Volatile market curbs deals; Cara Operations' bond sale hits bumps, depends on takeover

By Cristal Cody

Prospect News, Nov. 1 - Canadian issuers stayed on the sidelines in volatile trading on Tuesday as the markets digested the news that Greece would send the euro bailout package to a referendum.

The last part of the week is expected to be busier with bond sales from CNH Capital Canada Receivables Trust and GreenField Ethanol Inc.

But, Cara Operations Ltd.'s slated sale of C$75 million of senior second-lien guaranteed notes may be pushed back or changed.

On Tuesday, Cara Operations announced that it extended the deadline for the consent solicitation for its outstanding 9 1/8% senior second-lien guaranteed notes due Dec. 1, 2015 to 5 p.m. Toronto time on Thursday. The solicitation was set to expire on Monday.

The company made the consent solicitations on Oct. 17 to amend certain terms and provisions of the trust indenture that governed the outstanding notes as part of its takeover of Prime Restaurants Inc. Among other things, the amendments to the trust indenture would allow the company to grant liens in respect of the issuance of about C$76 million of senior secured second-lien guaranteed debt.

The company said in the consent solicitation supplement on Tuesday that it plans to issue C$75 million in subscription receipts that would be concerted or exchanged into notes upon closing of the acquisition. If the deal does not close by Jan. 17, the proceeds would be returned to subscription receipt holders.

"Based on market conditions, however, we may effect the Prime Financing in another manner," Cara said in the consent solicitation supplement. Any senior secured debt sold also "will contain special mandatory redemption terms in the event the Prime acquisition is not completed on or before Jan. 17, 2012."

The takeover must receive court support and approval from shareholders of Prime Restaurants.

Scotia Capital is the lead manager of the bond deal.

Vaughan, Ont.-based Cara is Canada's largest full-service restaurant operator with brands that include Swiss Chalet Rotisserie & Grill, Harvey's and Montana's Cookhouse.

GreenField to finish marketing

Scotia Capital also is leading the sale of GreenField, which wraps its two-week roadshow for a C$175 million offering of five-year senior second-lien notes (/B+/DBRS: B) on Wednesday. The deal is expected to price by the end of the week, according to sources.

Co-managers are Macquarie Capital Markets Canada Ltd., Societe Generale (Canada) and TD Securities Inc.

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.

Government bonds better

Canada's 10-year note yield fell to 2.15% from 2.22% on Tuesday. The 30-year bond yield fell 9 basis points to 2.79%.

"It was a standard risk-off kind of day, triggered in large part because of the headlines coming out of Europe," a bond source said. "That unwound a lot of the gains we saw last week when the progress they made was announced."

Canadian government bonds stayed strong, especially on the longer end, a second day on the latest overseas wrinkle. Greece prime minister George Papandreou said late Monday he would put the bailout plan to a referendum. Market analysts feel support is unlikely.

Greece's government will hold a confidence vote on Friday.

"There will be a period of volatility through the end of the year, given how the confidence cote in the Greek parliament goes on Friday," the source said.

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