Quebec reopens 10-year notes, Westport Innovations sells three-year debentures; Kruger up

By Cristal Cody

Prospect News, Sept. 23 - Canada's bond markets saw two surprise deals on Friday after a volatile week.

The Province of Quebec sold C$500 million in a reopening of its 10-year benchmark notes. On the corporate side, Westport Innovations Inc. raised C$36 million in three-year debentures.

"It was a bit of a surprise that even this one came," a bond source said of Quebec's offering. "It's been a difficult, challenging week. But when equities turned around, there was a little bit of a window to do something."

Quebec's deal was the only one brought in the provincial markets over the week.

Canada Housing Trust (Aaa/AAA/DBRS: AAA) sold C$5 billion of 1.85% five-year Canada mortgage bonds on Tuesday. A couple of corporate deals also priced early in the week, including Hydro One Inc., which sold C$300 million in 4.39% 30-year bonds on Wednesday, and Plenary Health Care Partnerships Humber LP, which raised more than C$1 billion of bonds (/A/DBRS: A) in three tranches on Tuesday.

Issuers stayed to the sidelines after benchmark government bonds saw historic low yields in trading on Wednesday and Thursday following the Federal Reserve's plan to buy back longer-dated bonds and amid a weaker view of the U.S. economy and continued fear that Greece will default on its debt.

In the secondary market on Friday, provincial bond spreads opened the day wider but closed flat, a source said.

"Very quiet at the end of the day here," the bond source said. "Things opened a little defensively this morning with equities in negative territory, but then we came back again because equities are a little calmer."

Corporate bonds were wider on the week, sources said. High-yield bonds in Canada closed out the week about 45 basis points wider, one source said.

In trading, Kruger Products LP's notes edged higher on Friday, a trader said.

Garda World Security Corp.'s bonds also remained active in the secondary market but were flat from the previous day.

Government bonds gave back some gains on Friday on global growth concerns. Canada's 10-year note yield climbed 5 bps to 2.07%. The 30-year bond yield rose 2 bps to 2.7%.

Quebec reopens 10-years

In the week's only provincial deal, the Province of Quebec (Aa2/A+/DBRS: A) sold C$500 million in a reopening of its 4.25% benchmark notes due Dec. 1, 2021 at 109.783 to yield 3.12% on Friday, a bond source said.

The notes were sold at a spread of 109 bps over the Canadian government benchmark.

National Bank Financial Inc. was the lead manager.

The issue previously was reopened on Sept. 7 in a C$500 million add-on priced at 108.08 to yield 3.311%, or a spread of 103 bps over the Canadian government benchmark. The total outstanding is C$5 billion.

Westport sells debentures

Westport Innovations announced on Friday that it sold C$36 million of unsecured subordinated debentures due Sept. 22, 2014 on a private placement basis.

The bonds carry a 9% coupon.

Macquarie Private Wealth Inc. was the manager.

The debentures were sold to replace previously issued debentures that matured in July.

Vancouver, B.C.-based Westport Innovations creates and operates alternative fuel, low-emissions technologies that allow engines to operate on clean-burning fuels.

Kruger rises

In the secondary market, Kruger Products' 8% senior notes due Aug. 9, 2018 (/B/DBRS: BB) traded higher on Friday at 97.5 bid, a trader said.

The bonds were seen on Thursday at 97 bid, 99 offered.

The company sold C$175 million of the notes at par on July 28.

Kruger is Canada's leading tissue products producer, with brands that include Cashmere, Purex and Scotties. The company is a subsidiary of Montreal-based pulp and paper producer Kruger Inc.

Garda unchanged

Garda Securities' 9¾% senior notes due March 15, 2017 (B2/B/) traded unchanged on Friday at 102, a trader said.

The company reopened the issue on May 31 in a C$50 million add-on priced at 106.5 and originally priced the C$75 million issue at 98.148 on March 8, 2010.

The security services provider is based in Montreal.

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