Fairfax Financial, Telus, Savanna Energy sell bonds; Canada eyes Connacher note offering

By Cristal Cody

Prospect News, May 19 - The pace of deals in Canada's bond market picked up dramatically over Wednesday and again on Thursday with offerings from Telus Corp., Fairfax Financial Holdings Ltd., Savanna Energy Services Corp. and an upsized deal from Shaw Communications Inc.

The bond deals were said to have seen great demand and the corporate bond market had a great tone, especially after the abundance of provincial and corporate bonds the previous day.

"With the exception of Telus, none of these guys are real frequent issuers; the market was happy to see that kind of new product," one source said.

Another high-yield deal is expected on Friday from Connacher Oil and Gas Ltd., which set price talk for its $900 million equivalent two-part offering of senior secured notes on Thursday, according to an informed source.

A portion of the U.S. dollar-denominated deal is expected to be purchased in Canada, one high-yield bond source said.

"We believe they will take up to C$250 million to C$300 million in Canada," the source said.

A couple more high-yield deals are expected in the Canadian bond market before the month is out, according to the source.

Canadian government bonds were higher in trading, with the yield on the 10-year bond down 2 basis points to 3.2%. The 30-year bond yield fell to 3.59% from 3.61%.

Treasuries closed mixed on the day in choppy trading on weak data. The 10-year note yield also edged down 1 bp to 3.17%. The 30-year bond yield rose 1 bp to end at 4.3%.

"We've been chopping around plus or minus a little bit," said Mary Ann Hurley, a fixed income trader for D.A. Davidson & Co. "It was looking like it was going to be a day in the reds until the housing data, manufacturing data and leaders data came out."

Telus brings deal

Telus brought C$600 million of 3.65% five-year notes (Baa1/DBRS: A) on Thursday at 99.629 to yield 3.732%, according to the company and informed bond sources.

The series CI senior notes due May 25, 2016 priced at a spread of 118 bps over the Canadian bond curve.

"It had almost 70 buyers with some of the people who came in late getting very, very small sales, 10% to 20%," the source said. "It had been very heavily expected. The book was massively oversubscribed."

CIBC World Markets Inc. and the Scotia Capital Inc. were the lead managers.

Proceeds will be applied toward the repayment of the company's outstanding 8% notes due June 1, 2011.

In the secondary market, the notes were seen trading soon after pricing 1 bp tighter on the bid side at 117 bps bid, 114 bps offered, a source said.

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

Fairfax sells 10-years

Fairfax Financial sold C$400 million of 6.4% 10-year senior notes (Baa3/BBB-) at 99.592 to yield 6.456%, the company said Thursday.

The notes due 2021 priced at a spread of 322 bps over the Canadian bond curve.

The deal was upsized from C$300 million and had 40 to 50 buyers, a bond source said.

The deal was a "bit of a surprise," the source said. "People just found that spread pretty attractive."

BMO Capital Markets Corp., CIBC World Markets Inc., RBC Capital Markets Corp. and Scotia Capital Inc. were the lead managers. Co-managers included TD Securities Inc., Cormark Securities Inc. and GMP Securities LP.

Proceeds will be used to purchase additional notes tendered under the company's previously announced tender offer for existing notes issued by Fairfax and its subsidiaries.

Fairfax Financial Holdings is a Toronto-based financial services holding company involved in property and casualty insurance and reinsurance and investment management.

Savanna Energy wraps sale

Savanna Energy Services priced C$125 million of 7% senior notes due May 25, 2018 at par, or a spread of 413 bps over the Government of Canada benchmark, on Thursday, said an informed bond source involved in the sale.

The notes (/B+/DBRS: B) priced on the tight end of initial guidance in the low 7% area.

There's "no ability to upsize," the source said, noting "38 buyers for C$125 million."

TD Securities Inc. and RBC Capital Markets Corp. were the managers.

Proceeds will be used to pay down the company's bank facility.

Calgary, Alta.-based Savanna Energy is a drilling and well servicing provider in the oil and gas industry.

Shaw lifts preferreds sale

Shaw Communications said Thursday it increased the offering of its cumulative redeemable rate reset preferred shares to C$300 million from C$200 million.

The sale was increased to 12 million shares from 8 million shares.

The series A preferred stock (DBRS: Pfd-3) priced at C$25.00 per share with a 4.5% dividend for the initial period ending June 30, 2016. Thereafter the dividend rate will be reset every five years at a rate equal to the then current five-year Government of Canada bond yield plus 200 bps.

TD Securities Inc. and CIBC World Markets Inc. were the lead managers.

The deal includes an over-allotment option of 2 million shares, or C$50 million.

The proceeds will be used for working capital and general corporate purposes.

Calgary, Alta.-based Shaw Communications is a telecommunications, cable and internet provider.

Connacher talks offering

Connacher Oil and Gas set price talk for its $900 million equivalent two-part offering of senior secured notes on Thursday, according to an informed source.

A tranche of dollar-denominated eight-year notes is talked with a yield in the 8.25% area. The Rule 144A and Regulation S for life tranche is being led by left bookrunner Credit Suisse Securities (USA) LLC.

In addition, the Calgary, Alta.-based integrated oil company is privately placing a Canadian dollar-denominated tranche of seven-year notes, which are talked with a yield in the 8.5% area. RBC Capital Markets is the left lead bookrunner for that tranche.

Both Credit Suisse and RBC are serving as global coordinators and joint bookrunners for the deal.

Both tranches of notes come with four years of call protection and will feature three-year 35% equity clawbacks and 101% poison puts.

The notes are secured by a second-priority lien on all of the existing and acquired property of the issuer and each restricted subsidiary of the issuer.

Connacher plans to use the proceeds to refinance its existing first-lien and second-lien notes.

Paul A. Harris contributed to this review

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