Valeant Pharmaceuticals wraps deal; Skylink starts roadshow; Vermilion 6.5% notes stronger

By Cristal Cody

Prospect News, March 3 - Canada's Valeant Pharmaceuticals International priced $1.5 billion in two tranches of senior notes on Thursday in the U.S. high-yield market, an informed source said.

Back in Canada, Skylink Aviation Inc. started a roadshow in Toronto for an upcoming five-year high-yield note deal, sources said.

Bonds were mostly flat to slightly better on Thursday in Canada's high-yield sector, though Vermilion Energy Inc.'s 6.5% notes due Feb. 16, 2016 (/BB-/DBRS: BB) traded up to 103.25 bid, 104.25 offered, a source said. The Calgary, Alta.-based oil and gas producer sold the notes on Feb. 3 at par.

Canadian government bonds dropped in line with U.S. Treasuries, sending yields up, as oil prices fell on a potential solution in Libya. Canada's 10-year bond yield rose to 3.395% from 3.35%. The 30-year bond yield rose 5 basis points to 3.8%.

No major economic data is expected in Canada until the upcoming week, with reports including building permits, housing prices and February jobs data.

Treasuries sold off on stronger jobs data and ahead of the Labor Department's monthly labor report, scheduled to be released on Friday. The 10-year Treasury benchmark note yield had risen 10 bps before ending the day at 3.55% from 3.47%. The 30-year bond yield rose 6 bps to 4.62%.

Bonds fell after the Labor Department said initial jobless claims fell 20,000 to 368,000, the lowest level since 2008 for the week ended Feb. 26.

"It was certainly a very good jobless claims number and there's nervousness before tomorrow's nonfarm payroll number given the big drop in jobless claims," said Mary Ann Hurley, a fixed income trader for D.A. Davidson & Co. "If it's a real strong report, depending on where the jobs are added or not subtracted, we could see 10s get back up to a 3.65%."

Valeant sells $1.5 billion

Valeant Pharmaceuticals International sold $1.5 billion in two tranches of senior notes on Thursday, sources said.

The notes (Ba3/BB-/) were offered under Rule 144A and are guaranteed by parent Valeant Pharmaceuticals International, Inc.

The first tranche of $950 million of 6.5% notes due July 15, 2016 priced at par. Initial guidance on the notes was for a 6.25% yield, according to a bond trader from a high-yield mutual fund. The notes are non-callable for two years.

The second tranche of $550 million of 7.25% notes due July 15, 2022 priced at 98.125 to yield 7.5%. Initial guidance on the tranche was for a 7.25% yield, according to the bond trader. The notes are non-callable for three years.

Goldman Sachs & Co. was the bookrunner.

A trader saw Valeant Pharmaceuticals International's new two-part issue up slightly from the levels at which the Mississauga, Ont.-based drug company's deal came to market earlier in the session.

He quoted its 6½% notes due 2016 at 100½ bid, 100¾ offered, versus the $950 million tranche's par issue price, and saw its $550 million of 7¼% notes due 2022 at 98¼ bid, 99 offered, versus a 98.125 pricing level.

A second trader queried a little later saw the 61/2s at 100½ bid, 101 offered, while the 71/4s were at 98½ bid, 99 offered.

At another shop, a trader said Valeant's deal "didn't really go anywhere." He saw the six-year bonds up ½ point to 100½ bid, while with the 11-years, "we can be generous and say they were up ¼ [point]."

"They clearly outperformed Jones [Group] from yesterday [Wednesday] but they didn't exactly run to the upside," the trader said.

The proceeds will be used to prepay the amounts outstanding under the company's term loan A facility, to finance the redemption of 4% convertible subordinated notes due 2013, to fund the $275 million repurchase of the parent company's common shares from ValueAct Capital Master Fund, LP and for general corporate purposes.

Skylink plans five-year deal

Skylink Aviation started a roadshow on Thursday in Toronto that is expected to run through Monday for a C$125 million five-year note (B/B) sale, a source said.

RBC Capital Markets Corp. is the lead manager.

The Toronto-based global charter company specializes in emergency airlifts and evacuations and logistical support for governments and corporations.

OPTI active

A trader said OPTI Canada Inc.'s 7 7/8% and 8¼% notes due 2014 "saw a little bit of action," ending around 55 bid on "decent volume."

He said that the Calgary, Alta.-based oil-sands energy company's paper was "well-bid, up½ point, but no great shakes."

Paul Deckelman contributed to this review

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