TransCanada, Teck sell $2.75 billion in U.S. deals; Canadian bank paper mixed, Viterra flat

By Cristal Cody

Prospect News, July 30 - Canadian issuers Teck Resources Ltd. and TransCanada Pipelines Ltd. both priced U.S. dollar-denominated deals on Monday, while domestic primary activity stayed quiet.

Teck Resources sold $1.75 billion in three tranches of notes and TransCanada Pipelines priced $1 billion of 10-year senior notes in the U.S. high-grade market.

Some Canadian primary action is expected midweek since the markets in Canada will close early on Friday and be closed on Aug. 6 for a civic holiday, bond sources said.

"It's fairly quiet in terms of the primary market," one source said. "There was a lot of U.S. issuance - 11 deals announced in the morning just on the back of better tone. With the early close this week, if there are [any offerings], they will probably come tomorrow through Wednesday and things will start to die down on Thursday."

Calgary, Alta.-based DirectCash Payments Inc. is expected to price C$125 million of seven-year senior notes (B3/B/) during the week after it completes a roadshow, a source said.

TransCanada Pipelines' offering traded wrapped around the new issue price in the secondary market, a trader said late afternoon.

Teck Resources' shorter-dated tranches traded tighter, with the five- and 10-year notes 3 basis points to 4 bps better and the 30-year tranche 1 bp tighter.

Canadian bank paper was mixed on Monday after Standard & Poor's lowered its outlook for seven Canadian banks on Friday to negative from stable.

S&P dropped the outlook on banks that included Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, National Bank of Canada and Laurentian Bank of Canada.

Bank of Nova Scotia's paper traded wider, while Toronto-Dominion's notes ended the day mostly better, a source said.

Viterra Inc.'s bonds traded flat on the day as the company's takeover by Glencore International plc nears completion, a bond source said.

Corporate bonds closed slightly weaker. The Markit CDX Series 18 North American investment-grade index eased 1 bp to a spread of 106 bps.

The Markit CDX Series 18 North American high-yield index fell to 97.30 from 97.39.

Government bonds recouped some gains from Friday's sell-off. Canada's 10-year note yield dropped 5 bps to 1.70%. The 30-year bond yield fell 3 bps to 2.30%.

"It was such a traumatic sell-off Friday, we've recouped about half of the losses," a bond source said.

TransCanada sells $1 billion

TransCanada Pipelines sold $1 billion of 2.5% 10-year senior notes on Monday to yield Treasuries plus 100 bps, a source who worked on the trade said.

The bonds sold tighter than talk in the 110 bps area, the source said.

The notes (A3/A-/) were priced at 99.921 to yield 2.509%. There is a make-whole call at 15 bps over Treasuries.

The deal had about $3 billion on the books, according to a source who worked on the offering.

Bookrunners were Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

Deutsche Bank Securities Inc., HSBC Securities (USA) Inc., Mitsubishi UFJ Securities (USA), Inc., Bank of America Merrill Lynch, Mizuho Securities USA Inc. and UBS Securities LLC were co-managers.

Proceeds are being used for general corporate purposes and to reduce short-term debt of the corporation and its affiliates.

TransCanada was last in the U.S. bond market with a $500 million offering of three-year notes on Feb. 28.

In the secondary market, TransCanada Pipelines' new 2.5% notes due 2022 traded at 100 bps bid, 98 bps offered, a trader said.

The natural gas and oil pipeline is based in Calgary, Alta.

Teck sells $1.75 billion

Teck Resources sold $1.75 billion of notes (Baa2/BBB/) in three tranches on Monday, a source close to the trade said.

Books for Teck Resources' offering were $3.25 billion for the five-year notes, $3.4 billion for the 10-year tranche and $2.3 billion for the 30-year bonds.

The $500 million of 2.5% notes due 2018 priced at 99.69 to yield 2.561% with a spread of Treasuries plus 195 bps. The tranche sold tighter than talk in the 220 bps area.

There was a make-whole call at 30 bps over Treasuries.

