Bank of Nova Scotia, First Capital Realty tap markets; provincials on deck; bonds firm

By Cristal Cody

Prospect News, March 22 - The deal market picked up slightly on Tuesday with a $1 billion bond offering in the United States from the Bank of Nova Scotia and an upsized sale of C$110 million of debentures from First Capital Realty Inc. in Canada, sources said.

In new offerings coming up, Financement-Quebec is expected to reopen its 3.5% notes due Dec. 1, 2017, a source said Tuesday.

The Province of Ontario announced early Tuesday that it will be under a borrowing blackout period until it releases its budget March 29, a source said. The province was rumored to be planning to sell a "long deal and now they won't for a week or so. That had investors buying in the secondary market, pushing in spreads a little."

A couple of other provincial issuers also are likely to be in the market soon, but after budgets are finalized, a source said. "Others may follow suit as well."

In the secondary market, AltaGas Ltd.'s bonds stayed firm in trading a day after pricing, though no major activity was seen, a source said Tuesday.

Corporate bonds overall tightened 2 basis points on the day, a source said.

"Provincial spreads are in a couple as well, 1 to 1½ on the long end of provi's over the last couple of days," the source said. "Fives are actually weaker on the day - 1 bp weaker - and 10s are about a ½ bp tighter."

Canadian government bonds were stronger on softer economic data and as traders waited for the new fiscal federal budget. The 10-year note yield fell 2 bps to 3.19%, and the 30-year bond dropped 3 bps to 3.7%.

Statistics Canada said retail sales fell 0.3% to C$37.1 billion in January, the second straight monthly decline.

In a separate leading indicators report, the composite leading index rose 0.8% in February, the largest advance since May 2010, the agency said. New orders for durable goods were up 1%.

U.S. Treasuries held in on Tuesday, with yields flat on the short end and down 2 bps on the long end of the curve. The 10-year note yield ended the day unchanged at 3.32%. The 30-year bond yield fell 2 bps to 4.43%.

Bank of Nova Scotia prices

Bank of Nova Scotia priced $1 billion of 2.9% five-year senior notes on Tuesday at a spread of 90 bps over Treasuries, a market source said late in the day.

The notes were sold in line with guidance in the 90 bps area.

The notes (Aa1/AA-/AA-) priced at 99.834 to yield 2.936%.

Bookrunners were Barclays Capital Inc., Citigroup Global Markets Inc., Merrill Lynch, Morgan Stanley & Co., Inc. and Scotia Capital (USA) Inc.

Co-managers were Goldman Sachs & Co., UBS Securities LLC and J.P. Morgan Securities LLC.

Proceeds are being used for general corporate purposes.

The financial services company is based in Toronto.

First Capital Realty prices

First Capital Realty sold C$110 million 5.6% series M senior debentures due April 30, 2020 at 100.312 to yield 5.555% on Tuesday, an informed source said.

The debentures (Baa3//DBRS: BBB) priced in line with guidance at a spread of 237.8 bps over the Government of Canada benchmark.

The deal was upsized by an extra C$10 million.

The debentures have a Canada call at 59.5 bps over the government benchmark.

TD Securities Inc. and RBC Capital Markets Corp. were the lead managers.

The proceeds will be used for development and redevelopment activities, acquisitions and general corporate purposes.

First Capital Realty is a Toronto-based owner, developer and operator of supermarket- and drugstore-anchored shopping centers in metropolitan areas in Canada.

Financement-Quebec on tap

Financement-Quebec (Aa2/A+/DBRS: A) is expected to be back in the market with a reopening of its 3.5% notes due Dec. 1, 2017, a source said Tuesday.

The upcoming deal is expected to be sized at C$600 million but could be upsized to C$1 billion, the source said.

The provincial agency sold C$600 million of the notes on Jan. 18 at a spread of 71 bps over the Government of Canada benchmark.

Pricing is targeted for later in the current week or the March 28 week.

The issuer's debt is guaranteed by the Province of Quebec.

Financement-Quebec is a Quebec provincial agency that provides financial services to public institutions, including health care, school boards, community colleges and universities.

AltaGas steady

The new bonds from AltaGas held steady in secondary trading on Tuesday, a source said.

The company sold C$200 million 4.1% senior medium-term notes due March 24, 2016 (/BBB/DBRS: BBB) at a spread of 152.4 bps over the Canadian government benchmark.

The notes closed Monday at 150 bps bid, 147 bps offered, the source said.

AltaGas is an energy company based in Calgary, Alta.

Andrea Heisinger contributed to this review

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