Brookfield sells mortgage bonds; Connacher notes active in secondary; Newalta trades up

By Cristal Cody

Prospect News, Dec. 16 - Brookfield Office Properties Canada LP came with a surprise sale of C$405 million of mortgage bonds on Friday, wrapping what is expected to be one of the last deals to price before the end of the year, according to a bond source.

"There were some rumors of some provincial deals today; however, they didn't materialize," the source said. "It's highly unlikely they'll come next week. But anything from now [until January] will be primarily driven off of reverse inquiries, rather than a normal offering."

Late Thursday, Moody's Investors Service lowered the outlook on the Province of Ontario's debt rating to negative.

Because corporate supply has been light as the year closes, bond spreads in January likely will "tighten in a little bit," a source said.

High-grade bonds overall ended weaker on the day. The Markit CDX Series 17 North American investment-grade index eased 1 basis point to a spread of 131 bps.

Canadian high-yield bonds traded better with spreads more than 15 bps firmer over the week, a trader said.

Connacher Oil & Gas Ltd.'s bonds continued to stay active in the secondary market on Friday after the company rejected an unsolicited takeover proposal earlier in the week.

Also during the session, Newalta Corp.'s 7¾% seven-year senior debentures (B1/DBRS: BB) sold last month traded higher, a source said.

Canadian government bonds ended Friday stronger and yields fell 2 bps to 7 bps across the curve.

The yield on the 10-year note dropped 6 bps to 1.86%. The 30-year bond yield fell to 2.45% from 2.52%.

Statistics Canada said on Friday that non-residents bought C$1.2 billion of Canadian bonds in October.

Foreign investment in Canadian securities cooled in October with non-residents adding C$2 billion, compared to C$9.2 billion the previous three months.

Canadians acquired $1.1 billion of foreign bonds in October, led by investment in U.S. Treasury notes with short-term maturities.

"This was the second consecutive month, and the third time in 2011, that residents invested in U.S. government bonds," Statistics Canada said.

Brookfield sells C$405 million

Brookfield Office Properties Canada sold C$405 million in 4.386% 10-year monthly pay first mortgage bonds at par to yield 4.426% on Friday, a bond source said.

The bonds due Dec. 21, 2021 priced at a spread of 260 bps over the Government of Canada benchmark in a private placement deal.

CIBC World Markets Inc. and TD Securities Inc. were the bookrunners.

The bonds have an average life until Jan. 15, 2021.

Proceeds will be used for the West Tower of Bay Adelaide Centre development project.

Toronto-based Brookfield is a major Canadian real estate investment trust with investments in downtown office properties in Toronto; Calgary, Alta.; Ottawa; and Vancouver, B.C.

Connacher active

Connacher Oil's 8¾% notes due 2018 traded at 90 in the Canadian secondary market on Friday, a trader said.

The bonds had rallied up to 95 from the low 80s on the unsolicited takeover offer for the company and fell on Tuesday after the company announced it had rejected the bid.

The Calgary, Alta.-based crude oil and natural gas company sold C$350 million of the 8¾% seven-year notes on May 20, 2011 at par.

Newalta better

Newalta's 7¾% senior debentures due Nov. 14, 2019 traded up to 102.5 on Friday, up about a quarter of a point on the week, a trader said.

The company priced C$125 million of the debentures (B1/DBRS: BB) at par on Nov. 8.

Newalta's older debt was down slightly on the week. The 7 5/8% notes due Nov. 23, 2017 were seen at 102.875 bid on Friday. The issue was sold in a C$125 million offering at par on Nov. 18, 2010.

Newalta is a Calgary, Alta.-based industrial waste management and environmental services company.

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