Telus, Honda Canada, BMO, RioCan bring deals; Connacher flat to lower on S&P downgrade

By Cristal Cody

Prospect News, Dec. 6 - Canadian issuers kept desks busy on Thursday with offerings in the investment-grade, high-yield and preferred stock markets, sources close to the sales said.

Bank of Montreal raised C$1.5 billion in an offering of five-year deposit notes.

Honda Canada Finance Inc. came with a C$400 million sale of five-year senior notes in a private placement.

Telus Corp. brought a C$500 million senior note offering.

RioCan Real Estate Investment Trust priced an upsized C$250 million of 3.716% senior debentures at a "premium," one source said.

RioCan REIT said on Wednesday that it has agreed to buy a $1.1 million portfolio of Canadian retail properties from Primaris Real Estate Investment Trust as part of an acquisition offer to acquire Primaris by a KingSett Capital-led consortium,

In the high-yield market, Trilogy Energy Corp. was scheduled to price C$250 million of seven-year senior notes (/B/DBRS: B) talked to yield 7¼% late in the day following a four-day roadshow. Final pricing terms were not immediately available.

"Nothing's going to be done until the end of the day," a syndicate source said.

The offerings that priced over the day saw good demand, according to bond sources.

"Honda hasn't been in the markets for a long time; Telus hasn't been in the markets for a long time; RioCan has a special place in the REIT market and BMO did C$1.5 billion, so something was OK," one source said.

Capital Power Corp. raised C$150 million in an offering of preferred stock following the company's investor conference on Thursday, according to sources.

Some additional pricing action may happen on Friday, following Canadian and U.S. job reports, but sources expect more activity in the upcoming week.

"We'll see some decent issuance next week for sure," a syndicate source said. "It will probably shut down after next week, but next week is still open."

In the secondary market, Connacher Oil & Gas Ltd.'s bonds traded flat to 1 point lower following a downgrade by Standard & Poor's, a trader said.

Bonds closed mostly unchanged on the day.

The Markit CDX Series 18 North American investment-grade index was flat on the day at a spread of 98 bps.

The Markit CDX Series 18 North American high-yield index rose to 100.44 from 100.26.

Government bonds ended flat to slightly better on the short end. Canada's two-year note yield fell 1 bp to 1.04%. The 10-year note yield closed flat at 1.69%.

Bank of Montreal prices

Bank of Montreal (Aa2/A+/DBRS: AA) sold C$1.5 billion of 2.24% five-year deposit notes at 99.976 to yield 2.245% on Thursday, an informed bond source said.

The notes due Dec. 11, 2017 priced at a spread of 99.9 bps over the Government of Canada benchmark.

BMO Capital Markets Corp. was the bookrunner.

Bank of Montreal was last in the Canadian debt markets on Oct. 2 when it sold C$1.5 billion of 1.89% three-year deposit notes at 99.997 to yield 1.891%, or a spread of 74.1 bps over the Government of Canada benchmark.

The financial services company is based in Toronto and Montreal.

Telus sells C$500 million

Telus raised C$500 million in an offering of 3.35% senior notes (Baa1/BBB+/DBRS: A) at 99.883 to yield 3.364%.

The series CJ notes due March 15, 2023 priced at a spread of 160 bps over the interpolated Government of Canada bond curve, a source said.

Scotia Capital Inc. and CIBC World Markets Inc. were the bookrunners.

Telus was last in the Canadian debt markets on May 19, 2012 with a C$600 million offering of 3.65% five-year notes (Baa1//DBRS: A) that priced at 99.629 to yield 3.732%, or a spread of 118 bps over the Canadian bond curve.

Proceeds will be applied toward repayment of outstanding commercial paper, which is short-term floating-rate debt the Vancouver, B.C.-based telecommunications company issued.

Honda Canada Finance prices

Honda Canada Finance sold C$400 million of 2.275% five-year senior notes at par in a private placement on Thursday, according to an informed source.

The non-callable notes due Dec. 11, 2017 (A1//DBRS: A) priced at a spread of 101 bps over the interpolated Government of Canada bond curve.

CIBC World Markets and RBC Capital Markets were the lead managers.

Honda Canada Finance last brought a bond deal on Feb. 15, 2012 when the company sold C$300 million of three-year floating-rate notes at par, or a spread of 95 bps over CDOR.

The Honda Motor Co., Ltd. affiliate is based in Markham, Ont.

RioCan REIT upsizes

RioCan Real Estate Investment Trust sold an upsized C$250 million of 3.716% senior debentures at 100.243 to yield 3.684% on Thursday, according to an informed source.

The series R debentures (/BBB- expected/DBRS: BBB expected) due Dec. 13, 2021 priced at a spread of 207 bps over the interpolated Government of Canada bond curve.

The deal was upsized from C$200 million.

TD Securities Inc. was the bookrunner. Scotia Capital Inc. was the co-lead manager.

Proceeds will be used to repay debt, including debt incurred in the ordinary course under RioCan's operating lines of credit, for property acquisitions, to fund development and for general trust purposes.

The REIT last was in the debt markets on July 12 with a C$25 million reopening of its 3.85% seven-year senior debentures.

Toronto-based RioCan REIT is Canada's largest real estate investment trust.

Capital Power taps market

Capital Power said on Thursday that it sold C$150 million of cumulative rate reset preference shares to yield 4.6% for the initial period ending Dec. 31, 2018.

The series 3 preferreds (/P-3/DBRS: Pfd-3) priced at C$25.00 per share. The company sold 6 million shares of the preferreds.

TD Securities and BMO Capital Markets were the lead managers.

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

The series 3 shares are redeemable by Capital Power on Dec. 31, 2018 and on Dec. 31 of every fifth year thereafter.

The dividend rate will be reset on Dec. 31, 2018 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield and 323 bps.

Shareholders will have the right to convert all or part of their shares into series 4 cumulative floating-rate preference shares on Dec. 31, 2018 and on Dec. 31 of every fifth year thereafter. Series 4 shareholders will be entitled to receive a cumulative quarterly floating dividend at a rate equal to the sum of the then 90-day Government of Canada Treasury bill yield plus 323 bps.

Proceeds will be lent under a subordinated debt agreement to Capital Power LP, which will use the funds to repay the outstanding balance under its credit facilities, to finance development projects and for general corporate purposes.

The power producer is based in Edmonton, Alta.

Connacher flat

Connacher Oil & Gas' 8¾% senior notes due 2018 (Caa2/B+/) traded "kind of unchanged to down a point" going out at 73 bid, 74 offered, a trader said on Thursday.

Standard & Poor's said it lowered the rating on the company's Canadian dollar and U.S. dollar bonds to B+ from BB- and dropped the company's corporate credit rating to B- from B following the company's completion of a strategic review process without finding a joint venture partner or acquirer.

S&P said the company's existing operations are not able to generate sufficient funds from operations to internally fund its minimum required maintenance capital spending beyond 2013.

The Calgary, Alta.-based integrated oil company sold C$350 million of the six-year notes on May 20, 2011 at par.

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