H&R REIT sells C$175 million; Quebec raises C$500 million; Barrick Gold's new bonds firm

By Cristal Cody

Prospect News, March 29 - The Canadian bond markets resumed activity on Thursday with two bond offerings following a deal on Wednesday that broke a dry streak.

H&R Real Estate Investment Trust sold an upsized C$175 million of senior debentures due 2020 late afternoon. Earlier in the day, the Province of Quebec priced C$500 million in a reopening of 4.25% debentures due 2043.

"It had been very quiet over the last two weeks. It's good to see another transaction back in Canada," a corporate bond source said. "Despite the volatility the last couple of trading sessions over the concerns in the weak economic tone, we saw corporate spreads firm 1 or 2 [bps], so that demonstrates there's a lot of cash looking to invest."

Canada's Barrick Gold Corp. tapped the U.S. high-grade market on Thursday in a $2 billion offering of 10-year notes and 30-year bonds.

Canadian primary activity is likely to stay quiet over the next month, but additional issuance from other real estate investment trusts is possible, a source said.

"We estimate the pipeline to be very light over the near future," the source said. "We think it's going to be limited."

First Capital Realty Inc.'s sale of C$175 million of 4.5% series N senior debentures due March 1, 2021 on Wednesday was the first domestic bond deal in more than two weeks.

Toronto-based First Capital Realty sold the debentures (Baa3/DBRS: BBB) at a spread of 237.3 bps over the Government of Canada benchmark. The debentures traded better in the secondary market on Thursday, a source said.

"It broke a couple basis points tighter and right now it's trading 3 to 4 basis points tighter," the source said, noting a "really good performance."

Barrick Gold's two tranches were seen firmer in secondary trading.

Corporate bonds overall traded flat to weaker over the day. The Markit CDX Series 18 North American investment-grade index eased 2 bps to a spread of 93 bps on Thursday.

Government bonds were stronger following the release of Canada's federal budget for fiscal 2012-2013. The Canadian 10-year note yield fell 4 bps to 2.08%. The 30-year bond yield dropped 3 bps to 2.64%.

H&R REIT sells C$175 million

H&R Real Estate Investment Trust sold C$175 million of 4.45% series F senior debentures due March 2, 2020 at 100.07 to yield 4.44% on Thursday, an informed bond source said.

The debentures (DBRS: BBB) priced at a spread of 250 bps over the Government of Canada benchmark.

The deal was upsized from C$150 million.

RBC Capital Markets Corp. and CIBC World Markets Inc. were the lead managers. Co-managers were TD Securities Inc., BMO Capital Markets Corp., Scotia Capital Inc., Canaccord Capital Corp. and RJ Ltd.

Proceeds will be used to fund future acquisitions and developments, to repay outstanding debt and for general trust purposes.

H&R REIT was in the Canadian market last on Oct. 27 with an offering of C$100 million of 4.9% senior debentures due 2018 priced at par, or 295.6 bps over the Canadian bond curve.

Downsview, Ont.-based H&R REIT owns office, single-tenant industrial and retail properties.

Quebec reopens long bonds

The Province of Quebec (Aa2/A+/DBRS: A) sold C$500 million of its 4.25% debentures due Dec. 1, 2043 at 110.863 to yield 3.667% in a reopening of the issue that was "very well received" on Thursday, a bond source said.

The province sold the debentures at a spread of 101.5 bps over the Government of Canada benchmark.

National Bank of Canada was the lead manager.

The province originally priced the debentures in a C$500 million offering on Aug. 12 at 103.875 to yield 4.034%, or 97 bps over the government benchmark. The total outstanding is C$3.5 billion.

Barrick Gold sells $2 billion

Barrick Gold sold $2 billion of notes (Baa1/A-/) in two tranches on Thursday, an informed source said.

The $1.25 billion of 3.85% 10-year paper was sold at 99.943 to yield 3.857% with a spread of Treasuries plus 170 bps. The tranche priced at the tight end of talk in the 175 bps area, plus or minus 5 bps, the source said.

There is a make-whole call at 25 bps over Treasuries.

A $750 million tranche of 5.25% 30-year bonds priced at 99.82 to yield 5.262% with a spread of 200 bps over Treasuries. The bonds also sold tight to guidance in the 205 bps area, plus or minus 5 bps.

The 30-year notes have a make-whole call at Treasuries plus 30 bps.

Citigroup Global Markets Inc., J.P. Morgan Securities Inc., Morgan Stanley & Co. LLC and RBC Capital Markets LLC ran the books.

The deal was done under Rule 144A and Regulation S.

Barrick was last in the market with a $4 billion deal in four parts on May 24, 2011. The 4.4% 10-year notes from that offering sold at 130 bps over Treasuries, and the 5.75% 30-year bonds sold at 150 bps.

In the secondary market, Barrick Gold's 3.85% notes due 2022 traded tighter at 168 bps bid, 164 bps offered, a trader said.

The 5.25% 30-year tranche was seen going out at 193 bps offered.

The gold mining company is based in Toronto.

Andrea Heisinger contributed to this review

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