Light Canadian deal week forecast; Brookfield sells C$200 million preferreds; banks firm

By Cristal Cody

Prospect News, Oct. 1 - Canadian markets started the short week with quiet new-deal activity that included one C$200 million offering of preferred stock brought by Brookfield Renewable Energy Partners LP on Monday.

"Nothing for today," an investment-grade syndicate source said. "The markets are kind of better. It should be a reasonable week, although a lot of the corporate issuers are moving to blackout soon."

The Canadian bond markets will close early on Friday and will be closed on Oct. 8 for Thanksgiving Day.

The potential for a couple of deals to happen this week is possible, another bond source said.

Upcoming new issuance may be in the immediate future from Enbridge Inc., which filed a prospectus with Sedar on Friday for a C$4 billion medium-term note program.

The prospectus is a continuation of Enbridge's medium-term note program that was last renewed on Sept. 22, 2010 and is in addition to the current notes outstanding. As of Friday, Enbridge said about C$3.32 billion of notes and about $1.1 billion of U.S. dollar notes were outstanding.

The Calgary, Alta.-based oil and gas distributor and transportation company last tapped the Canadian bond markets on Aug. 22 with an upsized C$400 million offering of 4.24% 30-year medium-term notes.

National Bank of Canada also filed a prospectus on Friday to sell C$5 billion of debt securities, first preferred shares and common stock from time to time.

In the secondary market, Toronto-Dominion Bank's 2.375% notes due 2016 firmed 5 basis points from Friday's session, while five-year paper from Bank of Montreal and Bank of Nova Scotia tightened about 1 bp on the day, a market source said.

Canadian bank paper has come in about 20 bps to 50 bps since July.

The Markit CDX Series 18 North American investment-grade index closed the day unchanged at a spread of 99 bps.

The Markit CDX Series 18 North American high-yield index rose to 99.94 from 99.81.

Canadian government bonds ended better on the short end of the curve on weaker economic data. The 10-year note yield fell 2 bps to 1.71%. The 30-year bond yield closed flat at 2.32%.

Industrial prices edged down 0.1% in August, Statistics Canada said in a report. Key labor data for September will be released on Friday.

Brookfield sells preferreds

Brookfield Renewable Energy Partners sold C$200 million of class A preference shares to yield 4.4% for the initial period ending July 31, 2019, the company said on Monday.

Brookfield Renewable Energy sold 8 million shares of the series 3 preferred stock at C$25.00 per share.

TD Securities Inc., CIBC World Markets Inc., RBC Capital Markets LLC and Scotia Capital Inc. were the lead managers.

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

Brookfield Renewable Energy guarantees the preferreds, which will be issued through a wholly owned subsidiary.

The shares are redeemable on or after July 31, 2019.

The dividend will reset every five years at a rate equal to the then five-year Government of Canada bond yield plus 294 bps.

Holders will have the right to convert their shares into series 4 class A preference shares on July 31, 2019 and on July 31 of every fifth year thereafter. The holders of series 4 shares will receive quarterly floating-rate cumulative dividends equal to the then 90-day Government of Canada Treasury bill yield plus 294 bps.

Brookfield Renewable Energy plans to use the proceeds to repay outstanding debt and for general corporate purposes.

The Bermuda-based partnership was renamed in November 2011 after the combination of Brookfield Renewable Power Fund and Brookfield Renewable Power Inc.

TD Bank better

Toronto-Dominion Bank's 2.375% notes due 2016 traded 5 bps better at 42 bps bid on Monday, a bond source said.

The notes have come in more than 20 bps in the secondary market since July 30, when they were seen at 63 bps.

TD sold $600 million of the notes (Aaa/AA-) in a reopening on Nov. 3, 2011 at 117 bps over Treasuries.

The bank and financial services company is based in Toronto.

BMO firms

Also in trading, Bank of Montreal's 2.5% senior medium-term notes due 2017 firmed 1 bp to 50 bps over the session, a source said.

BMO's paper has tightened by more than half since early July, when the notes were quoted trading in the area of 104 bps.

The bank sold $1.5 billion of the notes (Aa2/A+) on Jan. 6, 2012 at a spread of 170 bps over Treasuries.

The financial services company is based in Toronto and Montreal.

Scotiabank tightens

Bank of Nova Scotia's 2.55% notes due 2017 tightened 1 bp on the day to 55 bps, a market source said.

The paper is about 20 bps tighter from trading over the summer when the notes were seen at 75 bps on July 30.

Scotiabank sold $1.25 billion of the paper (Aa1/AA-/) on Jan. 5, 2012 at Treasuries plus 172 bps.

The bank is based Halifax, N.S.

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