Cominar REIT plans first bullet bond; Dundee, H&R await paperwork; Norbord details emerge

By Cristal Cody

Tupelo, Miss., June 6 - Primary activity cooled in Canada on Tuesday, but deal activity is expected to pick up later in the week, according to informed bond sources.

Dundee Real Estate Investment Trust and H&R REIT are awaiting an indenture for their offering of C$650 million of first-mortgage bonds, with the deal expected to price once the paperwork is completed, a syndicate source said.

Also in the REIT sector, Cominar Real Estate Investment Trust (DBRS: BBB) likely will bring its first Canadian bullet bond following an information roadshow the previous week.

"It would be a first-time issuer in the bond market," one source said. "They've done some converts before but never a bullet bond. They may be an issuer in the near future, but there's nothing imminent."

John Deere Canada Funding Inc. is looking to be in the market in the coming future after filing a C$2.5 billion medium-term note (DBRS: A) shelf prospectus on Tuesday. The program includes direct, unsecured and unsubordinated securities.

In the high-yield market, additional details of Norbord Inc.'s U.S.-dollar denominated $240 million senior note deal emerged on Tuesday.

"The roadshow kicks off tomorrow in Toronto - lunch meetings and a conference call," an informed source said.

Pricing is tone-dependent and hard to pinpoint because of "various moving parts in the transaction," the source said.

In the provincial market, there's some expectation of domestic supply from the Province of Ontario and possibly some deals in the U.S. high-grade market, a source said.

"We may have not seen as much interest in bonds given the absolute all-in yields are extremely low," the source said.

"Since it's not attracting buyers into this, it may cause Canada to correct a little bit and sell off. There's also a couple provinces that are looking at the U.S. market potentially. The arbitrage levels make it attractive."

Corporate bonds traded modestly better on the day. The Markit CDX Series 18 North American investment-grade index firmed 1 basis point to a spread of 126 bps.

Provincials stayed mostly flat.

"Spreads are unchanged again today," a bond source said.

"Overall, it's a relatively positive market tone. There may be some index-related bond buying of long provincial bonds we have seen around the June 1 coupon. The flows the last few days have been skewed toward better buying of longs and selling of 10s with the index extension trades."

Government bonds were weaker following the Bank of Canada's unsurprising decision to leave the 1% interest rate unchanged. The 10-year note yield rose to 1.57% from 1.53%. The 30-year bond yield climbed 7 bps to 2.64%.

Cominar REIT to bring deal

Cominar Real Estate Investment Trust (DBRS: BBB) held its informational roadshow the previous week, a bond source said on Tuesday.

BMO Capital Markets Corp. and National Bank Financial Inc. managed the roadshow.

The company filed a shelf prospectus on May 29 for C$750 million of senior or subordinated debt securities.

Quebec City-based Cominar REIT holds office, retail and industrial properties in Quebec and Ontario.

REITs await paperwork

Dundee Real Estate Investment Trust and H&R REIT wrapped a roadshow for an offering of C$650 million of first-mortgage bonds and are awaiting final documentation for an indenture, an informed source said.

Pricing is subject to "receipt of documentation," the source said.

The bonds due June 20, 2010 (provisional DBRS: A rating) are expected to price later in the week.

The bonds are set to price at a rate no higher than 3.45%.

Scotia Capital Inc. and TD Securities Inc. are the bookrunners.

The REITs announced in May they purchased Bank of Nova Scotia's Scotia Plaza complex in Toronto for C$1.27 billion.

Proceeds will be used to pay for the transaction, which is expected to close on June 20.

About C$433.3 million of the bonds will be allocated to Dundee, according to the company.

Toronto-based Dundee will keep a two-thirds interest in the property, while Downsview, Ont.-based H&R REIT will hold a one-third stake.

Norbord to kick off roadshow

Additional details of Norbord's U.S.-dollar denominated $240 million offering of senior notes emerged on Tuesday with the company expected to hold a roadshow in Toronto and investor call on Wednesday, according to an informed bond source.

The company said on Monday that it will price $165 million of senior secured notes (Ba2/BB-/DBRS: BB) that are Rule 144A eligible. The notes will rank pari passu with the company's existing senior secured notes due 2017.

The company said it will sell the second tranche of $75 million of senior unsecured notes (B2/B+/DBRS: B) to an institutional investor.

CIBC World Markets Inc. is the left bookrunner.

Credit Suisse Securities (USA) LLC and Bank of America Merrill Lynch are the joint bookrunners.

Co-managers are Comerica Securities, Inc., RBC Capital Markets Corp., Scotia Capital Inc. and TD Securities Inc.

Proceeds will be used to refinance the company's $240 million outstanding of 7.25% debentures due July 1, 2012.

The Toronto-based manufacturer of wood panels operates 13 plant locations in the United States, Canada and Europe.

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