GE Capital Canada brings C$550 million deal; pricing action forecast to continue; banks firm

By Cristal Cody

Prospect News, June 6 - The Canadian bond markets saw a C$550 million offering late in the day on Wednesday from GE Capital Canada Funding Co., which priced two tranches of notes 2 basis points to 3 bps tighter than guidance, informed bond sources said.

"Nice tone, decent amount of buying," a syndicate source said. "Spreads are tighter."

The Markit CDX Series 18 North American Investment Grade index firmed 4 bps to a spread of 122 bps.

Primary activity is expected to continue through the rest of the week. A C$650 million first mortgage bond offering is expected from Dundee Real Estate Investment Trust and H&R REIT, which are awaiting final documentation, sources said.

"Ideally, they'd love to get that priced this week, but they need to get that approval," a source said.

Also in the works, Nobord Inc. held a roadshow and an investor call on Wednesday for a U.S.-dollar denominated $240 million two-tranche offering of senior notes.

The Toronto-based wood panel maker plans to sell $165 million of Rule 144A eligible senior secured notes (Ba2/BB-/DBRS: BB) as well as a second tranche of $75 million of senior notes (B2/B+/DBRS: B) to an institutional investor to refinance its $240 million of 7.25% debentures due July 1, 2012.

CIBC World Markets Inc. is the left bookrunner. Credit Suisse Securities (USA) LLC and Bank of America Merrill Lynch are joint bookrunners.

In the secondary market, Canadian bank and financial paper firmed going out. Paper from National Bank of Canada and Bank of Montreal traded 2 bps better, while Bank of Nova Scotia's five-year notes tightened 8 bps.

Government bond yields climbed higher on the day.

"Ten-year Canada rates are up about 5 to 6 basis points, and the U.S. is up 8 to 10 basis points," a bond source said.

Canada's 10-year note yield closed the day 8 bps higher at 1.8%, and the 30-year bond yield climbed to 2.35% from 2.29%.

GE sells tighter than talk

Late afternoon in the Canadian market, GE Capital Canada Funding (A1/AA+/) sold C$550 million of fixed- and floating-rate notes, according to bond sources.

GE Capital Canada priced C$350 million in the first tranche of 3.55% notes due June 11, 2019 at 99.773 to yield 3.587%, or a spread of 207.3 bps over the Government of Canada benchmark. The notes came tighter than talk of 210 bps over the benchmark.

The C$200 million second tranche of two-year floating-rate notes priced at par to yield three-month Canadian Dealer Offered Rate plus 88 bps, better than guidance of 90 bps plus three-month CDOR.

TD Securities Inc. and RBC Capital Markets Corp. were the bookrunners.

GE Capital Funding Canada is the Canadian financing arm for GE Capital Canada.

Mortgage bond deal ahead

Dundee REIT and H&R REIT are expected to price C$650 million of first mortgage bonds on final approval from the Competition Bureau, which monitors acquisitions, an informed bond source said on Wednesday.

The REITs announced in May they purchased Bank of Nova Scotia's Scotia Plaza complex in Toronto for C$1.27 billion, and proceeds from the bond sale will be used to pay for the acquisition.

The bonds due June 20, 2019 (provisional DBRS: A) are set to price at no higher than 3.45%.

Scotia Capital Inc. and TD Securities are the bookrunners.

About C$433.3 million of the bonds will be allocated to Toronto-based Dundee, which will hold a two-thirds interest in the property. Downsview, Ont.-based H&R REIT will retain a one-third stake.

Scotiabank tightens

Bank of Nova Scotia's 2.55% notes due 2017 (Aa1/AA-) traded 8 bps better on the day, going out at 99 bps over Treasuries, a market source said.

Scotiabank sold $1.25 billion of the notes (Aa1/AA-/) on Jan. 5 at a spread of 172 bps plus Treasuries.

The bank is based in Halifax, N.S.

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