Cara Operations, Quebec bring sales; Canadian deal activity quiets for U.S. holiday

By Cristal Cody

Prospect News, Nov. 24 - Cara Operations Ltd. and the Province of Quebec kept the Canadian market active on Wednesday with two sales of high-yield and provincial securities.

For the remainder of the week, the primary market was expected stay quiet until early in the week ahead week, when Calgary, Alta.-based Paramount Resources Ltd. plans to price a C$250 million offering of senior notes due 2017 (Caa2/B+).

"With the U.S. Thanksgiving, it's quiet," a source said. "I don't think we're going to see any issuance the rest of this week."

On Wednesday, Cara Operations sold C$200 million in 9 1/8% senior secured second lien guaranteed notes due Dec. 1, 2015 at par on Wednesday, according to an informed source.

The notes (DBRS: B//BB-/) priced at a spread of 667 basis points over the Government of Canada benchmark bond.

The deal's yield came at the low end of talk for a 9¼% yield plus or minus 12.5 bps.

Earlier in the day, a source said, "expressions of interest in the issue are very strong and the deal is well-oversubscribed, which bodes for pricing near the tight end of the guidance range."

The notes have a make-whole call at 50 bps over the Canadian benchmark.

Scotia Capital Inc. was the lead manager of the sale.

Proceeds will be used to repay short-term bank debt.

Vaughan, Ont.-based Cara Operations is the largest full-service restaurant operator in Canada.

Meanwhile Canadian government bonds dropped in line with U.S. Treasuries on a round of mixed economic data. Canada's 10-year note yield rose to 3.186% from 3.12%. The two-year note yield closed the day at 1.735%, up from 1.68%.

Statistics Canada said Wednesday that quarterly operating profits for Canadian companies were $61.5 billion in the third quarter, unchanged from the previous quarter.

No economic releases were scheduled for Thursday or Friday in Canada.

U.S. Treasuries fell on mixed economic demand as the government saw poor demand for its auction of $29 billion in seven-year notes. The yield on the 10-year note jumped to 2.91% from 2.77% in light holiday trading. The five-year note yield rose 14 bps to 1.53%.

The Labor Department said initial jobless claims fell 34,000 to 407,000 in the previous week. In other data, the Commerce Department said that new home sales fell 8.1% in October to an annual rate of 283,000. Durable goods orders were down 3.3%, while personal spending rose 0.4% in October.

Quebec prices at 75 bps spread

In provincial securities, Quebec sold C$250 million in a reopening of the province's existing 4.5% bond due Dec. 1, 2019 on Wednesday, a source said.

Quebec priced the bond at 105.335 to yield 3.79%, or a spread of 75 basis points over the Canadian benchmark bond.

National Bank Financial was the bookrunner.

"It was a small deal that came today," an informed source said. "It was a deal underwritten by the syndicate but sold by one dealer, National Bank. It's always the same for all Quebec deals."

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