GE Capital Canada, ANZ, New Brunswick stir up markets; GMP Capital, RONA sell preferreds

By Cristal Cody

Prospect News, Feb. 1 - Canadian bond markets found an influx of deals on Tuesday from GE Capital Canada Funding Co., Australia and New Zealand Banking Group Ltd. and the Province of New Brunswick, sources said.

In addition, Canada saw two preferred offerings from GMP Capital Inc. and RONA Inc., which upsized its deal by the end of the day.

"The Egypt situation has everybody stepping back a little bit. People are waiting for more deals to come down the pipe," a source said.

On Tuesday, Egypt's president, Hosni Mubarak, said he would step down at the end of his term. In the secondary market, bank bonds were flat on Tuesday after widening 1 basis point to 2 bps on Monday. The sector had firmed 3 bps to 4 bps on Friday, the source said.

"Bank deposit notes rallied at the end of last week. They gave a little bit of that back yesterday," the source said. "Banks are getting into their blackout period, they'll be reporting earnings, but that provides a good time for companies like GE Capital and diversified financials to enter the marketplace."

In other activity, traders said OPTI Canada Inc.'s bonds fell after reports the company had hired a financial adviser to review strategic alternatives.

Canadian government bonds fell following the strong economic data in the United States. Canada's 10-year bond yield rose to 3.344% from 3.31%. The two-year note yield rose to 1.709% from 1.7%.

Treasuries also fell on the stronger manufacturing data. The 10-year Treasury note yield rose to 3.43% from 3.37%. The two-year note yield rose 4 bps to 0.6%.

The Institute for Supply Management's manufacturing index was 60.8, higher than the forecast of 58.0 and the highest since May 2004.

"The data was very strong, and stocks had a great run. The day was all about risk, and everybody's money was coming from Treasuries," said William O'Donnell, a strategist at RBS Securities Inc.

Treasuries also sold off as investors put their money elsewhere after government bonds had rallied over the unrest in Egypt.

"The Egyptian crisis seems to have calmed down a little bit. A lot of the money that went into the Treasury market late last week is bleeding out," he said.

GE's three-part deal

GE Capital Canada Funding (Aa2/AA+) sold C$850 million in three tranches of senior notes on Tuesday, sources said.

The deal was upsized from C$800 million.

GE Capital Canada Funding priced C$250 million of floating-rate notes due Feb. 10, 2014 at a spread of three-month CDOR plus 82 bps. The notes were talked at CDOR plus 84 bps.

The second tranche of C$200 million of 2.95% notes due Feb. 10, 2014 sold at 99.883 to yield 2.991%, or a spread of 110.6 bps over the Government of Canada benchmark.

The last tranche of C$400 million of 4.4% notes due Feb. 8, 2018 priced at 99.845 to yield 4.426%. The notes priced at a spread of 155 bps over the Canadian government benchmark.

RBC Capital Markets Corp., TD Securities Inc. and Bank of America Merrill Lynch were joint bookrunners on both three-year tranches. RBC and TD Securities were lead managers on the sale of the seven-year tranche. Co-managers on the deals included BMO Capital Markets Corp., CIBC World Markets Inc. and Scotia Capital Inc.

GE Capital Canada Funding is the Canadian financing arm for General Electric Co.

ANZ sells C$100 million

Australia and New Zealand Banking Group (Aa1/AA) sold C$100 million of 3.125% euro medium-term notes due Feb. 10, 2015 at 100.89 on Tuesday, an informed source said.

ANZ and TD Securities Inc. were joint bookrunners.

Docklands, Victoria-based ANZ is the fourth-largest bank in Australia.

New Brunswick reopens

The Province of New Brunswick (Aa2/AA-/DBRS: A) priced C$465 million in a reopening of its 10-year and 30-year benchmark issues on Tuesday, a source said.

The province sold C$165 million of 4.5% notes due June 2, 2020 at 103.441 to yield 4.052%, or a spread of 72 bps over the Government of Canada benchmark.

The issue now has C$1.37 billion outstanding.

The second tranche was C$300 million of 4.8% bonds due June 3, 2041 at par, or a spread of 88 bps over the Government of Canada benchmark. The 30-year tranche now has C$900 million outstanding.

TD Securities Inc. was the lead manager.

RONA upsizes

In the preferred market on Tuesday, RONA upsized its offering of series 6 class A 5.25% cumulative rate reset five-year preferred shares (/P-3/DBRS: Pfd-3) to C$150 million from C$125 million, the company said in a statement.

RONA sold 6 million preferreds at C$25 each. RONA also increased the over-allotment option by 150,000 preferreds to 900,0000 preferreds.

