Nexen widens on possible block of buyout; pipeline thin, Ainsworth to extend maturities

By Cristal Cody

Prospect News, Oct. 22 - Nexen Inc.'s bonds widened 20 basis points in trading on Monday before going out 10 bps wider on speculation that Canadian regulators may reject its buyout deal.

The Calgary, Alta.-based oil and natural gas producers' shareholders and preferred shareowners approved the $15.1 billion buyout by Hong Kong-based Cnooc Ltd. in September.

On Friday, Canadian regulators rejected a C$5.2 billion bid for Calgary, Alta.-based Progress Energy Resources Corp. by Malaysia's oil and gas company Petronas.

Mostly, though, the corporate bond markets in Canada were quiet on Monday, sources said.

"Pretty stable, pretty slow," one bond source said.

The day had reasonable secondary flows, but "it's kind of sideways today, if anything, the market is maybe a little bit soft," another informed source said.

The Markit CDX Series 18 North American investment-grade index ended unchanged at a spread of 94 bps.

The Markit CDX Series 18 North American high-yield index fell to 100.47 from 100.70.

Issuers stayed to the sidelines on the weaker tone in the Canadian markets on Monday and likely will for the rest of the week, sources said.

"The pipeline's ending here and the markets are not particularly firm," one source said. "It doesn't seem like a great market to launch a deal."

Canadian issuers, including Canadian Imperial Bank of Commerce, Laurentian Bank of Canada, the Province of Ontario and Xstrata Finance (Canada) Ltd. sold new paper the previous week in the Canadian and U.S. investment-grade and high-yield markets.

"The first half of October had over C$8.5 billion of issuance - I don't think the second half of October will see the same pace of issuance," a debt capital markets source said.

Ainsworth Lumber Co. Ltd. on Monday announced plans to offer about C$350 million of new debt, as well as C$175 million of common shares.

Rick Eng, chief financial officer of Ainsworth, said in an interview that he could not comment on the exact maturity the company is seeking but could "say that we will be extending our maturity profile beyond what we have today."

Proceeds from the offerings will be used to repay Ainsworth's existing senior secured term loan due June 2014 and 11% senior notes due July 2015.

BMO Capital Markets Corp. is the financial adviser.

The Vancouver, B.C.-based engineered wood product manufacturer expects to release additional details of the debt financing on Nov. 2.

Canadian government bonds ended mostly unchanged ahead of the Bank of Canada's policy rate decision on Tuesday. No changes are expected to the overnight 1% rate, though the bank's policy statement is forecast to be more dovish.

"There really wasn't much going on today - either from the overseas session or anything in the North American market with respect to economic data," a government bond analyst said. "We're just seeing people playing it close to home."

Canada's 10-year note yield rose 2 bps to 1.87%. The 30-year bond yield closed 1 bp higher at 2.45%.

Nexen widens

Nexen's 6.2% notes due 2019 and 6.2% notes due 2039, both U.S. dollar issues sold in 2009, widened 20 bps in early secondary trading on Monday with the bonds going out 10 bps wider, a trader said.

"Both 10 wider on the day," the trader said. "They traded as much as 20 bps wider earlier today."

Nexen's 6.2% notes due 2019 widened to 102 bps bid, 87 bps offered.

The long bonds widened to 177 bps bid, 167 bps offered.

Nexen (Baa3/BBB-/DBRS: BBB) sold $300 million of the seven-year notes and $700 million of the notes due 2039 each at a spread of 250 bps over Treasuries on July 27, 2009.

Nexen's series 2 preferred stock fell 2 Canadian cents, or 0.08%, to C$25.64 a share on Monday.

The company sold C$150 million of the 5% cumulative redeemable class A rate reset preferred shares due 2017 (DBRS: Pfd-3) on Feb. 27, 2012.

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