Aussie bond market attracts Manitoba, Export Development Canada; Yellow Media trades up

By Cristal Cody

Prospect News, July 26 - The Province of Manitoba tapped the Kangaroo bond market on Thursday, while Export Development Canada also intends to bring an Australian dollar-denominated offering, according to informed bond sources.

The Province of Manitoba sold an upsized A$200 million of 4.25% 10-year Kangaroo bonds, a source said.

Export Development Canada launched an offering of A$300 million of five-year Kangaroo bonds that are expected to price overnight.

"The books are in very good shape," an informed source said. "I would expect the deal size to go to A$600 [million] or perhaps a little more."

The only other Canadian provinces that have sold bonds in the Aussie market are Ontario and Quebec, a source noted.

"There's good demand for this space and good demand for their currency right now," the source said.

Primary activity is expected to be light on Friday other than the Export Development Canada Kangaroo bond offering, though an issuer may bring a deal if the market tone stays better after a week tone most of the week, a source said.

"It should be quiet and hopefully we'll see a pickup in activity come Monday or Tuesday," the source said.

Bond spreads improved in the provincial and corporate markets on Thursday, sources said.

Provincial bonds firmed 1 basis point to 2 bps across the curve.

The Markit CDX Series 18 North American investment-grade index tightened 4 bps to a spread of 111 bps.

The Markit CDX Series 18 North American high-yield index climbed to 96.18 from 95.51.

Yellow Media Inc.'s senior notes rose a point in the secondary market, a trader said.

In other trading, Sherritt International Corp.'s senior notes (DBRS: BB) traded flat to lower following the company's second-quarter earnings release.

Government bonds ended weaker on assurances from European Central Bank president Mario Draghi that the central bank will do whatever is necessary to preserve the euro.

Canada's 10-year note yield climbed to 1.64% from 1.59%. The 30-year bond yield rose 5 bps to 2.27%.

Manitoba taps market

The Province of Manitoba (Aa1/AA//) sold an upsized A$200 million of 4.25% 10-year Kangaroo bonds at 99.316 to yield 4.335% on Thursday, an informed bond source said.

The notes due Aug. 8, 2022 priced in line with guidance at a spread of the three-month bank bill swap rate (BBSW) plus 75 bps.

The deal was launched at A$100 million.

TD Securities Inc. and National Australia Bank Ltd. were the lead managers.

The inaugural issue priced under the province's Aussie bond shelf filed in 2007.

More supply hits market

Export Development Canada (Aaa/AAA//) launched an offering of A$300 million of five-year Kangaroo bonds at a spread of 21 bps over the three-month bank bill swap rate in the Aussie market on Thursday, an informed bond source said.

The deal is expected to price overnight and likely will be upsized, the source said.

Citigroup Global Markets Inc., TD Securities and Commonwealth Bank of Australia are the lead managers.

Ottawa-based Export Development Canada provides financing, insurance and risk management to Canadian exporters and investors.

Yellow Media improves

Yellow Media's 7.3% notes due 2015 and other debt traded up a point to 54 bid, 55 offered, a trader said on Thursday.

The notes (/C/DBRS: C) were seen in the 53 bid, 54 offered area on Tuesday.

Yellow Media said the recapitalization includes an exchange of credit facilities and medium-term notes for C$1.8 billion of debt. The recapitalization will reduce its debt to C$750 million of 9% senior secured notes due in 2018 and $100 million of subordinated exchangeable debentures due in 2022.

DBRS and Standard & Poor's downgraded the company's ratings after the announcement.

Montreal-based Yellow Media is a Canadian directory publisher.

Sherritt mixed

Sherritt International's senior notes were mixed in secondary trading on Thursday a day after the company announced lower quarterly earnings, a source said.

The 8% notes due 2018 fell to 106 bid from 107.25 bid on Friday. Sherritt sold C$400 million of the notes at par on Oct. 28, 2011.

The company's 8¼% notes due 2014 traded flat at 107.25, the source said.

Sherritt said on Wednesday that second quarter revenue fell 3% to C$488 million. Earnings dropped to C$40.8 million, or 14 cents a share, in the quarter from C$63.1 million, or 20 cents a share, in the year-ago period.

Toronto-based Sherritt produces coal, oil, gas and power and mines and refines nickel.

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