Great-West Lifeco upsizes preferreds; Yellow Media trades lower; Canadian Satellite flat

By Cristal Cody

Tupelo, Miss., Feb. 10 - The Canadian bond markets saw stronger secondary activity over the week as primary activity slowed amid only two corporate deals sold domestically, according to sources on Friday.

"There was a lot of secondary trading this week because there was so little issuance," a bond source said. "Corporate primary activity is expected to be random as earnings season is underway."

Great-West Lifeco Inc. was in the market with an upsized C$250 million offering of preferred stock on Friday, a day after announcing stronger fourth-quarter results.

Investment-grade bonds traded weaker on the day. The Markit CDX Series 17 North American high-grade index eased 3 basis points to a spread of 99 bps.

Yellow Media Inc.'s senior notes (BB+/BB) fell in trading after the company reported fourth-quarter earnings the previous day, sources said.

"There's going to be something interesting happening there; we just don't know what," a bond source said. "The curve has been flattening there and the short-dated bonds have been taking it in the chops just on concern they are going to restructure."

Yellow Media's preferred stock also fell more than 30% in trading on Thursday and more than 16% on Friday on news that the company suspended preferred dividends going forward, which is estimated to save about C$41 million a year.

In other trading on Friday, Canadian Satellite Radio Holdings Inc.'s 9¾% senior notes due 2018 were unchanged, a trader said.

Government bonds rallied on a flight to safer-haven debt on new opposition to austerity measures for a second Greek financial bailout. Canada's 10-year note yield dropped 4 bps to 2.05%. The 30-year bond yield fell to 2.61% from 2.65%.

Great-West Lifeco upsizes

Great-West Lifeco said on Friday that it sold an upsized C$250 million of non-cumulative first preferred shares (DBRS: Pfd-1) to yield 5.4% for the initial five-year period.

Great-West Lifeco upsized its deal by C$100 million due to strong demand, the company said in a statement.

The company upsized the deal from C$150 million, or 6 million shares. Great-West Lifeco sold 10 million shares of the series P preferred stock due March 31, 2017 at C$25.00 per share.

BMO Capital Markets Corp., RBC Capital Markets Corp. and Scotia Capital Inc. were the lead managers.

The shares are not redeemable prior to March 31, 2017.

Proceeds will be used for general corporate purposes and to augment the company's current liquidity position.

On Thursday, Great-West Lifeco reported fourth-quarter earnings of C$624 million, or 65 cents a share, compared to C$465 million, or 49 cents a share, in the same period a year ago.

The company reported profit of $2.02 billion, or $2.129 per share, for the 12 months ended Dec. 31, compared to C$1.62 billion, or C$1.704 a share, in the year-ago period.

Winnipeg, Man.-based Great-West Lifeco has life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses in Canada, the United States, Europe and Asia.

Yellow Media trades lower

Yellow Media's bonds continue to stay lower in secondary trading, according to bond sources.

Yellow Media's 5¼% notes due 2016 were quoted on Thursday at 39.5 bid.

The 7¾% notes due 2020 traded lower at 40 bid.

On Dec. 6, both tranches traded in the 43 to 46 range.

The 5¼% notes due 2016 traded at 82 back in June.

The company on Thursday reported a fourth-quarter profit of C$48.2 million from continuing operations, compared with a loss of C$7.2 million in the same period a year ago.

Fourth-quarter revenue fell 9% to C$313.3 million.

Montreal-based Yellow Media is Canada's largest directory publisher.

Canadian Satellite Radio flat

Canadian Satellite Radio Holdings' 9¾% senior notes due 2018 traded flat at 105 bid on Friday, a trader said.

The notes were unchanged in trading from a week ago.

Canadian Satellite Radio Holdings, parent of XM Canada, sold C$62 million of the notes at par on March 31.

Canadian Satellite Radio Holdings was created through the merger of XM Canada and Sirius Canada on June 21.

The satellite radio and communications company is based in Toronto.

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