Ontario reopens 10-year notes after downgrade; Telesat Canada prices; Coors notes firm

By Cristal Cody

Prospect News, April 30 - The Province of Ontario tapped the Canadian bond market for C$750 million in a reopening of its 10-year notes on Monday following Thursday's downgrade by Moody's Investors Service.

"The market was receptive and they had good buyers," a syndicate source said of the province's deal on Monday.

Moody's dropped the province to Aa2 from Aa1. Standard & Poor's reaffirmed the province's AA- rating but revised its outlook to stable from negative and DBRS confirmed its AA rating.

The downgrade did not appear to affect provincial spreads and Ontario bonds ended the week 4.5 basis points tighter in five-year notes and 3.5 bps firmer in 10-year notes, a source said on Friday.

"Overall, the provincial market is still relatively firm, even with last week's news," a bond source said. "We actually saw Ontario spreads come in a bit because the broader provincial space did relatively well. It speaks volumes that Ontario came right back with this rather large debt offering today for 10-year money with reasonable success."

Bonds got a lift on Monday from the weaker Canadian gross domestic product, which fell 0.2% in February, Statistics Canada said in a report.

Government bond yields dropped 8 bps on the short end of the curve on Monday after the weaker GDP report, which raised doubts about how quick the Bank of Canada will be to raise interest rates.

"That set a fairly good environment for the entire bond market, including Ontario's issue," a source said.

Canada's two-year note yield dropped to 1.33% from 1.41%. The 10-year note yield ended the day 4 bps lower at 2.03%. The 30-year bond yield fell 2 bps to 2.6%.

In corporate action, Telesat Canada and Telesat LLC priced a $700 million issue of five-year senior notes (B3/B-) in the U.S. high-yield market on Monday.

Investment-grade bonds traded flat to weaker. The Markit CDX Series 18 North American investment-grade index eased 1 bp to a spread of 95 bps.

Molson Coors Brewing Co.'s senior notes (Baa2/BBB-/DBRS: BBB) priced the previous week traded stronger in the secondary market on Monday, according to a bond source.

Ontario sells C$750 million

In Canadian primary activity, the Province of Ontario (Aa2/AA-/DBRS: AA) sold C$750 million in a reopening of the 3.15% 10-year notes at 100.472 to yield 3.095% on Monday, a bond source said.

The notes due June 2, 2022 priced at a spread of 96 bps over the Government of Canada benchmark.

RBC Capital Markets Corp. was the lead manager. Co-managers were TD Securities Inc., BMO Capital Markets Corp., CIBC World Markets Inc., National Bank Financial Inc., Scotia Capital Inc. and Merrill Lynch Canada Inc.

The province originally priced the notes on Nov. 3, 2011 in a C$750 million offering at 99.589 to yield 3.196%, or a spread of 87 bps over the government benchmark.

The issue was last reopened on March 7 to sell C$500 million of the notes at 101.477 to yield 2.981%, or 92.5 bps over the government benchmark. The total outstanding is C$4.5 billion.

Telesat Canada prices

Telesat Canada and Telesat priced a U.S. dollar-denominated $700 million issue of five-year senior notes (B3/B-) at par to yield 6% on Monday, according to a market source.

The yield printed on top of price talk.

J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. were the joint bookrunners.

The Ottawa-based fixed satellite services operator plans to use the proceeds to the fund tender of its 11% notes due 2015.

Molson Coors tightens

Molson Coors Brewing's 3.5% notes due 2022 firmed about 1 bp on the day to 149 bps bid on Monday, a source said.

The notes were quoted 10 bps tighter at 150 bps bid, 147 bps offered on Friday. The company sold $500 million of the 10-year notes at 160 bps over Treasuries.

Molson Coors' 5% bonds due 2042 traded stronger on the day at 173 bps bid. The bonds were quoted on Friday at 178 bps bid, 175 bps offered. Molson Coors sold $1.1 billion of the 30-year bonds at Treasuries plus 190 bps.

Molson Coors is a beer brewer based in both Denver and Montreal.

Paul A. Harris contributed to this review

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