GE Canada, Veresen tap high-grade market, RioCan prices; Canada Housing offers five-years

By Cristal Cody

Prospect News, Nov. 17 - GE Capital Canada Funding Co. and Veresen Inc. tapped the Canadian investment-grade bond markets under an iffy tone on Thursday, sources said.

"It's been shaky with continued worries over Europe and U.S. banks. Credit's been weak today," a bond source said.

GE Capital Canada Funding sold C$500 million of five-year medium-term notes, and Veresen sold C$150 million of seven-year senior medium-term notes.

RioCan Real Estate Investment Trust also was in the market with C$130 million of preferred trust units.

No provincial bond offerings were seen on Thursday. Friday is expected to be mostly quiet with little primary activity expected, sources said Thursday.

In the week ahead, the Canadian bond markets will be open, while the U.S. bond markets will close late in the week for the Thanksgiving Day holiday.

Primary activity may be active in the first half of the upcoming week, a source said.

"Monday through Wednesday we could see stuff; Thursday and Friday probably will be quiet," a source said. "The first two weeks of December we could see stuff then, but then things quiet down a lot the last two weeks of December. Usually the Canada Mortgage Bond issue is the last thing you seen in the year."

Canada Housing Trust (Aaa/AAA/DBRS: AAA) is expected to sell a five-year fixed-rate note in mid-December.

"And then the market pretty much shuts down," the source said.

Canada Housing Trust is a unit of Canada Mortgage and Housing Corp., which offers financing, mortgage loan insurance and mortgage-backed securities. The trust was in the Canadian bond markets on Wednesday with the sale of C$3.75 billion in two tranches of Canada Mortgage Bonds.

Overall weakness

Bonds overall traded weaker on the day. The Markit CDX Series 17 North American high-grade index eased 2 basis points to a spread of 136 bps.

Canadian government bonds were flat to lower on the short end of the curve. The 10-year note yield rose 1 bp to 2.09%. The 30-year bond yield was unchanged at 2.71%.

Statistics Canada said foreign investors added C$7.4 billion of Canadian securities in September.

Non-residents removed C$612 million from their holdings of Canadian bonds in September following a C$6 billion increase in August.

Canadian investors reduced their holdings of foreign bonds by C$469 million in September, led mostly by U.S. corporate bonds, the agency said.

GE Capital Canada prices

GE Capital Canada Funding (Aa2/AA+) priced C$500 million of 3.35% five-year medium-term notes at 99.868 to yield 3.379% on Thursday, a bond source said.

The notes due Nov. 23, 2016 priced at a spread of 203.7 bps over the Government of Canada benchmark.

RBC Capital Markets Corp. and TD Securities Inc. were the lead managers. BMO Capital Markets Corp., CIBC World Markets Inc. and Scotia Capital Inc. were the co-managers.

GE Capital Canada Funding last brought a bond deal on Feb. 1 with an C$850 million offering of three tranches of senior notes. The issuance included C$250 million floating-rate notes due Feb. 10, 2014 at a spread of three-month CDOR plus 82 bps, C$200 million of 2.95% notes due Feb. 10, 2014 at 110.6 bps over the government benchmark and C$400 million of 4.4% notes due Feb. 8, 2018 at a 155 bps spread.

GE Capital Canada Funding is the Canadian financing arm for General Electric Co.

Veresen taps market

Veresen sold C$150 million of 4% seven-year senior medium-term notes at 99.728 to yield 4.045% on Thursday, a bond source said.

The notes due Nov. 22, 2018 (/BBB/DBRS: BBB) priced at a spread of 230 bps over the Government of Canada benchmark.

CIBC World Markets Inc. was the bookrunner. Scotia Capital and TD Securities were co- lead managers. Co-managers were HSBC Capital (Canada) Inc., National Bank Financial Inc. and RBC Capital Markets.

Proceeds will be used to reduce Veresen's outstanding debt, to finance future growth opportunities, including acquisitions and investments, and for general corporate purposes.

Calgary, Alta.-based Veresen operates gas pipelines and processing facilities.

RioCan REIT prices preferreds

RioCan Real Estate Investment Trust announced on Thursday that it sold C$130 million, or 5.2 million shares, of cumulative rate reset preferred trust units.

The series C units (/expected P-3/DBRS: Pfd-3) were sold at C$25.00 per unit. The units yield a 4.7% dividend annually for the initial period ending June 30, 2017.

The distribution rate will be reset on June 30, 2017 and every five years thereafter at a rate equal to the then five-year Government of Canada bond yield plus 318 bps.

RioCan may redeem the units on June 30, 2017 and on June 30 of every fifth year thereafter.

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

The deal includes a greenshoe of 780,000 units, or C$19.5 million.

Proceeds will be used to redeem RioCan's $120 million outstanding of 5.7% series K senior debentures due Sept. 11, 2012, to repay other debt, to acquire property, to fund development and for general trust purposes.

Toronto-based RioCan REIT is Canada's largest real estate investment trust and owns and manages Canada's largest portfolio of shopping centers.

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