Inter Pipeline, Ontario end busy week of issuance; Vermilion deal capped at C$200 million

By Cristal Cody

Prospect News, Jan. 28 - The Inter Pipeline Fund and the Province of Ontario brought deals on Friday, capping a busy week in the Canadian bond markets.

In addition, two issuers, Paramount Resources Ltd. and Lanesborough Real Estate Investment Trust, came back to price add-ons to previous sales.

February is poised to start with at least one new deal - from Vermilion Energy Inc., which plans a roadshow in the week ahead for C$200 million of five-year senior notes. The deal is not expected to "grow," a source said.

Meanwhile, heavy trading continued Friday in OPTI Canada Inc.'s bonds, while Paramount Resources' bonds were quoted lower on the offer side, sources said.

Canadian government bonds outperformed on the growing unrest in Egypt as investors sought safer havens for debt. The 10-year bond yield fell to 3.245% from 3.29%. The two-year note yield fell to 1.675% from 1.73%.

U.S. Treasuries also rose on Friday, sending yields down. The 10-year Treasury note yield fell 6 basis points to 3.33%. The two-year note yield dropped to 0.54% from 0.58%.

Egypt's 6.85% 10-year bonds traded up 52 bps on Friday and 106 bps on the week as anti-government protestors took to the streets, a trader said.

Ontario sells C$600 million

The Province of Ontario sold C$600 million in a reopening of its 4.65% benchmark bonds due June 2, 2041 at 101.946 to yield 4.531% on Friday, a source said.

The deal was sold at a spread of 80.5 bps over the Government of Canada benchmark.

TD Securities Inc. was the lead manager.

The issue now has a total outstanding of C$4.95 billion.

Inter Pipeline upsizes

The Inter Pipeline Fund (/BBB+/DBRS: BBB) sold an upsized C$325 million of 4.967% medium-term notes due Feb. 2, 2021 at par on Friday, an informed source said.

The notes priced at a spread of 163 bps over the Government of Canada bond curve. The notes were talked at 163 bps over the curve.

The deal was upsized from C$250 million.

"Current credit market conditions are very favorable for energy infrastructure issuers, and we are extremely pleased with the interest shown in this offering," David Fesyk, president and chief executive officer of Inter Pipeline, said in a statement. "By creating a Canadian public debt platform, we are well positioned to finance the next phases of our long-term growth plans."

The notes have a Canada call at 41 bps plus the Government of Canada benchmark.

CIBC World Markets Inc. and TD Securities Inc. were the lead managers.

Inter Pipeline Fund is a Calgary, Alta.-based petroleum transportation, storage and natural gas liquids extraction business that operates in western Canada, the United Kingdom, Germany and Ireland.

Paramount Resources adds

Paramount Resources sold C$70 million in an add-on to its 8.25% series 2 senior notes due Dec. 13, 2017 at 103 to yield 7.602% on Friday, sources said.

The notes (Caa2/B+) priced at a spread of 477 bps over the Government of Canada benchmark.

The offering has a Canada call at 100 bps over the Government of Canada benchmark and a change-of-control put at 101%.

RBC Capital Markets Corp. was the lead manager.

Proceeds will be used for capital expenditures and general corporate purposes.

Paramount Resources originally priced C$300 million of the notes on Nov. 30 at par to yield 562 bps over the Government of Canada benchmark bond.

In the secondary market, the deal traded early Friday at 103.25 bid, 104.25 offered and was seen closing out the day at 103.25 bid, 103.75 offered, an informed source said.

Calgary, Alta.-based Paramount Resources is an oil and natural gas exploration, development and production company.

Vermilion deal set

Vermilion Energy plans to start a roadshow for C$200 million five-year senior notes (/BB-/DBRS: BB) on Monday with pricing likely on Thursday, a source said.

The roadshow for the notes due Feb. 11, 2016 starts Monday in Vancouver and continues through Feb. 3 in Montreal.

The transaction "will not grow," the source said.

Scotia Capital Inc. and CIBC World Markets Inc. are the lead managers.

The notes have a Canada call at 100 bps over the Canadian benchmark. The deal has a change-of-control put at 101%.

The proceeds will be used to pay down the amount outstanding on Vermilion's credit facility and for general corporate purposes.

Vermilion Energy is a Calgary, Alta.-based oil and gas producer.

OPTI drops

A trader said OPTI Canada debt was the "most active again," continuing the bonds' trading streak.

"It is amazing that it's managed to be this active for this many days," he said.

He called the 7 7/8% and 8¼% notes due 2014 a couple points softer at 60 bid, 60½ offered.

The 9% notes due 2012 were pegged at 98 bid, 99 offered. That was about unchanged on the day, but down from 101 bid, 102 offered just two weeks ago, the trader said.

The 9% notes, the trader remarked, were "more interesting" given "that they have come off." Inside the capital structure, those bonds should be well covered in the event of a bankruptcy, he said.

"At worst case, they should be par bid, 101 offered," he said.

At another desk, a trader deemed the 7 7/8% and 8¼% notes weaker, closing around 60.

OPTI Canada is a Calgary, Alta.-based oil sands producer.

Stephanie N. Rotondo contributed to this report

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