The preferreds are redeemable at RONA's option on March 31, 2016 and every fifth year thereafter. After the initial five-year period ends, the dividend rate will be reset to the then-current five-year Government of Canada bond yield plus 265 bps.

National Bank Financial Inc. and BMO Capital Markets Corp. were the joint bookrunners.

The proceeds will be used to reduce debt, contribute to funding future acquisitions and capital projects and for general corporate purposes.

The Boucherville, Quebec-based company is Canada's largest hardware and gardening retailer and distributor.

GMP Capital sells

GMP Capital priced the second offering of preferred shares. The company sold C$100 million of five-year series B cumulative rate reset preferred shares that yield 5.5% a year for the initial period ending March 31, 2016.

The offering included 4 million preferreds (DBRS: Pfd-3) at C$25 each.

The deal includes an over-allotment option of 600,000 shares.

National Bank Financial Inc., GMP Securities LP and Scotia Capital Inc. are the lead managers.

The proceeds will be used for general corporate purposes, which may include the reduction of debt.

Toronto-based GMP Capital is an independent investment dealer.

OPTI hires another adviser

While the rest of the market seemed firmer - or, at the very least, unchanged - OPTI Canada's debt dropped on news the company had hired Lazard Freres & Co. LLC to "assist in its ongoing review of strategic alternatives."

"They've been sinking," said one market watcher, who dubbed the credit "an oilsands play that just hasn't played out."

He said the 7 7/8% and 8¼% second-lien notes due 2014 fell into the mid-50s, while the first-lien notes - the 9¾% notes due 2013 and the 9% notes due 2012 - were trading in the mid-90s.

Another trader said "hundreds of millions" of OPTI bonds turned over, estimating as much as $400 million of the company's various issues changed hands. "And they were everywhere," he added, seeing the second-lien paper hit a high of 61, a low of 55 and a close of 55½ bid, 56½ offered.

He also saw the 9% notes at 97¾ bid, 98¾ offered and the 9¾% notes at 97 bid, 98 offered.

"That was a big hunk of what people cared about," he said.

Additionally, he said that, on the high-grade side, Nexen Inc. - OPTI's joint venture partner in the Long Lake project - was also trading actively, with about $400 million of notes changing hands.

A third trader said OPTI was "quite the active bond," deeming the 7 7/8% and 8¼% notes 4 points softer around 56.

According to a company-issued press release, Lazard will work alongside Scotia Waterous Inc. and TD Securities Inc., which were hired as financial advisers in November 2009. The company has been struggling for over a year as operational issues have beset the Long Lake project. As a result, the project has not yet been producing up to full capacity, a milestone OPTI has previously said was important to its financial health.

The Calgary, Alta.-based oilsands producer said it still intends to release its fourth-quarter earnings on Feb. 10.

Another trader said that OPTI Canada "by far was the name of the day - I don't think anybody beat them. It seemed like non-stop trading, all down it seems."

When he looked at where the troubled oilsands energy producer's bonds finished, he added, "WOW."

He saw OPTI's 7 7/8% and 8¼% notes, both due 2014, finishing in a range of 55 to 561/2, with "huge amounts" of the bonds being traded, "a lot of volume," calling them down 4 to 5 points on the day. The trader also noted a nosedive in OPTI's shares on the Toronto Stock Exchange; they plunged by C$0.24, or 34.78%, to close at C$0.45 on volume of 29.5 million, more than seven times the usual turnover, with trading in the name halted for a time. "It was ugly all around," he declared.

A second trader said that OPTI's news was "not something you want to hear about."

He pegged the 7 7/8s down 3¾ points on the day at 56¼ bid, with volume "north of $70 million trading today," while seeing over $80 million of the 81/4s trading, also down in that same 56¼ area.

"OPTI Canada got hit pretty hard again today," said another trader, citing "continued speculation about what's going to happen with that capital structure."

The 2014 bonds were being quoted down around 55¾ bid, 56¼ offered, well down from prior levels around 60 bid.

Catalyst flat

A trader said that Catalyst Paper Corp.'s 7 3/8% notes due 2014 are holding steady around 87 bid, 88 offered, "where they were last week," while the 11% senior secured notes due 2016 were at 103 bid, 104 offered, also little changed.

The Richmond, B.C.-based paper company's bonds, and those of such sector peers as NewPage Corp., had pushed solidly higher last week on the news that Rock-Tenn Co. had agreed to buy rival cardboard-packaging maker Smurfit-Stone Container Corp.

Paul Deckelman and Stephanie N. Rotondo contributed to this review

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