Primary activity slows; Yellow Media bonds drop in trading; Manitoba Telecom paper firms

By Cristal Cody

Prospect News, Sept. 29 - The Canadian bond markets took a breather from new deal activity on Thursday after a handful of offerings over the week.

At least one new deal from Municipal Finance Authority of British Columbia is expected in early October, a source said.

Otherwise, the day was mostly quiet with "minimal trading" as the month winds down and on the Rosh Hashana holiday, a source said.

"It's actually very quite after having a little bit of issuance earlier in the week," the source said.

Corporate spreads were unchanged to about 2 basis points tighter.

In the secondary market, Yellow Media Inc.'s outstanding bonds fell 4 to 5 points in trading since the company announced on Wednesday that it would take a C$2.9 billion goodwill impairment charge and its bonds were downgraded to junk status.

"All trading lower," a source said of Yellow Media's short- and long-dated bonds.

In other trading, the new notes from Manitoba Telecom Services Inc. traded as much as 9 bps tighter, sources said.

"Spreads widened 3 to 4 [bps] yesterday in general, but Manitoba Telecom tightened a couple," one source said.

Hydro-Quebec's 5% debentures due 2050 traded about 5 bps wider after the issue was reopened on Tuesday, a source said Thursday.

Also in trading, the 3.5% 10-year notes that Regional Municipality of Peel sold the previous day were flat on the day.

Government bonds were lower on the long end. The Canadian 10-year note yield rose 1 bp to 2.21%. The 30-year bond yield also ended 1 bp higher at 2.84%.

"Market tone was decent, although things are kind of sloppy this afternoon," a bond source said. "Equities are struggling to hold their gains."

British Columbia add-on eyed

Coming up in new deals, the Municipal Finance Authority of British Columbia (Aaa/AAA/AAA) is expected to sell C$100 million to C$150 million in a reopening of its 4.15% notes due June 1, 2021, a source said.

"On average they issue twice a year," the source said.

The authority held its semiannual meeting of the municipal finance members on Tuesday.

The offering is expected to price the week of Oct. 3.

The Victoria, B.C.-based authority borrows funds on behalf of municipalities in British Columbia.

Yellow Media notes slide

Yellow Media's outstanding bonds continued to weaken on Thursday after the company announced the previous day that it would take a C$2.9 billion goodwill impairment charge in the third quarter and eliminate its dividend after the Oct. 17 payment.

Yellow Media's bonds later Wednesday were downgraded to BB from BBB by DBRS based on the phone directory publisher's struggles to switch from print to a digital platform.

On Thursday in the secondary market, Yellow Media's 5.71% notes due 2014 fell to 57 and the 6½% notes due 2013 traded down to around 70, a source said.

Both issues were quoted in the 90 area in late June.

Yellow Media's longer-dated bonds also weakened. The 5.85% notes due 2019 and the 7¾% notes due 2020 were both seen trading down to 38, 40, the source said.

"They have the EBITDA and business for the next few years to pay off most of the maturities," the source said. "Given the price of the bonds, the market seems to be very pessimistic about that ever happening."

Yellow Media is based in Montreal.

Manitoba Telecom firms

In other trading, sources saw the 4.25% notes due Oct. 1, 2018 that Manitoba Telecom Services sold on Tuesday trading around 272 bps bid, 273 bps offered on Thursday.

Manitoba Telecom sold C$200 million of the seven-year medium-term notes (/BBB/DBRS: BBB) at a spread of 275 bps over the Government of Canada benchmark.

The telecommunications company is based in Winnipeg, Man.

Hydro-Quebec widens

Hydro-Quebec's series JN 5% debentures due Feb. 15, 2050 (Aa2//AA-/DBRS: A) traded wider Thursday at 110 bps bid, a source said.

"They widened significantly," the source said.

The electric distributor sold C$500 million in the reopening of the long bonds on Tuesday at 104.5 bps over the Government of Canada benchmark.

Hydro-Quebec is a government-owned corporation that generates, transmits and distributes electricity in Quebec.

Peel trades around issuance

The 3.5% notes due Dec. 1, 2021 that the Ontario Regional Municipality of Peel (Aaa/AAA) priced the previous day traded unchanged at 133 bps, a source said Thursday.

The municipality sold C$200 million of the 10-year notes at a spread of 133 bps over the Canadian government benchmark.

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