Capital Power, Manulife tap Canadian markets; Canada Housing to sell C$3.5 billion bonds

By Cristal Cody

Prospect News, Feb. 14 - Capital Power LP, Manulife Financial Corp. and Manulife affiliate Manufacturers Life Insurance Co. tapped the Canadian financial markets on Tuesday, bond sources told Prospect News.

Capital Power raised an upsized C$250 million of seven-year medium-term notes, with about C$20 million "of retail carved out," a source said.

The well-received deal follows an investor roadshow from the company in January.

Manufacturers Life Insurance sold C$500 million of 4.165% 10-year subordinated debentures following a C$250 million preferred stock sale from Manulife Financial on Tuesday.

Also on Tuesday, Canada Housing Trust launched C$3.5 billion of Canada Mortgage Bonds in two tranches. The mortgage bonds are expected to price on Wednesday.

Deal flows are open until probably Thursday, one bond source said.

"We do have a long weekend coming up this week and an early close on Friday," the source said.

The bond markets in Canada and the United States will be closed on Monday for holidays.

In the secondary market, Capital Power's notes traded 5 basis points to 6 bps tighter, a source said.

"Despite the negative news out of Europe, market conditions are very good," a source said.

Investment-grade bonds overall were flat to weaker. The Markit CDX Series 17 North American high-grade index eased 1 bp to a spread of 98 bps.

Government bonds traded better over the day. Canada's 10-year note yield fell to 2.02% from 2.07%. The 30-year bond yield dropped 4 bps to 2.6%.

Capital Power taps market

Capital Power priced an upsized C$250 million of 4.85% medium-term notes due Feb. 21, 2019 at 99.883 to yield 4.87% on Tuesday, an informed bond source said.

The notes (DBRS: BBB) priced on the tight end of guidance at a spread of 315 bps over the Canadian bond curve.

The deal was launched at C$200 million in size on guidance of 320 bps, plus or minus 5 bps.

About C$20 million of the deal was sold to retail investors, the source said.

CIBC World Markets Inc. and Scotia Capital Inc. were lead managers. Co-managers were BMO Capital Markets Corp., RBC Capital Markets Corp., TD Securities Inc., National Bank Financial Inc., Desjardins Securities Inc., HSBC Capital (Canada) Inc. and Bank of America Merrill Lynch.

Capital Power is an Edmonton, Alta.-based energy company.

Manufacturers Life prices

Manulife Financial affiliate Manufacturers Life Insurance sold C$500 million of 4.165% 10-year subordinated debentures (DBRS: A) at par to yield 4.166% on Tuesday, an informed bond source said.

The debentures priced at a spread of 270 bps over the Canadian bond curve.

The deal was launched with the fixed size of C$500 million on guidance of 272 bps, plus or minus 2 bps.

The debentures will convert to a floating rate of 245 bps over the three-month Canadian Dealer Offered Rate on June 1, 2017.

BMO Capital Markets Corp. and RBC Capital Markets Corp. were the lead managers.

Co-managers were CIBC World Markets Inc., Scotia Capital Inc., TD Securities Inc., Bank of America Merrill Lynch, National Bank Financial Inc., HSBC Securities (Canada), Desjardins Securities Inc., Laurentian Bank Securities, Inc., Canaccord Capital Corp. and Manulife Securities.

Proceeds will be used for general corporate purposes.

Manufacturers Life Insurance is a unit of Toronto-based financial services and reinsurance company Manulife Financial.

Manulife Financial active

Manulife Financial raised C$250 million in an offering of five-year preferred stock (/BBB/DBRS: Pfd-2) to yield 4.6% on Tuesday, the company said in a statement.

"Our capital raising activity takes into account our expected refinancing requirements and recognizes that, while our capital position remains strong, there could be pressure on our common share price and bond spreads if our capital ratios decline. We see this action as prudent when faced with uncertain market and economic conditions," Donald Guloien, president and chief executive officer of Manulife, said in the release.

The company sold 10 million shares of the non-cumulative rate reset class 1, series 7 preferred stock at C$25.00 per share.

After the initial five-year period ends March 19, 2017, the dividend rate will reset every five years at a rate equal to the five-year Government of Canada bond yield plus 313 bps.

Scotia Capital, RBC Capital Markets and TD Securities were the lead managers.

Proceeds will be used for general corporate purposes, which may include investments in subsidiaries.

Manulife Financial is a Toronto-based financial services group.

Canada Housing launches

Canada Housing Trust (Aaa/AAA/DBRS: AAA) launched C$3.5 billion in two tranches of Canada Mortgage Bonds on Tuesday, an informed bond source said.

The offering of a minimum of C$1 billion of five-year floating-rate notes and C$2.5 billion of 10-year fixed-rate notes is expected to price on Wednesday.

The deal is being led by a syndicate that includes CIBC World Markets and BMO Capital Markets.

Canada Housing last was in the market on Dec. 15 with an offering of C$5.5 billion of 1.85% Canada Mortgage Bonds due 2016, priced at a spread of 36 bps over the Government of Canada benchmark.

The trust is a unit of Canada Mortgage and Housing Corp., which provides financing, mortgage loan insurance, mortgage-backed securities and housing policy and programs.

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