Sydney Airport plans seven-year deal; New Brunswick sells bonds; Armtec drops, CHUM firms

By Cristal Cody

Prospect News, June 9 - Additional details emerged about the upcoming Maple bond offering from Sydney Airport Finance Co. Pty Ltd. The Australian airport is on a roadshow for an offering of seven-year notes, a source said Thursday.

The deal is likely to price in the week ahead.

Details also emerged about an offering of eight-year senior notes from Quadra FNX Mining Ltd.

No new bond deals came in the Canadian market on Thursday, but the Province of New Brunswick sold an upsized $750 million of 2.75% seven-year bonds in the U.S. market.

"It's dead," said one Canadian bond source. "Canadian wise, zero. Spreads are drifting a little bit and the fact that government rates have moved down so low has put a stall on credit."

In trading, Armtec Infrastructure Inc.'s stock and bonds weakened after the company posted a wider first-quarter loss and suspended its quarterly dividend.

Recently priced bonds also continued to trade weaker, a source said.

The series CI notes due May 25, 2016 sold in May by Telus Corp. moved out 5 basis points.

"It's a matter of indigestion. May wasn't too bad but the month before was chock full of issuance," the source said. "Just about all new issuances brought in the past month are trading below issue price."

One issuer bucking that trend is Health Montreal Collective LP's bonds priced earlier in the week. The bonds were seen trading about 5 bps tighter.

Canadian government bonds fell following weaker trade data, sending the 10-year bond yield up 3 bps to 3.03%. The 30-year bond yield rose 2 bps to 3.51%.

Statistics Canada said Canada's trade deficit widened to C$924 million in April from C$417 million n March. Exports fell 1.9% in April following a 4.8% gain in March. Imports also fell 0.6%.

New Brunswick prices

The Province of New Brunswick sold an upsized $750 million of 2.75% seven-year notes on Thursday at a spread of mid-swaps plus 35 bps, a market source said.

The notes sold in line with guidance in the mid-to-high 30 bps over mid-swaps area, the source said. The size was increased from $500 million.

The notes (Aa2/AA-) were priced at 99.703 to yield 2.797%.

The securities are non-callable.

Bookrunners were Bank of America Merrill Lynch, CIBC World Markets and RBC Capital Markets LLC.

Proceeds are being added to the province's consolidated fund and used for general purposes, or applied to the purchase of securities issued by the New Brunswick Electric Finance Corp.

Sydney Airport on tap

Sydney Airport Finance of Australia is on a roadshow for an offering of seven-year Maple bonds, an informed source said Thursday.

The size is expected in the C$300 million to C$500 million range.

The deal likely will price the week of June 13.

Scotia Capital Inc. and Bank of America Merrill Lynch are the bookrunners.

The airport is majority owned by infrastructure fund MAp Group Ltd. and affiliates.

Quadra FNX Mining sets talk

Quadra FNX Mining talked its $500 million offering of eight-year senior notes (B1/BB-) with a yield in the 7½% area on Thursday, according to a market source.

The deal is expected to price on Friday.

J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC are the joint bookrunners. BMO Capital Markets Corp. is the co-manager.

The Rule 144A and Regulation S for life notes come with four years of call protection.

The mid-tier copper mining company plans to use the proceeds to finance the development of the Sierra Gorda project in Chile.

Quadra FNX Mining maintains corporate offices in Vancouver, B.C., and Toronto, Ont.

Armtec weaker

Armtec reported first-quarter revenue of C$75 million, up 4.8%, and a wider-than-expected loss of C$13.3 million, compared to a loss of C$10.6 million in the year ago period.

Armtec's stock plunged 59% to C$4.35 on the Toronto Stock Exchange.

The 8.875% senior unsecured notes due Sept. 22, 2017 sold by subsidiary Armtec Holdings, Ltd. were seen going out at 94.25 bid, 95.25 offered on Thursday, a bond source said. The company priced C$150 million of the seven-year notes (/B//DBRS: BB) on Sept. 15, 2010 at par.

The company suspended until further notice its quarterly dividend. One bond source does not expect the company to reinstate the dividend in the immediate future based on the company's weak outlook for the second and third quarters.

Armtec said in the earnings release that it suspended the dividend because of the greater-than-expected first-quarter loss from bad weather conditions and margin compression in a business unit.

"As previously disclosed, Armtec must meet certain financial covenants in its credit facilities and senior notes involving leverage and earnings tests to permit it to pay dividends," the company said. "It is anticipated that the earnings test on the senior notes will prevent Armtec from paying dividends beginning in the third quarter of 2011. Suspension of the quarterly dividend will assist Armtec to reduce its indebtedness otherwise outstanding."

Armtec is a Guelph, Ont.-based manufacturer and marketer of industrial infrastructure products and engineered construction solutions.

Telus wider

Telus' deal brought in May traded weaker along with other recently priced deals, an informed bond source said. Telus sold C$600 million of 3.65% five-year senior notes (Baa1/DBRS: A) on May 19 at a spread of 118 bps over the Canadian bond curve.

"Telus bonds are now 5 bps wider," the source said.

Vancouver, B.C.-based Telus is the largest telecommunications company in western Canada.

Health Montreal firms

Health Montreal Collective sold C$1.371 billion of senior amortizing bonds (Baa2/DBRS: BBB) at par to yield 6.721% on Tuesday. The bonds have stayed strong in the secondary market, a source said Thursday.

"Montreal Health is definitely tighter. It broke right out of the gate tighter," the source said. "There was a big amount of buying on that thing."

The series A bonds due Sept. 30, 2049 priced in line with talk at a spread of 315 bps over the Canadian government benchmark. The bonds are expected to have an average life of 28.3 years.

The Montreal medical teaching center is also known as CHUM.

Andrea Heisinger and Paul A. Harris contributed to this review

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