Viterra rises on buyout; Agrium flat; high-yield bonds 'better bid' on lack of new supply

By Cristal Cody

Prospect News, March 21 - Canadian bonds traded better on Wednesday on a lack of supply as primary activity stays light over the school break.

In the secondary market, Viterra Inc.'s notes due 2021 traded higher a day after the company's buyout was announced.

A trader said the paper was "up probably 2 points."

Bonds from Agrium Inc., which plans to acquire Viterra's retail stores in Canada and Australia and an interest in an Alberta nitrogen facility, traded unchanged.

Canada's high-yield market was "better bid" on Wednesday, a trader said. "It's better to buy; there's not a lot of supply around."

Primary activity has stayed light over the last two weeks as various provinces take school breaks, but sources report some corporate roadshows are in the pipeline.

Superior Plus LP's high-yield debentures were active in Wednesday's trading.

The Markit CDX Series 18 North American investment-grade index firmed 1 basis point to a spread of 87 bps.

Canadian government bonds performed better across the curve on Wednesday as prices rose and yields fell. The 10-year note yield dropped to 2.23% from 2.28%. Canada's 30-year bond yield fell 4 bps to 2.76%.

The Bank of Canada saw strong demand for its auction of C$1.4 billion of 3.5% bonds due 2045 at an average yield of 2.793% on Wednesday.

In economic data, Statistics Canada said the composite leading index rose 0.6% in February, following a 0.4% gain in January.

Canadian retail trade figures for February will be released on Thursday.

Viterra rises

In the high-yield secondary market, Viterra's 6.406% notes due 2021 rose 2 points to 111 bid on Wednesday, a trader said.

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

The company (Ba1/BBB-//DBRS: BBB) announced on Tuesday that investment-grade rated Glencore International plc will acquire Viterra for C$16.25 a share. The acquisition is in partnership with Agrium Inc. and Richardson International Ltd.

Viterra's two other outstanding bonds, 8.5% notes due 2014 and 8.5% notes due 2017, saw a slight uptick in trading. The two- and five-year notes have call dates in July and August, respectively.

"They're trading a little bit but they're trading with a 2% money market yield because they're callable," the trader said.

Moody's Investors Service said on Wednesday that it placed Viterra's Ba1 corporate rating under review for upgrade on the acquisition by Glencore. The deal is valued at more than C$6 billion, not including C$1.2 billion of debt to be refinanced or assumed at Viterra.

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

Agrium unchanged

Agrium's bonds traded mostly flat in the U.S. high-grade secondary market, a trader said on Wednesday.

Agrium's 6.75% senior notes due 2019 traded at 120 bps bid, 110 bps offered.

"No real change in the past few days," the trader said. "Going back to the 16th, they were 120, 110 then."

Agrium (Baa2/BBB/DBRS: BBB) sold the notes in a $500 million offering in 2008 at a spread of 310 bps over Treasuries.

The agriculture products and service retailer is based in Calgary, Alta.

Superior Plus active

In other trading in Canada on Wednesday, Superior Plus' 8¼% senior debentures due 2016 were seen at 105.5 bid, a trader said.

Superior Plus sold C$150 million of the debentures (/BB-/DBRS: BB) in 2009 at par.

The company is a subsidiary of Calgary, Alta.-based Superior Plus Corp., which operates energy distribution, specialty chemicals and specialty construction divisions.

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