalyst.

On the upside, a trader said Nortel Networks Corp.'s notes gained ground as yet another potential bidder for the company's patent portfolio entered the fray. Another trader, however, did not agree that the debt was firmer.

In other bond news, Statistics Canada said Tuesday in a report that foreign investors purchased C$6.3 billion of Canadian securities in March, including C$3.236 billion of Canadian bonds, while investors from Canada reduced their holdings of foreign debt by an amount equivalent to C$1.7 billion.

Foreign investors added C$3.2 billion of Canadian bonds in March. Foreign investment on the secondary market of C$8 billion was the largest amount since May 2010 and included mostly federal government and corporate bonds.

Canadian investors reduced their holdings of foreign bonds by C$2.3 billion in March, mostly in short-term Treasuries.

Canadian government bonds rose, tracking U.S. Treasuries. The 10-year bond yield fell 4 basis points to 3.16%. The 30-year bond yield dropped to 3.56% from 3.58%.

Treasuries gained on Tuesday, sending yields down, on weaker economic data. The 10-year note yield fell 4 bps to 3.11%, and the 30-year bond yield dropped 5 bps to 4.22%.

Cards II Trust taps market

In the only deal brought in Canada on Tuesday, Cards II Trust priced C$600 million 3.333% credit card receivables-backed notes due May 15, 2016 at par, an informed bond source said.

"There were more than 30 buyers," a source connected to the sale said.

The series 2011-4 notes (DBRS: AAA) priced at a spread of 87 bps over the Canadian bond curve.

CIBC World Markets Inc. was the lead manager.

The proceeds will be used to finance the purchase of an undivided co-ownership interest in receivables of certain credit card accounts.

No secondary market activity was immediately seen on the notes.

Cards II Trust has co-ownership interests in Visa credit card receivables originated by Canadian Imperial Bank of Commerce.

Savanna Energy sets talk

The primary has a deal in the works this week from Savanna Energy Services, which is expected to price C$125 million senior notes due 2018 in the low 7% area, an informed bond source said Tuesday.

The notes (/B+/DBRS: B) are expected to price on Thursday.

The company held roadshows in Toronto on Thursday and Montreal the previous week.

TD Securities Inc. and RBC Capital Markets Corp. are the managers.

Proceeds will be used to pay down a bank facility.

The Calgary, Alta.-based company is a drilling and well servicing provider in the oil and gas industry.

Flint Energy starts roadshow

Flint Energy Services began a roadshow on Tuesday for a C$200 million offering of eight-year senior notes, according to an informed source.

The deal is expected to price during the week ahead.

Credit Suisse Securities (USA) LLC and BMO Capital Markets are the joint bookrunners for the Rule 144A for life offering.

The notes come with four years of call protection and feature a three-year 35% equity clawback and a 101% poison put.

Proceeds will be used to refinance bank debt and for general corporate purposes.

Flint Energy is a Calgary, Alta.-based provider of products and services to the oil and gas industry.

Connacher to price notes

Connacher Oil and Gas plans to price $900 million equivalent of senior secured notes before the end of the present week, according to an informed source.

The deal will feature dollar-denominated eight-year notes. That Rule 144A and Regulation S for life tranche will be led by left bookrunner Credit Suisse Securities (USA) LLC.

In addition, the Calgary, Alta.-based integrated oil company intends to privately place a Canadian dollar-denominated tranche of seven-year notes via left lead RBC Capital Markets.

Both of those banks are serving as global coordinators for the deal.

Both tranches of notes come with four years of call protection and will feature three-year 35% equity clawbacks and 101% poison puts.

The notes are secured by a second-priority lien on all of the existing and acquired property of the issuer and each restricted subsidiary of the issuer.

Connacher plans to use the proceeds to refinance its existing first-lien and second-lien notes.

Bell Canada firms

In secondary trading, the two tranches that Bell Canada (Baa1/BBB+/DBRS: A) priced on Monday traded about 2 bps tighter on Tuesday, a bond source said.

Bell Canada sold an upsized C$1 billion in two tranches of C$500 million each in series M-23 medium-term debentures on Monday.

Bell Canada sold the 3.65% notes due May 19, 2016 at a spread of 117 bps over the Canadian bond curve.

In the second tranche, the company sold 4.95% notes due May 19, 2021 at a spread of 182 bps over the curve.

"This morning, the five-years were quoted at 115, 110 and the 10-years at 180, 172," the source said.

The telecommunications company is based in Montreal.

OPTI bonds weaken

There was no news out on OPTI Canada on Tuesday, but that didn't stop the subordinated debt from trading "fairly active," according to a trader.

He said the 7 7/8% and 8¼% notes due 2014 closed lower around 46.

Another trader echoed that level.

A third trader saw OPTI Canada's 8¼% notes due 2014 ending around 46½ bid, 47½ offered, noting that "over the last week, those are down 7 points," with "a decent amount of the bonds traded" around 461/2. The bonds were "down 2 points from the other day."

The Calgary, Alta.-based oil-sands producer has seen its bonds decline ever since it released yet another disappointing earnings report in mid-April. The company also warned that it would most likely not hit its 2011 production target.

Catalyst Paper flat

Catalyst Paper Corp.'s 7 3/8% notes due 2014 were hanging around a 59-61 context, which a source said was about where the Richmond, B.C.-based papermaker's bonds had been trading. "They were unchanged, with not much volume," he said.

The Catalyst bonds had declined over several days from recent levels in the middle 60s, in line with the fall in U.S. rival NewPage's paper.

Nortel inches up

Nortel Networks' 10¾% notes due 2016 moved up slightly as news reports indicated that yet another interested party was thinking of joining the auction for Nortel's patent portfolio.

However, "it wasn't extremely active," a trader said.

The trader called the notes up a quarter-point to around 92.

But another trader said the issue was "unchanged, maybe a smidge lower," also around that 92 level.

Ericsson AB is reported to be considering making a bid for Nortel's portfolio of patents, possibly in conjunction with a partner, according to Bloomberg News.

Google Inc. made the initial $900 million bid last month. RPX Corp. and Research In Motion Ltd. are also reported to be considering making an offer.

The increasingly high level of interest has led some to believe that the purchase price could easily top $1 billion.

Nortel is a bankrupt telecommunications company based in Toronto.

Paul Deckelman, Paul A. Harris and Stephanie N. Rotondo contributed to this review

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