Kruger sets roadshow for seven-year notes; Brookfield Office pulls deal; Cascades flat

By Cristal Cody

Prospect News, July 18 - Primary activity in Canada's high-yield bond market picked up with a new roadshow announcement from Kruger Products LP, giving the market two roadshows for the week after a month of inactivity, informed bond sources said.

Noranda Operating Trust also is holding a roadshow during the week for an offering of about C$90 million of 51/2-year senior notes (DBRS: BB).

"There are a few issuers kind of looking at the market," one bond source said.

However, an expected corporate bond deal from Brookfield Office Properties Inc. (DBRS: BBB) has been "pulled from the market," the bond source said. "There was some disagreement in terms of covenants, pricing, that the issuer decided to pull the deal."

Corporate bond spreads were seen going out a "couple basis points wider on the day," a bond source said, noting the "same on provincials. Spreads are a little softer, a half a basis point to a basis point wider."

In the paper sector, Cascades Inc.'s 7.75% five-year notes (Baa3/B+) traded Monday mostly unchanged from the previous week.

Statistics Canada said on Monday that foreign investment in Canadian bonds rose to C$11.1 billion in May, with most of the purchases from U.S. investors.

However, foreign investors decreased their holdings of Canadian corporate bonds for the first time since August 2009, the agency said.

Government bonds were weaker on continued volatility in Europe. The 10-year note yield rose 1 bp to 2.87%. The 30-year bond yield rose 2 bps to 3.35%.

Kruger sets roadshow

Kruger Products plans to hold a roadshow for an offering of about C$150 million of seven-year senior notes (expected ratings /B/DBRS: BB), an informed bond source said Monday. The deal has a small amount of room to grow, the source said.

The roadshow starts on Wednesday in Montreal and ends on July 25 in Toronto.

Scotia Capital Inc. is the bookrunner.

The notes are due in 2018 and are non-callable for four years. The offering includes a three-year 35% equity clawback and a 101% poison put. The deal also has a Canada call at 50 bps over the Canadian benchmark.

The notes are guaranteed by Kruger Products (USA) Inc. and Grupo Tissue de Mexico.

Proceeds will be used to refinance the company's syndicated credit facility and for general corporate purposes.

Kruger is Canada's leading tissue products producer, with brands that include Cashmere, Purex and Scotties. The company is a subsidiary of Montreal-based pulp and paper producer Kruger Inc.

Noranda starts roadshow

Noranda Operating Trust's roadshow for the notes due December 2016 is expected to start Tuesday and end on Thursday.

CIBC World Markets Inc. and Scotia Capital Inc. are the bookrunners.

The notes are guaranteed by Noranda Income Fund, Canadian Electrolytic Zinc Ltd., Noranda Income LP and NILP General Partner Ltd. N-Zinc Ltd. is a special guarantor.

Proceeds will be used to repay debt outstanding under the bridge facility and for general corporate purposes.

Noranda Operating Trust is owned by Toronto-based Noranda Income Fund and has a 75% interest in Noranda Income LP, which owns the Canadian Electrolytic Zinc metal processing facility in Quebec.

Brookfield Office pulls deal

Brookfield Office Properties (DBRS: BBB) finished a roadshow last week to gauge investors' interest for a potential five-year bond offering, but the deal, expected in the C$200 million area, has been pulled, a bond source said.

The commercial real estate corporation has headquarters in New York, Toronto and Sydney, Australia.

Cascades trades unchanged

In the secondary market on Monday, Cascades' 7.75% notes due Dec. 15, 2016 were seen trading at 104.12 bid, fairly unchanged from the 104.125 bid, 105.125 offered seen on Thursday, a trader said.

The company sold the notes on Nov. 18, 2009 at 98.67 to yield 8%.

Cascades is a Kingsey Falls, Quebec-based producer, converter and marketer of packaging and tissue products.

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