Ontario, Master Credit Card price five-year deals; Western Energy concludes roadshow

By Cristal Cody

Prospect News, Jan. 17 - The Canadian bond markets stayed active with two deals on Tuesday after a quiet Monday due to the U.S. markets closing for a holiday.

The Province of Ontario tapped the government bond market for C$1.25 billion of five-year bonds, and Master Credit Card Trust raised C$1 billion from the sale of five-year asset-backed notes, according to informed sources.

"Market tone is still pretty good," one source said.

Primary activity in Canada likely will stay active over the week, and a high-yield deal is expected from Western Energy Services Corp., which wrapped a three-day roadshow on Tuesday for C$75 million to C$125 million of bonds, according to a bond source.

Western Energy is a Calgary, Alta.-based oilfield drilling company.

Credit spreads are modest, providing attractive coupons for borrowers, and investor appetite for credit remains high, a source said.

"The window to issue is open right now," a source said.

As bond sources predicted for 2012, the telecom sector is beginning to wake. On Monday, Bell Aliant Regional Communications filed a prospectus for C$1 billion of medium-term notes, and DBRS rated the program BBB.

The Canadian markets were stable despite the volatility swirling around the credit rating downgrades of France and other European nations by Standard & Poor's on Friday.

"The bond markets are very well bid. We're getting the feeling a lot of investors still want more product and they still want to sell," a source said.

Trading flows were light on Tuesday but are "definitely skewed toward better buying activity," the bond source said. "We are seeing continued bids in the long end of high quality sectors."

The Markit CDX Series 17 North American investment-grade index firmed 3 basis points to a spread of 113 bps on Tuesday from Friday's session.

Government bonds traded modestly better as the Bank of Canada left the overnight 1% rate unchanged as expected on Tuesday. Canada's 10-year note yield fell 1 bp to 1.92%. The 30-year bond yield also dropped 1 bp to 2.5%.

Statistics Canada said on Tuesday that foreign investors acquired $6.2 billion of Canadian government and corporate bonds through the secondary markets in November, the largest inflow since May.

Canadian investors purchased $2.8 billion of foreign securities, evenly split between stocks and bonds.

Ontario sells C$1.25 billion

Early on Tuesday, the Province of Ontario (Aa1/AA-/DBRS: AA) sold C$1.25 billion 1.9% bonds due Sept. 8, 2017 at 99.744 to yield 1.948%, according to a bond source.

The bonds priced at a spread of 58.5 bps over the Government of Canada benchmark.

RBC Capital Markets Corp., BMO Capital Markets Corp. CIBC World Markets Inc., National Bank Financial Inc., Scotia Capital Inc., TD Securities Inc. and Merrill Lynch Canada Inc. managed the deal.

The deal is expected to settle on Jan. 20.

Master Credit Card prices

Also over the day, Master Credit Card Trust raised C$1 billion from the sale of 2.626% five-year asset-backed notes at par on Tuesday, a bond source said.

The series 2012-1 class A credit card receivables-backed notes due Jan. 21, 2017 (DBRS: AAA) came at a spread of 137.3 bps over the Government of Canada benchmark, or 132 bps over the curve.

BMO Nesbitt Burns Inc. was the bookrunner.

The notes are backed by credit card receivables originated by the Bank of Montreal.

Proceeds will be used to purchase receivables arising in accounts from MasterCard credit card products originated and managed by BMO.

Master Credit Card Trust is a securitization vehicle for BMO MasterCard credit card receivables, the largest MasterCard portfolio in Canada.

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