British Columbia, Quebec bring C$1.1 billion of provincial bonds, AltaGas deal 'huge success'

By Cristal Cody

Prospect News, Sept. 25 - The Canadian markets chewed through C$1.45 billion of new bond supply on Tuesday in the corporate and provincial sectors, sources close to the deals said.

The Province of British Columbia sold C$600 million in reopenings of 10-year and 30-year notes, splitting the deal at C$400 million for the 2.7% notes due Dec. 18, 2022 and C$200 million for the 4.3% notes due June 18, 2042.

"Collectively, we felt there was more demand for the 10-year than there was for a 30-year, so we decided to go with the bigger size for the 10-year," an informed source said.

"We have found there has been some selling over the last little while, both domestically and outside Canada, of some of the more expensive names like B.C. and Alberta, so we had a high degree of confidence that today's deal would go well."

The Province of Quebec raised C$500 million in a reopening of its 4.25% medium-term notes due Dec. 1, 2043 on Tuesday, a week following its return to the debt market with a 10-year offering.

The province sold a C$500 million add-on to its 3.5% 10-year medium-term notes on Sept. 20, its first bond deal since government elections and a new finance minister was appointed.

"They had been out of the market since the third week of July because of the election call," a provincial bond source said. "Once they announced a new minister of finance last Wednesday, they decided to go with the 10-year reopening, so it wasn't a big surprise that they would do a 30-year today."

AltaGas Ltd. found plenty of demand for its offering of C$350 million of senior medium-term notes due Sept. 28, 2021 on Tuesday, an informed source said.

"Huge success," the source said, noting the deal was "well over-subscribed. It could've been a lot bigger if they wanted it to be."

Additional primary activity is expected for the rest of the week.

"There are two or three provincial issuers and municipal issuers looking at the market," a source said. "Over the next 10 days, the public sector space should remain fairly active."

On the corporate side, "demand in Canada remains robust," another bond source said.

Provincial bonds saw slight pressure going out on Tuesday from the new supply.

Corporates traded weaker.

The Markit CDX Series 18 North American investment-grade index eased 4 basis points to a spread of 102 bps.

The Markit CDX Series 18 North American high-yield index fell to 100.12 from 101.19.

Canadian government bonds traded mostly flat on stronger economic data.

Retail sales rose 0.7% to C$39 billion in July, Statistics Canada said in a report.

Canada's 10-year note ended unchanged at 1.82%. The 30-year bond yield fell 1 bp to 2.38%.

British Columbia taps market

The Province of British Columbia (Aaa/AAA/DBRS: AA) sold C$600 million in reopenings of its 10-year and 30-year notes on Tuesday, an informed bond source said.

"We launched and priced at the same spread," the source said.

The province sold C$400 million of 2.7% notes due Dec. 18, 2022 at 100.47 to yield 2.647%, or a spread of 82 bps over the Government of Canada benchmark.

The issue first priced on May 29 in a C$500 million offering of notes at 99.582 to yield 2.746%, or a spread of 91 bps over the Canadian government benchmark. The total outstanding is C$900 million.

In the second tranche, the province sold C$200 million of 4.3% notes due June 18, 2042 at 119.739 to yield 3.258%, or 86.5 bps over the government benchmark.

The long bonds were originally sold on May 29 in a C$700 million offering that priced at 118.393 to yield 2.327%, or 95.5 bps over the Canadian government benchmark. The total outstanding is C$900 million.

TD Securities Inc. was the bookrunner.

Quebec sells C$500 million

The Province of Quebec (Aa2/A+/DBRS: A) raised C$500 million in a reopening of its 4.25% medium-term notes due Dec. 1, 2043 at 114.284 to yield 3.494% on Tuesday, a bond source said.

The notes priced on top of guidance at a spread of 108.5 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the bookrunner.

The province first sold the notes in a C$500 million offering on Aug. 12, 2011 at 103.875 to yield 4.034%, or 97 bps over the government benchmark.

The issue was last tapped on April 24 in a C$500 million offering of notes that priced at 110.863 to yield 3.667%, or 101.5 bps over the Government of Canada benchmark. The total outstanding is C$4.5 billion.

AltaGas prices C$350 million

AltaGas sold C$350 million of 3.72% senior medium-term notes due Sept. 28, 2021 on Tuesday at 99.97 to yield 3.724%, an informed bond source said.

The notes (DBRS: BBB) priced at a spread of 192 bps over the Canadian bond curve, or 195 bps over the Government of Canada benchmark.

TD Securities and National Bank Financial were the lead managers.

Proceeds will be used to repay bank debt and for general corporate purposes.

AltaGas was last in the market on April 10 with a C$200 million offering of 4.07% medium-term notes due June 1, 2020 priced at 99.997 to yield 4.071%, or a spread of 220 bps over the Canadian government benchmark.

AltaGas is a Calgary, Alta.-based energy company.

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