B.C. sells in 'tricky tone'; GreenField continues roadshow; buying rises in U.S. bank paper

By Cristal Cody

Prospect News, Oct. 24 - One provincial issuer tapped the Canadian bond markets on Monday as the tone remained uncertain heading into a midweek meeting that could yield a resolution to Europe's debt problems.

The Province of British Columbia priced a C$500 million reopening of its 4.3% 31-year bonds in a market with a "tricky tone," a syndicate source said. "It was not the most positive tone. It's a challenging market with everything going on in Europe."

European leaders are expected to reach a resolution on Wednesday that includes the recapitalization of the continent's banks and a Greek debt restructuring.

Another Canadian issuer came to the market on Monday with a preferred stock deal. Brookfield Asset Management Inc. said Monday that it sold C$175 million in preferred shares.

No new corporate bond issues were seen on Monday.

On Friday, Vaughan, Ont.-based Cara Operations Ltd. wrapped a roadshow for an offering of C$75 million in five-year senior second-lien guaranteed notes (/BB-/DBRS: B).

Since the restaurant operator is not expected to close the deal until early November, the high-yield bonds may price this week or the week of Nov. 1, a source said Monday.

Greenfield Ethanol Inc. is planning a sale of C$175 million of five-year senior second lien notes (/B+/DBRS: B) the week of Nov. 2.

"GreenField is on the road right now doing one-on-ones," one source said. "Cara is still in the process. It's still swinging."

In Canada's secondary market, Canadian-dollar U.S. bank bonds were trading more actively, a source said.

"Names out of favor over the last couple of days have been back in favor, such as U.S. banks," the Canadian bond source said. "There was activity before, but over the last couple of days, it's been skewed towards buying."

The financial paper buys have not "translated into a huge spread move, but spreads should come in," the source said. "We opened a basis point to a bp and a half tighter."

The Markit CDX Series 17 North American high-grade index ended the day 3 basis points tighter at a spread of 126 bps.

Provincial bond spreads closed on Monday about half a basis point wider on the long end of the curve, a source said.

"It's a difficult market where people have to be really convinced they want to buy credit or buy bonds just because of the expectation of the news this week," the source said.

Coming up on Tuesday, the Bank of Canada will release its target for the overnight rate, though no changes to the key rate are forecast.

Canadian government bonds traded flat to lower on Monday. The 10-year note yield ended unchanged at 2.36%. The 30-year bond yield rose 1 bp to 2.99%.

British Columbia retaps

In primary activity, the Province of British Columbia (Aaa/AAA/DBRS: AA) priced C$500 million of its 4.3% 31-year bonds in a reopening at 108.013 to yield 3.852% on Monday, according to a syndicate source.

The bonds due June 18, 2042 priced at a spread of 86 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the lead manager.

The province previously reopened the issue on June 1 with a C$500 million add-on priced at 100.443 to yield 4.274%. The total outstanding is now C$3 billion.

Brookfield sells preferreds

Also in the market, Brookfield Asset Management (DBRS: Pfd-2) said Monday that it sold C$175 million of preferred stock to yield a 4.8% annual dividend for the initial period ending Dec. 31, 2017.

The company sold 7 million preferred shares, series 30, at C$25 per share.

The syndicate was led by CIBC World Markets Inc., RBC Capital Markets Corp., Scotia Capital Inc. and TD Securities Inc.

The deal includes an over-allotment option of C$75 million, or 3 million preferred shares.

Proceeds will be used for general corporate purposes.

Toronto-based Brookfield manages more than $150 billion in property, power and infrastructure assets.

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