Canadian bonds: Good market tone; H&R REIT sells upsized C$125 million debentures at par

By Cristal Cody

Tupelo, Miss., Sept. 7 - The Canadian bond market had a great tone in trading on Tuesday, according to sources.

H&R Real Estate Investment Trust sold an upsized C$125 million in senior unsecured debentures on Tuesday. The series C debentures due 2018 priced at par with a 5% coupon.

"The offer was very well received by private offer investors in Canada," said Susan Rimmer, head of debt capital markets at CIBC World Markets Inc., a joint bookrunner on the deal.

The deal was upsized from C$100 million "due to very strong demand," Rimmer said. "We see very good demand for yield product in the Canadian market on behalf of both institutional and retail investors. This 5% coupon was seen as attractive for a high-quality REIT."

The debentures were sold on a bought-deal basis to a syndicate of underwrites co-led by RBC Capital Markets Corp., TD Securities Inc. and CIBC. Settlement is expected on Sept. 14.

The proceeds will be used to repay debt, to fund future acquisitions and to develop The Bow, a 2 million-square-foot office building in Calgary, Alta.

The offering was a meaningful-sized deal for H&R REIT, which is based in Toronto and holds interests in office, residential and retail properties in the Greater Toronto area.

"It's going to be their largest nonconvertible bullet bond offering in the Canadian market," Rimmer noted.

Elsewhere in Canadian securities, the Canadian Minister of Finance reported Tuesday that the Government of Canada repurchased C$500 million of government marketable bonds.

The government repurchased C$500 million outstanding from the 2.75% bond due Dec. 1, 2010 at a cutoff yield of 0.761%.

Settlement is expected on Thursday. The series has C$7.7 billion outstanding.

The Canadian government plans its next repurchase of bonds on Sept. 14.

The yield on Canada's two-year note fell to 1.28% from 1.38% on Friday. The markets were closed on Monday in observance of the Labor Day holiday.

The yield on the 10-year note dropped to 2.81% on the day, down from 2.95%.

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