Hydro-Quebec, Calloway REIT continue deal action; Wells Fargo, Baytex trade stronger

By Cristal Cody

Prospect News, July 19 - Hydro-Quebec and Calloway Real Estate Investment Trust continued to amp up the new bond supply in the Canadian markets this week with two deals on Thursday, informed bond sources said.

Hydro-Quebec came with a C$500 million reopening of its 5% debentures due 2050, while Calloway Real Estate Investment Trust sold a C$150 million offering of eight-year senior debentures.

The market is digesting the heavier supply over the past two days with new issues trading tighter, sources said.

"The new Wells Fargo deal [is] still several bps tighter, and the Calloway deal is also a few bps tighter," one bond source said.

Wells Fargo Canada Corp. (A2/A+/DBRS: AA) sold C$1.5 billion of 2.944% seven-year medium-term notes at 158.2 bps over the Government of Canada benchmark the previous day.

Great Canadian Gaming Corp.'s high-yield offering sold on Wednesday was three times oversubscribed with one-third from U.S. investors, a source close to the deal said on Thursday.

Richmond, B.C.-based Great Canadian Gaming sold C$450 million of the 10-year senior notes (B1/BB+/) at par to yield 6 5/8%.

About C$40 million of the notes due July 25, 2022 traded between 101 and 102, the source said.

In other trading, Baytex Energy Corp.'s 6 5/8% debentures due 2022 continue to rally since the bonds priced last week.

The Markit CDX Series 18 North American investment-grade index ended the day flat at a spread of 108 bps.

The Markit CDX Series 18 North American high-yield index rose to 96.87 from 96.79.

Government bonds saw moderate losses across the curve. Canada's 10-year note yield closed 4 bps higher at 1.66%. The 30-year bond yield rose to 2.28% from 2.24%.

Hydro-Quebec taps market

Hydro-Quebec (Aa2/A+/DBRS: A) sold C$500 million in the 10th additional tranche of its 5% debentures due Feb. 15, 2050 at 132.648 to yield 3.444% on Thursday, according to the company and bond sources.

The series JN debentures priced at a spread of 117.5 bps over the Government of Canada benchmark.

National Bank Financial Inc. was the lead manager. RBC Dominion Securities Inc. and Scotia Capital Inc. were co-lead managers.

Co-managers were BMO Nesbitt Burns Inc., Casgrain & Co. Ltd., CIBC World Markets Inc., Desjardins Securities Inc., Laurentian Bank Securities Inc., Merrill Lynch Canada Inc. and TD Bank Securities Inc.

Hydro-Quebec originally sold the debentures on Jan. 15, 2009. The issue was last reopened on Nov. 3, 2011 in a C$500 million offering priced at 123.836 to yield 3.811%, or a spread of 98 bps over the Government of Canada benchmark.

The total outstanding is C$5.5 billion.

Hydro-Quebec is a Quebec government-owned electric power generator and distributor.

Calloway raises C$150 million

Calloway Real Estate Investment Trust sold C$150 million of 4.05% eight-year senior debentures at 100.163 to yield 4.026% on Thursday, an informed bond source said.

The series H debentures due July 27, 2020 (DBRS: BBB) priced at a spread of 255 bps over the Government of Canada benchmark.

CIBC World Markets was the bookrunner. RBC Capital Markets was co-lead manager.

Co-managers were BMO Capital Markets Corp., Scotia Capital, TD Securities Inc., Macquarie Capital Markets Canada Ltd., National Bank Financial Inc., Canaccord Capital Corp. and Desjardins Securities.

The notes may be redeemed at the Canada bond yield plus 63.5 bps.

Proceeds will be used to repay operating lines, to fund future acquisitions and for general trust purposes.

Ontario-based Calloway is one of Canada's largest real estate investment trusts.

Baytex up

In secondary trading, Baytex Energy's 6 5/8% debentures due 2022 climbed to 104 bid, 105 offered, up from 103.25 bid the previous day, a trader said on Thursday.

The company sold C$300 million of the series C debentures (B1/BB-/) at par, or a spread of 496.8 bps over the Government of Canada benchmark on July 10.

Calgary, Alta.-based Baytex is an energy exploration and production company.

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