Canadian markets see 'sleepy' start; Husky sells U.S.-dollar deal; Connacher improves

By Cristal Cody

Prospect News, March 19 - The Canadian markets ended Monday quietly as many investors and traders returned after the March school break.

"It's sleepy, sleepy, sleepy up here," one syndicate source said of the primary market.

Primary activity is expected to pick up later in the week, sources said.

Canadian petroleum company Husky Energy Inc. tapped the U.S. high-grade market on Monday in a $500 million offering of 10-year notes.

Bonds tightened in trading on the day, while Canadian bank paper was mostly unchanged in the secondary market, sources said.

The Markit CDX Series 17 North American investment-grade index firmed 4 basis points to a spread of 85 bps on Monday.

Connacher Oil & Gas Ltd.'s Canadian dollar- and U.S. dollar-denominated bonds (Caa2/BB-) traded better under speculation of whether the company will be sold, a bond source said.

Government bonds saw another weak day as prices fell and yields climbed 4 bps to 7 bps across the curve. Canada's 10-year note yield jumped 7 bps to 2.29%. The 30-year bond yield rose to 2.81% from 2.75%.

Canadian economic data was weaker. Statistics Canada said in a report that wholesale trade fell 1% to C$49 billion in January.

Husky Energy taps market

Husky Energy sold $500 million of 3.95% 10-year notes Monday to yield Treasuries plus 160 bps, a source close to the deal said.

The paper was sold tighter than talk in the 175 bps area, the source said.

The notes (Baa2/BBB+/) were priced at 99.685 to yield 3.988%. There is a make-whole call at 25 bps over Treasuries until Jan. 15, 2022, and a par call after that date.

Bank of America Merrill Lynch, Barclays Capital Inc. and Citigroup Global Markets Inc. ran the books.

Co-managers were CIBC World Markets Corp., HSBC Securities (USA) Inc., RBC Capital Markets, LLC, TD Securities (USA) LLC, Scotia Capital (USA) Inc., BMO Capital Markets Corp., Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and SMBC Nikko Capital Markets Ltd.

Proceeds will be used for general corporate purposes, including the purchase, redemption or payment of securities.

Husky last sold notes in the U.S. market in a $1.5 billion deal of five- and 10-year notes on May 6, 2009. The 7.25% 10-year notes from that offering were priced with a 412.5 bps spread.

The petroleum company is based in Calgary, Alta.

Bank paper flat

In the U.S. secondary market, Toronto-Dominion Bank's 2.375% senior notes due 2016 (Aaa/AA-/) ended the day unchanged from Friday's spread at 69 bps, a market source said.

Toronto-Dominion sold $600 million of the notes in a reopening on Nov. 3 at 117 bps over Treasuries.

The bank and financial services company is based in Toronto.

Connacher trades better

Connacher Oil & Gas' 8¾% senior notes due 2018 sold in Canadian dollars and 8½% senior notes due 2019 priced in U.S. dollars both were seen at 99 bid on Monday, a bond source said.

The 8¾% notes were quoted in late February at 97.5.

Both tranches priced on May 20, 2011 at par.

Connacher reported on Friday that fourth-quarter losses more than doubled to a loss of C$59.48 million, or 13 cents a share, from a year-ago loss of C$25.62 million, or 6 cents a share.

Revenue, net of royalties, rose to C$226.45 million in the fourth quarter from C$177.25 million in the same period last year.

Connacher said in January that it had begun a strategic review to examine the company's business plan. Connacher rejected an unsolicited takeover offer in December.

The company has experienced a shakeup in management over the last few months. Connacher appointed former president Peter D. Sametz as interim chief executive officer in February.

The integrated oil company is based in Calgary, Alta.

Andrea Heisinger contributed to this review

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