Ontario prices; Canadian markets thin, Yellow Media notes trade, Cash Store Financial flat

By Cristal Cody

Prospect News, Jan. 2 - Canadian bond market activity started the new year mostly light with many desks still empty for the week, sources said on Wednesday.

"A lot of people on the buyside and sellside are taking this week off, so I would suspect it will be pretty thin," an investment-grade bond source said. "I suspect we might start off [for the upcoming week] pretty steady."

The Province of Ontario sold C$600 million in a reopening of its 3.5% bonds due 2043 on Wednesday, an informed source said.

A steady pipeline of Canadian investment-grade and high-yield bond offerings is expected in January, sources said on Wednesday.

Calgary, Alta-based Husky Energy Inc. (Baa2/BBB+/DBRS: A) filed a U.S. dollar-denominated $3 billion shelf prospectus on Monday to offer common shares, preferred shares, debt securities, including debentures and notes, as well as subscription receipts, warrants and units over a 25-month period.

A high-yield bond source expects bond offerings over the month in the energy and mining sectors.

"Think there could be a few deals," the source said.

Activity in Canada's high-grade market ended the day fairly uneventful, a bond source said.

"Trades did next to nothing for days with a couple of tiny little trades," the source said. "There were no issues today in the corporate market and almost no trades. People are watching the equity screens. The tone is slightly positive following along with the equity markets; there's just not enough liquidity or trade to have a good pattern."

The Markit CDX Series 19 North American investment-grade index closed on Wednesday at a spread of 85 basis points.

Thin markets

Light activity was similar in Canada's high-yield bond market, sources said.

"There definitely hasn't been a lot of buying yet," one trader said. "I would say Monday we will have a better idea. We did a few trades today."

The Markit CDX Series 19 North American high-yield index ended at 102.59.

Yellow Media Ltd.'s 9¼% senior secured notes due 2018 traded on Wednesday wrapped around 100.5, the trader said.

"It's unchanged [on the day]," the trader said. "There were a few buyers and sellers out of the U.S."

Standard & Poor's lowered the Montreal-based directory publisher's long-term corporate credit rating to D from CC and DBRS discontinued the company's ratings on Dec. 20.

The company completed a recapitalization that exchanged the former securities from Yellow Media Inc. for cash, common shares and warrants of Yellow Media Ltd. and new senior secured notes and senior subordinated exchangeable debentures of YPG Financing Inc., the entity previously named Yellow Media Inc. and a subsidiary of Yellow Media Ltd.

Cash Store Financial Services Inc.'s 11½% senior secured notes due 2017 ended mostly unchanged in thin trading on Wednesday following the company's investor conference call, a trader said.

Cash Store said revenue for the fiscal year ended Sept. 30 was C$187.4 million compared to C$189.9 million in 2011. Earnings fell to a loss of C$43.1 million from a gain of C$9 million in the same period a year ago.

The company said it suspended dividend payments in the fourth quarter.

"There's definitely a lot of discussion and [investors] aren't exactly happy with how things turned out," a source said.

Ontario reopens debentures

The Province of Ontario (Aa2/AA-/DBRS: AA) raised a total of C$600 million with C$500 million placed on behalf of the syndicate at the same terms in a reopening of its 3.5% debentures due 2043 on Wednesday, an informed source said.

The debentures priced at 100.84 to yield 3.455%, or a spread of 101 bps over the Government of Canada benchmark.

BMO Nesbitt Burns Inc. was the bookrunner.

The issue was last reopened on Dec. 17 in a C$600 million offering with C$400 million placed on behalf of the syndicate at 101.429 to yield 3.424%, or a spread of 103 bps over the Government of Canada benchmark.

The province first sold the bonds on Jan. 26, 2012 in a C$600 million offering at 99.187 to yield 3.543%, or 88 bps over the Government of Canada benchmark.

The total outstanding is C$8.85 billion.

Cash Store flat

In the secondary market, Cash Store's 11½% senior secured notes due 2017 last traded flat on Wednesday at 74 bid, 75 offered, a trader said on Wednesday.

The company sold C$132.5 million of the notes (B3/B/) on Jan. 24, 2012 at 94.608.

Edmonton, Alta.-based Cash Store Financial provides broker and short-term lending services.

Government bonds fall

Canadian government bonds dropped as stocks rallied following U.S. lawmakers' approval of a bill late on Tuesday to avoid $600 billion in spending cuts and tax hikes set to start in 2013.

Canada's 10-year note yield climbed 7 bps to 1.87%. The 30-year bond yield closed 6 bps higher at 2.43%.

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