British Columbia sells C$500 million add-on; Skylink, OPTI Canada bonds active in trading

By Cristal Cody

Prospect News, April 6 - Bond issuance slowed down on Wednesday in Canada with only a C$500 million add-on pricing from the Province of British Columbia, as the high-yield market stayed busy from the recent wash of new deals in Canada and the United States, informed sources said.

Looking ahead to the provincial deal calendar, the provinces of Ontario and Quebec are expected to be back in the market before too long, an informed bond source said.

Provincial deals are likely to stay steady through the year, particularly in the first half of 2011, the source said.

"We do expect some of the issuance to be pushed earlier on in the year with elections expected in the fall," the source said.

"Nova Scotia announced yesterday they'll have slightly less to borrow this year, C$1.6 billion versus C$1.9 billion last year," the source said. "Ontario's borrowing is slightly less this year at C$35 billion versus C$40 billion last year. We're expecting a little less borrowing versus last year but still around C$80 billion this year."

In secondary trading, the long bonds from British Columbia were trading flat at 70 basis points bid, 69 bps offered, a provincial bond market source said.

"We were left with some bonds after launch," the source said. "It got done, but it was a little slow. The bonds are pretty much at issue bid."

Provincial bonds were flat to ½ bp weaker, a bond market source said.

"Ontario fives and longs are a half of a basis point wider. Tens are fairly unchanged," the source said. "We didn't see too much activity on the trading front, just some surrounding the B.C. deal. The market has been quiet this week given the Euromoney conference in Toronto."

Wednesday was the second day of the two-day Canada Forum of the Euromoney conference on the health of Canada's debt capital markets.

High-yield market picks up

High-yield bond markets saw a busy day with notes from Skylink Aviation Inc. seen active on the day, one source said.

Although trading in OPTI Canada Inc. also was up - due to a news story out of Edmonton, Alta., one source opined - they were virtually unchanged on the day, but up on the week.

Canadian government bonds closed the day weaker, tracking U.S. Treasuries. Canada's 10-year bond yield rose 3 bps to 3.41%, and the 30-year bond yield rose 5 bps to 3.82%.

"Canada's were soft, pretty much following the weakness in U.S. Treasuries on the back of fairly dovish commentary from Fed speakers leading to higher inflation expectations and steepening both curves," an informed source said.

Treasuries dropped, sending yields up 6 bps to 9 bps on the longer end of the curve, on growing inflation concerns. The 10-year Treasury note yield rose 6 bps to 3.54%, while the 30-year bond yield rose sharply to 4.59% from 4.5%.

"Market participants seem to continue to be worried about inflation and the Fed's lack of response to it," said Mary Ann Hurley, a fixed income trader for D.A. Davidson & Co.

British Columbia prices

The Province of British Columbia (Aaa/AAA//DBRS: AA) sold C$500 million in a reopening of its 4.3% bonds due June 18, 2042 at 96.871 to yield 4.487% on Wednesday, an informed source said.

The bonds priced at a spread of 70 bps over the Government of Canada benchmark.

CIBC World Markets Inc. was the lead manager.

The issue was previously reopened on Feb. 2, when the province sold C$500 million at a 71 bps spread. The total outstanding now is C$2 billion.

Skylink active

Skylink's 12.25% senior secured second-lien notes due 2016 traded up on the bid side on Wednesday at 100 bid, 100.50 offered compared to 99.75 bid, 100.75 offered the previous day, an informed source said.

Skylink sold the notes (/B//DBRS: B) at par on March 8.

The Toronto-based global charter company specializes in emergency airlifts and evacuations and logistical support for governments and corporations.

OPTI active, unchanged

OPTI Canada paper was among the day's most actively traded credits, with $50 million to $60 million of the company's subordinated paper changing hands, a trader said.

He placed the 7.875% and 8.25% notes due 2014 at around 54.5, which he deemed "kind of right where it's been, but certainly better on the week."

He said the bonds began trading Monday around 52 bid, 52.5 offered.

Another trader also said the debt was active but unchanged around the 54 level.

The first trader said the surge in action was due to a news story from the Edmonton Journal. The story had to due with the Alberta government's attempts to increase its conserved lands, which some environmental groups are lambasting as not good enough.

"Anytime there is stuff in the oil sands area, OPTI will trade," he said, adding that the news was really "meaningless" to OPTI specifically.

OPTI is a Calgary, Alta.-based oil sands producer.

Stephanie N. Rotondo contributed to this review

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