British Columbia Municipal Finance prices in challenging market; Yellow Media moves lower

By Cristal Cody

Prospect News, Oct. 4 - The global market tone stayed weaker on uncertainty in Europe as one Canadian issuer brought an expected deal on Tuesday, sources said.

The Municipal Finance Authority of British Columbia sold C$105 million in a reopening of the 4.15% 10-year notes, which came wider than when the notes originally were sold in March.

"Even if the markets were a little challenging, they still had to get something done this week," a source said. "We've seen spread widening in their name and other municipal names in the last month or two."

Municipal bonds have underperformed recently compared to provincial names, the source said.

"Given the poor market tone over the last couple of months and the uncertainty in Europe, we've seen fewer buyers of municipal names and people just looking for more benchmark issuers like Quebec and Ontario."

Bonds opened the day weaker but regained slightly as equities edged up late afternoon.

"The markets in North America had a little bit of a bounce into the close, but it was choppy earlier today," a bond source said. "Provincial spreads have ended the day maybe half a basis point tighter after widening half a bp earlier today - we have seen a couple buyers come into the market."

In trading, corporate bonds widened about 1.5 bps. The Markit CDX Series 17 North American high-grade index firmed 3 bps to a spread of 147 bps.

"Bonds are a bit weaker but nothing panicky," a trader said.

Yellow Media Inc.'s bonds continued to trade lower, with bonds falling to the "low 40s" on Tuesday, a trader said.

"We traded C$90 million on Friday and some yesterday and C$10 [million] to C$15 [million] today," the trader said.

Energy bonds from Paramount Resources Ltd. and Perpetual Energy Inc. also saw secondary activity on Tuesday.

Government bonds were lower on the day, sending yields higher on the short end of the curve. Canada's 10-year note yield rose 4 bps to 2.1%. The 30-year bond yield was flat at 2.7%.

Primary sees reopening

The Municipal Finance Authority of British Columbia (Aaa/AAA/AAA) raised C$105 million in a reopening of the 4.15% 10-year notes at 108.037 to yield 3.175% on Tuesday, according to a bond source.

The notes due June 1, 2021 priced at a spread of 117 bps over the Government of Canada benchmark.

RBC Capital Markets Corp. was the lead manager.

The issue originally priced on March 28, 2011 in a C$225 million offering at 99.791 to yield 4.176%, or 80.5 bps over the Canadian government benchmark. The total outstanding is C$330 million.

The Victoria, B.C.-based authority borrows funds on behalf of municipalities in British Columbia.

Yellow Media ends lower

Yellow Media's bonds traded in the 40 area on Tuesday, a trader said.

The company's bonds weakened after it announced last week a C$2.9 billion goodwill impairment charge for the third quarter and the elimination of its dividends. DBRS dropped the company's bonds to BB from BBB.

Yellow Media's 5.71% notes due 2014 fell to 43 bid, 45 offered on Tuesday from the 57 area on Thursday, the trader said.

The company's 5¼% notes due 2016 traded at 40 bid, 42 offered late afternoon, while the 7¾% notes due 2020 went out at 41 bid, 43 offered.

The phone directory publisher is based in Montreal.

Paramount bonds rise

Paramount Resources' 8¼% series 2 senior unsecured notes due Dec. 13, 2017 (Caa2/B+/) edged higher to 99 bid, 101 offered on Tuesday, a trader said.

The company sold C$300 million of the notes at par on Nov. 30, 2010.

Calgary, Alta.-based Paramount Resources is an oil and natural gas exploration, development and production company.

Perpetual Energy trades

In other trading, Perpetual Energy's 8¾% senior notes due March 15, 2018 (B3/B-/) were seen at 95 bid, 97 offered, a trader said on Tuesday.

The company sold C$150 million of the notes on March 10 at par.

Calgary, Alta.-based Perpetual Energy is an oil and gas company.

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