Hydro Quebec's $1.1 billion global Canadian dollar bond offering yesterday was the second 30-year deal to hit that fledgling market in less than a week.
The Montreal-based company's offering follows a $1.25 billion Canadian deal by Ontario Hydro Corp., which issued the global Canadian dollar bond market's first 30-year deal last Friday.
Ontario Hydro originated the market with a five-year, $1.25 billion Canadian global offering last December. The two companies are the only ones to issue global Canadian dollar bonds so far.
Hydro Quebec's $1.1 bilion Canadian deal comes to about $970 billion in U.S. currency, while Ontario Hydro's recent $1.25 billion deal equals approximately $1.1 billion.
A compensation mechanism allows Canadian dollar bonds to flow freely among Canadian, U.S., European, and Japanese markets, said Michel Labonte, Hydro Quebec's treasurer. The bonds are registered with the Securities and Exchange Commission, he added.
Hydro Quebec successfully issued a 10-year deal of the same amount last June, but worried how European investors would react to a longer maturity, Mr. Labonte said. The success of yesterday's 30-year deal allayed those fears, he said.
"We were nicely surprised," Mr. Labonte said, adding that investors like Canadian global bonds' liquidity.
"They can be traded around the clock so you can get out of your position even if New York is closed," he said.
With recent deals included, he estimated that market's size at $5 billion to $6 billion Canadian.
Hydro Quebec's $1.1 billion 10.5% noncallable global debentures due 2021 were priced at 99.485 to yield 10.557% or 82 basis points over Canadian government 9.75% bonds. Moody's investors Service Inc. rated them Aa3, while Standard & Poor's Corp. assigned an AA-minus rating. Merrill Lynch & Co. served as manager.
The company will use proceeds to finance its construction program, Mr. Labonte said. Hydro Quebec is currently finishing the second phase of its La Grande complex, a watershed project. The company completed the 10,000 megawatt first phase in the laste 1970s and early 1980s, he said. Finishing the second phase will require close to $8 billion Canadian over the next three years, Mr. Labonte said.
The investment grade and high-yield markets proved quiet yesterday as many traders observed the Jewish holy day Yom Kippur.
The high-grade market moved up slightly, while the high-yield market saw no discernible price movement except for Petrolane Gas Service L.P.'s 13 1/4 debentures due 2001. They inched up 1/2 point anticipating a sweetened offer by Clayton & Dubilier, one analyst said. Clayton & Dubilier has reached agreement on restructuring plan with Petrolane's parent, QFB Partners.
In the asset-backed market yesterday, MBNA Master Credit Card Trust 1991-1 issued $1 billion of certificates backed by Visa and MasterCard receivables. The certificates were priced to yield 7.887% or 80 basis points over the five-year Treasury's. Merrill Lynch & Co. managed the offering.
Standard & Poor's raised Fruit of the Loom Inc.'s senior debt rating to B from B-minus and its subordinated debentures and notes to B-minus from CCC-plus, the rating agency announced yesterday.
Fruit of the Loom's implied senior-secured rating is B-plus. The upgrade reflects the Chicago-based company's recent debt conversion, its plan to further reduce debt, and the reassessment of its relationship with Farley Inc., Fruit of the Loom's controlling shareholder.
The rating agency expects Farley's consolidated voting control of Fruit of the Loom to shrink below the current 46% level when the shareholder completes its restructuring. Further reductions are also expected to satisfy Farley's liquidity needs. The earlier rating in part reflected concern that problems at Farley, which defaulted on its bonds, could taint Fruit of the Loom's creditworthiness.
Fitch Investors Service Inc. has assigned an AAA to Chase Manhattan Credit Card Master Trust, Series 1991-2. The rating agency also affirmed its AAA rating on Series 1991-1.
Series 1991-2 issued $750 million of 7.5% certificates backed by Visa and MasterCard receivables. Fitch based its rating on the strength of the Visa and MasterCard receivables pool, Chase USA's sound legal structure and "excellent" servicing capabilities, and the credit enhancement provided by the 11% cash collateral account.
