Canadian primary action on break; New Gold starts roadshow; North American Energy falls

By Cristal Cody

Prospect News, March 27 - Canadian issuers continued to stay on the sidelines on Tuesday, but the lack of new issuance is giving bonds in the secondary market a stronger bid, according to informed sources.

"Nothing, nothing, nothing in our market," a syndicate source said. "New issue activity has been exceedingly spartan the last few weeks - not because of a weak market. The market is strong and there's cash, but we just don't see the issuers."

New Gold Inc. began a roadshow on Tuesday for a U.S. dollar-denominated offering of $300 million of eight-year senior notes, according to a syndicate source.

The lull in the domestic primary calendar is due in part to the March school breaks in provinces the last two weeks that had many out on holiday. In addition, provincial deals have quieted as the provinces reach the end of their fiscal year on March 31, sources said.

"We just don't seem to have issuers willing to jump into the market right now," a source said.

Moody's Investors Service held a conference in Toronto on Tuesday for its outlook on the Canadian telecommunications, media and cable industries. Moody's continues the conference on Wednesday in Montreal.

The telecom sector is expected to heat up with new bond deals later in the year based on merger activity, sources said.

Earlier in the month, Bell Canada said that it will acquire Astral Media Inc. for C$3.4 billion, which set off speculation for primary activity later in the year.

Bell Canada parent company BCE Inc. said on March 16 that it will assume C$380 million of Astral's debt as part of the deal, which is expected to close before the end of the 2012.

"We expect issuance out of that sector later on to finance some of the acquisitions that have been made, but we haven't heard or seen anything yet," a syndicate source said. "In some cases, they need to wait for regulatory approval to do the financing."

The Markit CDX Series 18 North American investment-grade index ended unchanged on Tuesday at a spread of 89 basis points.

Canadian corporate bonds are holding flat to stronger in the secondary market.

"Investors are shifting into the secondary market just because of a lack of new issue product," a source said. "There has been a relatively solid bid for secondary product."

In the high-yield market, North American Energy Partners Inc.'s 9 1/8% senior debentures due April 7, 2017 traded lower on Tuesday following the company's announcement it had reached a final agreement with Canadian Natural Resources Ltd. and that it had amended its credit agreement, according to a bond source.

Government bond prices rose on Tuesday sending yields lower across the curve. Canada's 10-year note yield fell 6 bps to 2.13%. The 30-year bond yield traded 5 bps lower at 2.67%.

New Gold starts roadshow

New Gold began a roadshow on Tuesday in Toronto for its $300 million offering of eight-year senior notes (expected ratings B2/BB-), according to a syndicate source.

The deal is set to price on April 3.

J.P. Morgan Securities LLC and Scotia Capital are the joint bookrunners. RBC Capital Markets and UniCredit Bank are the co-managers.

The Rule 144A and Regulation S for life notes come with four years of call protection.

The Vancouver, B.C.-based copper and gold mining company plans to use the proceeds to fund the redemption of its Canadian dollar-denominated 10% senior secured notes due 2017 and for general corporate purposes.

North American Energy lower

North American Energy Partners' 9 1/8% senior debentures due April 7, 2017 traded lower at 91.25 in the Canadian secondary market on Tuesday, a source said.

North American Energy Partners sold C$225 million of the debentures (B3/B) on March 26, 2010 at par. The debentures were quoted a month ago at 99.75 bid.

The company said in a news release on Tuesday that it received approval from a syndicate of lenders to amend its credit agreement and extend the maturity date by six months to Oct. 31, 2013.

The amendment also extends the term of a temporary increase to the company's revolving credit facility to June 30.

The company also said on Tuesday that it will receive a $34 million cash settlement that involved an overburden removal and mining services contract and receive about $40 million from the sale of assets to Canadian Natural Resources.

North American Energy said it plans to use the proceeds to reduce the draw on its revolving credit facility and eliminate the need for its temporary facility after the asset sales close, which is expected by June.

North American Energy Partners is an Edmonton, Alta.-based provider of heavy construction, mining, piling and pipeline services in western Canada.

Paul A. Harris contributed to this review

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