Alimentation Couche-Tard, Ontario, Royal Bank of Canada price billion-dollar deals

By Cristal Cody

Prospect News, Oct. 25 - Canadian issuers led primary action on Thursday with deals in the domestic and U.S. markets from Alimentation Couche-Tard Ltd., the Province of Ontario and Royal Bank of Canada.

Alimentation Couche-Tard sold an upsized C$1.05 billion in three tranches of senior notes (Baa3/BBB-/) on Thursday after it launched the deal early in the day at a set basis point spread.

"That was the max it was allowed to because they only had a C$1 billion shelf," one source said. "We knew they had quite a bit of funding to do at the back of the acquisition in Europe."

The Canadian convenience store operator filed the shelf prospectus on Oct. 2.

The Province of Ontario also tapped the market on Thursday with a C$1 billion add-on to its 1.9% five-year bonds.

In the U.S. market, the Royal Bank of Canada priced $1 billion of three-year global notes on Thursday to yield a spread of Treasuries plus 37.5 basis points.

RBC's notes due 2015 firmed 2 bps on the bid side in the secondary market, a trader said late in the afternoon.

In other deal action on Thursday, Algonquin Power & Utilities Corp. sold C$120 million of six-year preferred shares.

Primary activity on Friday is not expected in the Canadian markets, although a drive-by deal could happen, a source said.

The Canadian bond markets are "still relatively illiquid," the source said. "We're five or six days away from the fiscal month-end and fiscal-year end; therefore, dealer desks are getting very, very quiet. For the next few days, it starts getting a little bit choppy, and then the next week it opens up again."

Bonds traded moderately better on the day. The Markit CDX Series 18 North American investment-grade index firmed 1 bp to a spread of 98 bps.

The Markit CDX Series 18 North American high-yield index rose to 99.44 from 99.27.

Government bonds ended weaker across the curve. Canada's 10-year note yield rose 4 bps to 1.89%. The 30-year bond yield closed 3 bps higher at 2.46%.

More Canadian supply

Alimentation Couche-Tard upsized each of the three tranches of senior notes (Baa3/BBB-/) from C$250 million.

In the first tranche, the company sold C$350 million of 2.861% series 1 five-year notes at par to yield a spread of 140 bps over the Canadian bond curve.

The company sold C$450 million of 3.319% series 2 seven-year notes at par to yield 165 bps over the bond curve.

In the final tranche, C$250 million of 3.899% series 3 10-year notes priced at par to yield 195 bps over the Canadian bond curve.

National Bank Financial Inc., Scotia Capital Inc., HSBC Capital (Canada) Inc., UBS Securities LLC, Desjardins Securities Inc. and Barclays Capital Canada Inc. were the lead managers.

The notes will be direct unsecured obligations of Couche-Tard and will rank pari passu with all of the company's other outstanding unsecured and unsubordinated debt.

Proceeds will be used to pay down a portion of the credit facility that was used to fund the acquisition of Scandinavian transport fuel retailer Statoil Fuel & Retail ASA.

The convenience store operator is based in Quebec.

Ontario taps five-year notes

The Province of Ontario (Aa2/AA-/DBRS: AA) priced C$1 billion in its reopening of the 1.9% five-year bonds on Thursday at 99.672 to yield 1.971%, an informed source said.

The notes due Sept. 8, 2017 priced at a spread of 52.5 bps over the Government of Canada benchmark.

BMO Capital Markets Corp. was the lead manager.

The province first sold the issue on Jan. 17, 2012 in a C$1.25 billion offering at 99.744 to yield 1.948%, or a spread of 58.5 bps over the government benchmark. The issue was last reopened on Feb. 23, 2012 in a C$1 billion offering. The total outstanding is C$3.25 billion.

RBC sells $1 billion

In the U.S. dollar market, RBC priced $1 billion of 0.8% three-year global notes on Thursday to yield Treasuries plus 37.5 bps, according to an FWP filing with the Securities and Exchange Commission.

The notes (Aa3/AA-/AA) were sold at 99.976 to yield 0.808%. There is no call option.

Goldman Sachs & Co., nabSecurities LLC and RBC Capital Markets LLC were the bookrunners.

RBC was last in the U.S. bond market with a $2.5 billion sale of five-year covered bonds on Sept. 12.

The notes due 2015 traded tighter in the secondary market, going out late afternoon at 35 bps bid, 33 bps offered, a trader said.

The financial services company is based in Toronto.

Algonquin Power sells prices

Algonquin Power & Utilities said on Thursday that it sold C$120 million of cumulative rate reset preferred shares that yield 4.5% annually for the initial period ending on Dec. 31, 2018.

The company sold 4.8 million shares of the series A preferred stock at C$25.00 per share.

"With the imminent conversion of our final series of convertible debentures to equity, our first series of preferred shares opens another source of capital to fund our growth and further lowers our cost of capital," David Bronicheski, the company's chief financial officer, said in a news release.

Scotia Capital Inc. and TD Securities Inc. were the lead managers.

The dividend rate will reset on Dec. 31, 2018 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 294 bps.

Shareholders will have the option to convert all or any of their series A shares into series B cumulative floating-rate preferred shares on Dec. 31, 2018 and on Dec. 31 every five years thereafter.

Series B shareholders will receive quarterly floating-rate cumulative preferential cash dividends at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 294 bps.

The shares are redeemable by the company, at its option, on Dec. 31, 2018 and on Dec. 31 of every five years thereafter.

Proceeds from the sale will be used to fund the equity portion of the acquisition of two wind farms in the United States and for general corporate purposes.

Oakville, Ont.-based Algonquin Power owns and operates regulated and non-regulated water, electricity and natural gas utilities in North America.

Andrea Heisinger contributed to this review

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