Cameco, Mattamy, Saskatchewan, New Brunswick kick-start bond pipeline; Toronto deal eyed

By Cristal Cody

Prospect News, Nov. 7 - November primary activity heated up with new offerings on Wednesday in Canada's corporate and provincial bond markets, a dual currency deal in the U.S. junk bond market and a Canadian dollar issue in Europe, according to informed bond sources.

In the Canadian investment-grade market, Cameco Corp. came late in the day with a C$500 million sale of debentures in two tranches.

The tranches were "both trading well," an informed source said.

The 10-year and 30-year debentures traded about 3 basis points to 5 bps better in the secondary market, the source said.

Mattamy Group Corp. sold an upsized $500 million equivalent amount of eight-year senior notes in the U.S. high-yield market.

Rabobank Nederland NV tapped the European market with a Canadian dollar offering of C$100 million of five-year senior medium-term notes on Wednesday.

Two Canadian provinces also tapped the domestic bond markets on Wednesday.

The Province of New Brunswick sold C$400 million of notes due June 2, 2023.

"It was widely expected and the deal went very, very well," an informed source said. "It sold out in no time."

The Province of Saskatchewan raised C$300 million in a reopening of its 3.4% debentures due Feb. 3, 2042.

Potential issuance is possible on Thursday, depending on market conditions, according to sources. No activity is expected on Friday, an early market close for Canada. The Canadian markets will be closed for holiday on Monday.

A couple of new deals in the Canadian municipal bond markets are expected in November with one offering forecast from the City of Toronto, according to an informed source.

In the secondary market, bonds traded weaker on the day as stocks dropped in trading following U.S. president Barack Obama's re-election.

The Markit CDX Series 18 North American investment-grade index eased 4 bps to a spread of 100 bps.

The Markit CDX Series 18 North American high-yield index rose to 99.01 from 99.85.

"The market's still tougher with equities taking it on the chin," a source said. "It's just a function of what's going on in the U.S. equity market. Credit markets are under a little bit of pressure."

New Brunswick's notes traded unchanged at 105 bps.

Provincial bonds traded out about 1 bp across the curve.

"Provincial markets are a little softer but they're holding out quite well," the source said. "Today's deals certainly helped out tone."

Government bonds gained the safe-haven bid as stocks fell. Canada's 10-year note yield dropped 5 bps to 1.75%. The 30-year bond yield ended down 4 bps at 2.34%.

Cameco sells two tranches

In the deal from Cameco, the company sold C$500 million of debentures (/A-1/DBRS: BBB+) in two tranches on Wednesday, an informed bond source said.

In the first tranche, the company sold C$400 million of 3.75% series E debentures due Nov. 14, 2022 at 99.992 to yield 3.751%, or a spread of 195 bps over the Canadian bond curve.

The company sold C$100 million of 5.09% series F debentures due Nov. 14, 2042 in the second tranche at 99.954 to yield 5.093%, or 275 bps over the Government of Canada benchmark.

TD Securities Inc. and RBC Capital Markets LLC were the bookrunners.

Cameco said in a statement that proceeds will be used to strengthen its capital position and enhance its financial flexibility to support planned expansion of its uranium production capacity and for general corporate purposes.

The uranium producer is based in Saskatoon, Sask.

Mattamy upsizes

Mattamy Group priced an upsized $500 million equivalent amount of eight-year senior notes (B1/BB) on Wednesday, according to a syndicate source.

The deal included a $300 million tranche of notes, which priced at par to yield 6½%, on top of yield talk.

Mattamy also priced a C$200 million tranche of notes, which priced a par to yield 6 7/8%. The Canadian dollar-denominated notes also priced on top of talk, which had them yielding 37.5 bps more than the dollar-denominated notes.

The deal was upsized from $450 million equivalent.

Joint global coordinators Credit Suisse Securities (Canada) Inc. and RBC Dominion Securities Inc. were joint bookrunners. Citigroup Global Markets Canada Inc. was also a joint bookrunner.

The Burlington, Ont.-based residential homebuilder plans to use the proceeds to refinance existing debt.

Rabobank prices new deal

Rabobank Nederland (Aa2/AA/DBRS: AAA) sold C$100 million of 2.25% five-year senior medium-term notes at 99.68 to yield 2.319% in the European market, an informed bond source said.

The notes due Nov. 20 2017 priced at a spread of 100 bps over the Canadian bond curve.

Rabobank International and TD Securities Inc. were the lead managers.

The Dutch bank is the central organization for international financial services provider Rabobank Group.

New Brunswick taps market

The Province of New Brunswick (Aa2/A+/DBRS: A) priced C$400 million of 2.85% notes due June 2, 2023 at 99.621 to yield 2.892% on Wednesday, a syndicate source said.

The notes priced on top of guidance at a spread of 105 bps over the Government of Canada benchmark.

RBC Capital Markets LLC, CIBC World Markets Inc., TD Securities and Bank of America Merrill Lynch were the lead managers.

Saskatchewan prices add-on

The Province of Saskatchewan (Aa1/AAA/DBRS: AA) sold C$300 million in a reopening of its 3.4% debentures due Feb. 3, 2042 at 104.124 to yield 3.182% on Wednesday, according to an informed source.

The debentures priced at 86.5 bps over the Government of Canada benchmark.

The issue is non-callable.

RBC Capital Markets, CIBC World Markets and BMO Capital Markets Corp. were the lead managers.

The province first sold the issue on Jan. 26, 2012 in a C$300 million offering that priced at 99.126 to yield 3.447%, or 78 bps over the Government of Canada benchmark. The total outstanding is C$600 million.

Toronto considers long end

The City of Toronto (DBRS: AA) is expected to be in the market the week of Nov. 12 with an offering of C$300 million to C$400 million of 30-year debentures, according to an informed source on Wednesday.

The city last brought a long bond deal on June 2, 2011 with an offering of C$350 million of 4.7% debentures due 2041 that priced at 99.569 to yield 4.727%, or a spread of 123 bps over the Government of Canada benchmark.

Earlier this year, the city sold a C$300 million add-on to its 3.5% debentures due Dec. 6, 2021. The debentures priced on May 8 at 101.503 to yield 3.315%, or 143.5 bps over the government benchmark.

Paul A. Harris contributed to this review

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