Demand high for George Weston deal; notes firm; Perpetual Energy down on dividend cut

By Cristal Cody

Prospect News, Oct. 20 - George Weston Ltd. tapped the Canadian bond markets on Thursday in a well-subscribed C$350 million offering of five-year medium-term notes, sources said.

Coming up on the primary calendar, GreenField Ethanol Inc. prepped investors on Thursday with a national investor call for the planned sale of C$175 million of senior secured second-lien notes due 2016 (/B+/DBRS: B).

No price talk was available yet on the notes, a source said Thursday.

The source said the company was "getting a good response so far" to the offering.

Corporate bonds traded flat to slightly wider on the day, according to bond sources.

"Basically credit's unchanged today for most spreads," one source said.

The Markit CDX Series 17 North American high-grade index ended the day unchanged at a spread of 134 basis points.

The bonds from "infrequent issuer" George Weston continued to trade well in the secondary market, firming 10 bps, a source said.

In high-yield trading, Perpetual Energy Inc.'s bonds dropped 5 points after the company reported after the market closed on Wednesday that it has suspended future dividend payments until further notice.

Other high-yield bonds are "starting to firm up," a trader said. "Dealers don't really have the inventory; that's causing a bit of a technical bid."

Ford Credit Canada Ltd.'s Canadian dollar-denominated bonds traded higher on the day.

Government bonds were mostly flat. Canada's 10-year note yield fell 2 bps to 2.31%. The 30-year bond yield was unchanged at 2.93%.

In economic data, Statistics Canada said that Canadian wholesale sales rose 0.2% in August to C$48.2 billion, following a 0.9% rise in July.

George Weston taps market

George Weston, a "highly sought-after name in Canada," priced C$350 million of five-year medium-term notes, series 2A, at par to yield 3.78%, a bond source said on Thursday.

The notes (DBRS: BBB) due Oct. 25, 2016 priced at a spread of 220 bps over the Canadian bond curve.

Managers were RBC Capital Markets Corp., CIBC World Markets Inc., BMO Capital Markets Corp., Bank of America Merrill Lynch, National Bank Financial Inc., Scotia Capital Inc. and TD Securities Inc.

Proceeds will be used to fund the retirement of the company's $300 million of bonds due in October and for general corporate purposes. The company said in a statement that it will bridge any gap between the proceeds and the maturity date of the outstanding medium-term notes through available cash resources.

In secondary trading, the notes due 2016 came in 10 bps to 210 bps bid, 206 bps offered, a source said.

Toronto-based George Weston is a leading food processing company and Canada's largest food distributor.

GreenField deal

GreenField Ethanol is expected to price its notes the first week of November after it holds a roadshow that starts Monday in Vancouver, B.C., and continues on Tuesday in Montreal and Oct. 31 to Nov. 2 in Toronto.

Scotia Capital Inc. is the lead manager.

The notes are non-callable for three years. The deal has a change-of-control put at 101% and an equity claw for up to 35% in the first three years. The notes also have a Canada call at 50 bps over the Canadian government benchmark.

The guarantors are GreenField Ethanol (Johnstown) Inc.; GreenField Ethanol (Hensall) Inc.; GreenField Hensall LP; GreenField Hensall GP Inc.; Pharmco Products Inc.; Aaper Alcohol and Chemical Co., Aaper Holdings Inc.; GreenField Ethanol of Quebec Inc. and all future restricted subsidiaries of GreenField.

Proceeds will be used to repay debt, to terminate amounts outstanding under existing interest rate swap agreements and for general corporate purposes.

Ontario-based GreenField Ethanol is Canada's largest ethanol company and produces industrial and beverage alcohol, fuel ethanol and distillers' grains.

Perpetual Energy trades

In secondary trading on Thursday, Perpetual Energy's 8¾% senior notes due March 15, 2018 (B3/B-/) dropped 5 points, a trader said.

"They're wrapped around 90 on the news of the dividend cut," the trader said.

Perpetual Energy said in a statement after the market closed on Wednesday that it suspended future dividend payments because of continued weakness in natural gas prices.

The company sold C$150 million of the 8¾% notes due 2018 on March 10, 2011 at par.

Calgary, Alta.-based Perpetual Energy is an oil and gas company.

Ford Credit Canada rises

Ford Canada's 4 7/8% notes due March 17, 2014 traded up "half a point" to par bid on Thursday, a bond trader said.

The notes traded at 99 a week ago.

Ford Credit Canada sold the three-year notes (Ba2/BB-/DBRS: BB) on March 8, 2011 at par.

The issuer is the Canadian finance arm of Ford Motor Co.

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