A $750 million tranche of 3.75% notes due 2023 were sold at 99.188 to yield 3.845% with a spread of 235 bps over Treasuries. The tranche was priced tighter than guidance in the 250 bps area.

The notes have a make-whole call at 35 bps over Treasuries until Nov. 1, 2022 and a par call after.

There was also a $500 million tranche of 5.4% bonds due 2043 priced at 99.808 to yield 5.413% with a spread of Treasuries plus 285 bps. The bonds sold at the tight end of guidance in the 290 bps area.

The bonds have a make-whole call at 45 bps over Treasuries until Aug. 1, 2042 and a par call after that date.

The notes feature a change-of-control put at 101%.

Bank of America Merrill Lynch, Citigroup Global Markets Inc. and JPMorgan were the active bookrunners. Passive bookrunners were Goldman Sachs & Co., Morgan Stanley & Co. LLC and RBC Capital Markets LLC.

Co-managers were CIBC World Markets Corp., Deutsche Bank Securities, Mizuho Securities USA Inc., UBS Securities, Barclays Capital Inc., BNP Paribas Securities Corp., HSBC Securities (USA) Inc., RBS Securities Inc., Scotia Capital (USA) Inc. and BMO Capital Markets Corp.

Proceeds, along with cash on hand, are being used to fund the redemption of outstanding 10.25% senior notes due 2016 in the third quarter and for general corporate purposes, including retirement or redemption of other debt.

The notes are guaranteed by Teck Metals Ltd.

Teck Resources was last in the market with a $1 billion issue of notes in two tranches on Feb. 16. The 5.2% 30-year bonds from that offering were sold at 210 bps over Treasuries.

In the secondary market, Teck's notes due 2018 firmed to 191 bps bid, 188 bps offered, a trader said.

The tranche of notes due 2023 tightened to 232 bps bid, 231 bps offered.

The tranche of bonds due 2043 firmed 1 bp to 284 bps bid, 281 bps offered.

The mining company is based in Vancouver, B.C.

Scotiabank weaker

In the secondary market, Bank of Nova Scotia's 2.55% notes due 2017 (Aa1/AA-/) widened to 75 bps on Monday from 66 bps on Friday, a bond source said.

The bank sold $1.25 billion of the five-year notes on Jan. 5, 2012 at Treasuries plus 172 bps.

The Canadian bank is based in Halifax, N.S.

TD firms

Toronto-Dominion's notes traded better on the day with the 2.375% notes due 2016 seen 10 bps tighter at 63 bps, a source said on Monday.

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.

Viterra flat

Viterra's 6.406% notes due 2021 traded unchanged at 109 bid with no intraday activity seen, a source said.

"They are slightly better bid [on the week] because of market tone," the source said.

The bonds priced on Feb. 10, 2011 at par.

Swiss commodities producer Glencore received approval in the previous week from Australian regulators for the C$6.1 million takeover of Viterra.

On Monday, Glencore said in a news release that the extraordinary resolution authorizing and approving certain proposed amendments to Viterra's outstanding 6.406% senior notes due Feb. 16, 2021, which was scheduled to be considered at the extraordinary meeting of the holders of the notes on Monday, has been withdrawn and the meeting cancelled.

Baar, Switzerland-based Glencore previously received the necessary consents from the holders of Viterra's 5.95% senior notes due Aug. 1, 2020 to certain proposed amendments.

The proposed amendments to the notes due 2020 are conditional upon, among other things, the implementation of the proposed amendments to the notes due 2021. Glencore said it will determine and advise holders of the notes due 2020 whether it intends to waive the cross-condition and proceed with the 2020 proposed amendments.

According to a report from Covenant Research, an independent credit research firm, the proposed amendments would "materially weaken the Viterra bonds' protection against effective subordination by secured debt. The changes would also facilitate anticipated and potential asset transfers from Viterra."

Regina, Sask.-based Viterra provides agricultural ingredients to global food manufacturers.

Andrea Heisinger contributed to this review

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