Active Canadian corporate calendar ahead; Thomson Reuters, Armtec stronger in secondary market

By Cristal Cody

Prospect News, Sept. 17 - Canadian corporate bond issuance is expected to remain active for September on the heels of record issuance in the United States.

"It's certainly not slowing in any way. September will be busy in Canada, with a couple of more big corporates coming over the next week or two," said Michael Wolff, managing director for TD Securities Inc.'s debt capital markets.

Canadian corporate bond issuance is about 25% above last year's issuance.

"Year to date we're about C$35 billion in corporate issuance this year," he said.

One source said corporate credit markets were better overall on the week.

"Bank credit has improved," the source said. "It's been a good week for senior bank paper. There's a little bit of uncertainty around Tier One issues in Canada, but away from that, generally credit and banks are better."

In the secondary market, new deals from Armtec Holdings, Ltd. and Thomson Reuters Corp. performed well, which "shows us that at any level, both in the A category and the single B category, there's a great market," a source said.

Elsewhere in Canada, government bonds rallied on Friday on a disappointing read of economic data from the United States, said Douglas Porter, BMO Capital Markets Corp.'s deputy chief economist.

"There were no Canada figures out today so there were no domestic drivers for the market," he said. "It wasn't a big move today, just renewed questions on the strength of the U.S. consumer off the soft CPI."

The August consumer price index the U.S. Labor Department released Friday rose 0.3% in August and is up at the forecast 1.1% annual rate. In other data on Friday, the University of Michigan confidence survey fell to 66.6 in September from 68.9 in August.

The Canadian 10-year bond rose 9 Canadian cents to yield 2.93%, down from 2.98%.

Canada's two-year bond rallied 7 Canadian cents. The yield fell to 1.475% from 1.52%.

"We saw a bigger rally at the long end of the bond for the week as a whole," Porter said.

Thomson Reuters sale a success

Thomson Reuters on Thursday sold C$750 million of 4.35% 10-year notes (DBRS: A) at 99.615 to yield 4.398%, or 143.6 bps over the Canadian government benchmark bond, according to a source.

Toronto-Dominion Bank, Royal Bank of Canada and the Bank of Montreal were the lead managers of the deal.

Thomson Reuters plans to use the net proceeds from this offering, available cash and/or other resources to repay its €500 million principal amount of 4.625% medium term notes due in November 2010.

New York-based Thomson Reuters provides business and professional news and information.

The notes were seen trading in the secondary market on Friday at a spread of 135 bps bid, 132 bps offered, the source said.

"It was a hugely successful deal," the source said. "It's a name that doesn't come to market very often and has a good following in Canada."

Armtec stronger

The new debt sold on Wednesday from Armtec Holdings was stronger in the secondary market, a source said Friday.

"It's traded up a couple of bucks," a source said. "It's bidded up very nicely."

Armtec priced C$150 million in 8.75% seven-year senior unsecured notes (DBRS: BB) at par or 635.4 basis points over the 4.0% June 2017 government of Canada benchmark bond for a yield of 8.875%.

The notes were seen trading Friday at 102.5 bid, 103 offered.

The bonds are callable in 2013.

Guelph, Ont.-based Armtec manufactures drainage products and engineered solutions for water control.

Harvest Operations to start roadshow

Harvest Operations Corp. will begin a roadshow on Monday for a $500 million offering of non-callable seven-year senior notes (expected ratings Ba1/BB-), according to an informed source.

The roadshow wraps up on Sept. 24, and the deal is set to price on Sept. 27.

Bank of America Merrill Lynch and HSBC are joint bookrunners for the Rule 144A with registration rights offering.

The notes are offered with a make-whole provision at Treasuries plus 50 bps, and a poison put at 101.

Proceeds will be used to repurchase the company's existing 7 7/8% senior notes, as well as to repay its revolver and for general corporate purposes.

The prospective issuer is a Calgary, Alta.-based oil and gas producer, which is a wholly owned subsidiary of state-owned Korea National Oil Company.

Paul Harris contributed to this report

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