Montreal sells 3.15% five-year notes; corporate, provincial sales rise; telecom sector flat

By Cristal Cody

Prospect News, Dec. 3 - The City of Montreal brought one small sale of C$80 million in 3.15% notes due Dec. 1, 2015 at 100.054 to yield 3.138% on Friday, according to an informed source.

The notes (Aa2/A+) priced at a spread of 74 basis points over the Government of Canada benchmark bond.

CIBC World Markets Inc. was the lead manager.

In the provincial bond market, debt was a basis point wider, an informed source said.

Earlier in the week, the Province of British Columbia sold C$600 million in a reopening of its 3.7% 10-year benchmark notes at a spread of 64 basis points over the Government of Canada benchmark bond.

New debt offerings from the 10 Canadian provinces are on the rise so far in 2010, a source said.

"Total issuance to date by our calculations is C$82 billion, just from the provinces. It was C$71 billion the year before," the source said, including international and domestic total capital market borrowing.

In Canadian government debt, bonds were mixed Friday on job data.

The 10-year bond yield fell to 3.186% from 3.21%. The two-year note yield fell to 1.636% from 1.69%.

Statistics Canada said employers added 15,000 jobs in November, while the unemployment rate fell to 7.6% in November, the lowest since January 2009, from 7.9% on a drop in the number of youths working.

In the United States, unemployment rate rose to 9.8% in November from 9.6% the previous month, the Labor Department said Friday. U.S. employers added 39,000 jobs in November, much lower than the 130,000 forecast.

High-grade sales hit C$14 billion since November

Canadian corporate high-grade bonds performed decently on Friday on an improved tone toward credit in Europe that took pressure off of global credit markets, said Jason Parker, head of fixed income research at BMO Capital Markets Corp. in Toronto.

"We had a significant number of deals - $10 billion of product settled in November and another excess of $4 billion settling just in the first few days of December with another couple of billion expected next week," he said. "That took some of the favorable momentum out of spreads and [debt] definitely traded heavy."

New sales are expected in the bank and infrastructure sectors before the end of the year.

Telecom bonds flat

Spreads on high-grade debt in the telecom sector were stagnant and trading was slow, a source said.

New offerings from both Shaw Communications Inc. and Bell Canada were unchanged.

Shaw Communications sold C$900 million in two tranches of senior notes (DBRS: BBB/Baa3/BBB-/) on Thursday.

The tranche of C$500 million of 5.5% notes due Dec. 7, 2020 priced at a spread of 235 basis points over the Government of Canada benchmark bond.

The second tranche of C$400 million was a reopening of the company's 6.75% bonds due Nov. 9, 2039. The bonds priced at a spread of 330 bps over the Canadian government benchmark.

Calgary-Alta.-based Shaw Communications provides internet, phone and cable television services.

On Monday, Canada's largest telecommunications company Bell Canada priced C$1 billion in 3.6% series M-21 medium term debentures due Dec. 2, 2015 at a spread of 124 basis points over the Canadian government benchmark.

"They're flat to where they came, 124 on the curve," a source said.

TransAlta upsizes preferreds

Elsewhere in Canadian securities, TransAlta Corp. said that it upsized its previously announced sale of preferred shares on Thursday to C$250 million from C$200 million.

The company offered 10 million shares of cumulative rate reset first preferred stock (DBRS: Pfd-3) at a price of $25 per share to yield 4.6% for the initial period ending March 31, 2016.

The dividend rate will reset every five years at a rate equal to the five-year Government of Canada bond yield plus 203 bps.

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

The managers have an over-allotment option to purchase an additional C$50 million, or 2 million shares, of series A preferreds in whole or in part prior to closing.

Proceeds will be used to partially fund capital projects, for other general corporate purposes and to reduce short-term debt. The company may invest funds that it does not immediately require in short-term marketable debt securities.

Calgary, Alta.-based TransAlta is a power generation and wholesale marketing company.

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