Lower Mattagami Energy, Toyota Credit Canada, Ontario price; BAA Airports starts roadshow

By Cristal Cody

Prospect News, April 16 - The Canadian bond markets kicked off the week with an upsized deal from Lower Mattagami Energy LP.

The hydroelectric generator partnership sold C$225 million of 40-year senior secured bonds.

"The deal saw participation from 26 buyers with non-early orders receiving fills in the 25% area," the source said.

Toyota Credit Canada, Inc. said on Monday that it sold C$100 million of 2.25% four-year medium-term notes under its euro program.

Also in the marker, the Province of Ontario reopened its issue of floating-rate medium-term notes due April 2015 to add $100 million, according to an FWP filing with the Securities and Exchange Commission.

Some deal action is expected for the rest of the week, including a maple bond deal from BAA Airports Ltd.

London-based BAA, which owns airports such as Heathrow, Glasgow and Edinburgh airports, started a roadshow on Monday in Toronto that continues in Montreal on Tuesday.

Bank of America Merrill Lynch, CIBC World Markets Inc. and RBC Capital Markets Corp. are hosting the roadshow.

A bond deal is "subject to market conditions, but you may expect a transaction on the back of the roadshow," a source said.

Foreign investors purchased C$13 billion of Canadian bonds in February, the largest monthly investment since May 2010, Statistics Canada said on Monday. The inflows were led by a C$10.2 billion foreign investment in federal government bonds from both new issues and secondary market acquisitions of mostly shorter term-to-maturity federal bonds.

The remainder of the activity in Canadian bonds was mostly related to foreign purchases of new bonds sold by public and private corporations, mainly in the form of U.S. dollar-denominated instruments.

Canadian long-term interest rates fell 6 basis points in February as the long-to-short spread narrowed to 105 bps, the smallest difference since May 2008, Statistics Canada said.

Canadian investors removed C$1.9 billion from their holdings of foreign bonds in February, following a C$2.7 billion reduction in January. The divestment was mainly in medium-term U.S. government bonds and was supplemented by maple bonds, as retirements outpaced new issues in February, the agency said. The differential between long- and short-term U.S. interest rates narrowed to 189 bps, the smallest spread since February 2008.

Investment-grade bonds were better in quiet trading on Monday. The Markit CDX Series 18 North American investment-grade index firmed 1 bp to a spread of 101 bps.

Government bonds traded lower ahead of the Bank of Canada's policy rate announcement on Tuesday. No changes to the 1% overnight rate are forecast.

Canada's 10-year note yield rose to 2.01% from 1.98%. The 30-year bond yield rose 2 bps to 2.57%.

Lower Mattagami sells bonds

In Canadian pricing activity on Monday, Lower Mattagami Energy sold C$225 million, upsized from C$200 million, of 4.175% 40-year senior secured bonds (A2//DBRS: A) at par in a private placement, according to an informed bond source.

The series 2012-1 bonds due April 23, 2052 priced at a spread of 160 bps over the Government of Canada benchmark, which was the tight end of initial guidance of 163 bps, plus or minus 3 bps.

CIBC World Markets and BMO Capital Markets Corp. were the bookrunners.

The proceeds will be used to refinance outstanding commercial paper notes and/or to pay for existing construction costs incurred by affiliated entity Lower Mattagami LP.

Lower Mattagami Energy was last in the market with a bond offering in 2011. The company raised C$475 million in a two-part private placement sale of senior bonds (A2/DBRS: A) on May 12, 2011. That deal included C$225 million of 4.331% series 2011-3 notes due 2021 at par, or a spread of 111.6 bps over the Government of Canada benchmark, and C$250 million of 5.139% series 2011-4 bonds due 2041 at par, or a spread of 152 bps over the government benchmark.

Lower Mattagami Energy announced last year that it plans C$1.9 billion of project financing to fund the redevelopment and expansion of four hydroelectric generating stations on the lower part of the Mattagami River in northeastern Ontario.

The company operates hydroelectric generators on the Mattagami River and is a partnership of Ontario Power Generation Inc. and LM Energy Inc.

Toyota Credit Canada prices

In other activity, Toyota Credit Canada sold C$100 million of 2.25% four-year medium-term notes, series 54, at 101.16 to yield 1.946%, according to final terms released Monday.

The notes due April 19, 2016 are not rated.

The Canadian dollar-denominated issue priced under the €50 billion euro medium-term note program by Toyota Motor Finance (Netherlands) BV, Toyota Credit Canada, Toyota Finance Australia Ltd. and Toyota Motor Credit Corp.

The investment dealer arm of Toronto-Dominion Bank was the bookrunner and the lead manager was Bank of Montreal, London branch.

The Markham, Ont.-based issuer is a subsidiary of Toyota Motor Corp.

Ontario reopens floaters

In other primary activity, the Province of Ontario reopened its issue of floating-rate medium-term notes due April 2015 to add $100 million, according to an FWP filing with the Securities and Exchange Commission.

The notes (Aa1/AA-/) were sold at par plus accrued and unpaid interest with a coupon of Libor plus 15 bps.

Total issuance is $450 million, including $350 million issued on Feb. 29.

Goldman Sachs International was the bookrunner.

Andrea Heisinger contributed to this review

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