Laredo Petroleum Inc., an independent exploration and production company, is marketing debt as the premium investors accept to own high-yield, high-risk debt instead of Treasuries fell to the lowest since November 2007.
Laredo plans to sell $300 million of eight-year notes, according to a person familiar with the offering. The debt from the Tulsa, Oklahoma-based company may be issued as soon as next week, said the person, who declined to be identified because terms aren?t set.
Spreads on speculative-grade debt narrowed 16 basis points to 511 yesterday, the lowest since Nov. 14, 2007, according to Bank of America Merrill Lynch index data. The default rate for U.S. junk bonds fell for a 12th consecutive month in November to 3.35 percent, according to Standard & Poor?s. Reports yesterday showed that in December, service industries in the U.S. expanded at the fastest pace since May 2006 and companies boosted payrolls by the most since records began in 2001.
?I wouldn?t be worried about the market from a valuation standpoint,? said Martin Fridson, global credit strategist at BNP Paribas Asset Management in New York. ?Conditions could change for the worse but based on where conditions are now, we?re in good shape.?
Absolute yields on high-yield debt, rated below Baa3 by Moody?s Investors Service and BBB- by S&P, fell 2 basis points to 7.73 percent yesterday, according to Bank of America Merrill Lynch?s U.S. High Yield Master II index. Spreads on Nov. 14, 2007 were 504 basis points, the index data show. A basis point is 0.01 percentage point.
Average Spreads
Toyota Motor Credit Corp., the U.S. finance arm of the world?s largest automaker, helped lead $9.7 billion of issuance yesterday, after corporations sold $21.2 billion on Jan. 4, the most since September 2009, according to data compiled by Bloomberg.
Proceeds from Laredo?s offering will be used to retire a term loan, repay outstanding revolving-credit line borrowings and for general corporate purposes, said the person familiar with the offering.
Average spreads on investment-grade debt fell 1 basis point to 163 basis points yesterday, according to Bank of America Merrill Lynch?s U.S. Corporate Master index. Absolute yields on the securities rose to 4.22 percent from 4.11 percent.
The following is a description of at least $4.65 billion of pending sales of dollar-denominated bonds in the U.S.
Investment Grade
NETWORK RAIL LTD., the U.K. owner of railway lines and stations, is planning a benchmark issue of three-year bonds in dollars, according to a person familiar with the transaction. Bank of America Merrill Lynch, Deutsche Bank AG and Goldman Sachs Group Inc. will manage the offering, said the person, who declined to be identified because terms aren?t set.
SUMITOMO MITSUI BANKING CORP., a unit of Japan?s second- biggest lender by market value, plans to sell as much as $1.5 billion of three- and five-year notes, according to Sumitomo Mitsui spokesman Kyosuke Hattori. The three-year securities may yield about 90 basis points more than similar-maturity Treasuries, two people familiar with the matter said, asking not to be named as details are private.
RURAL ELECTRIFICATION CORP., India?s state-controlled lender to power projects, is likely to sell $500 million of bonds on Jan. 18, Finance Director Hari Das Khunteta said in a telephone interview Dec. 29. Rural Electrification hired Credit Agricole CIB, Royal Bank of Scotland Group Plc and Standard Chartered Plc to sell the bonds. The company earlier planned to sell bonds in December, postponing the offering because of ?adverse market conditions,? Khunteta said in a Dec. 3 interview.
TRANSNET LTD., South Africa?s state-owned ports, rail and pipeline operator, said it may sell $1 billion worth of bonds in international markets to pay for expansion. Transnet has 35.2 billion rand ($5.2 billion) of debt outstanding.
Not Rated
LAREDO PETROLEUM INC., an independent exploration and production company, plans to sell $300 million of eight-year notes, according to a person familiar with the offering. Proceeds will be used to retire the company?s term loan, repay outstanding revolving-credit-facility borrowings and for general corporate purposes.
High Yield
UCI INTERNATIONAL INC. plans to sell $250 million of senior notes maturing in 2019, according to a person familiar with the transaction, who declined to be identified because terms aren?t set. Proceeds will be used to fund UCI?s acquisition by an affiliate of the Auckland, New Zealand-based Rank Group, according to a statement distributed by Business Wire.
STATS CHIPPAC LTD., a Singapore-based provider of semiconductor test and assembly services, plans to sell $200 million of senior notes due 2016, according to an announcement on the Singapore stock exchange. Proceeds will be used to repay the company?s $234.5 million of debt outstanding under a $360 million senior term loan facility which was obtained in May, according to the announcement. Deutsche Bank AG has been hired to help manage the sale, the company said in the announcement.
BR MALLS PARTICIPACOES SA, Brazil?s biggest owner of shopping malls, plans to sell senior unsecured perpetual debt denominated in dollars, according to a person familiar with the transaction. The notes can?t be redeemed for five years, said the person, who asked not to be identified because terms aren?t set. The debt is expected to be rated BB- by Standard & Poor?s, and proceeds may be used for capital expenditures, acquisitions and debt repayment, the person said.
COMMSCOPE INC., the telecommunications equipment maker being taken private by Carlyle Group, said it plans to sell $1.5 billion of seven-year notes to help finance the buyout. CommScope also is marketing $1 billion of term loans to help pay for the transaction, according to a filing with the Securities and Exchange Commission. The Hickory, North Carolina-based company began selling a $400 million asset-backed revolving credit line that is part of the transaction in December.
AFREN PLC, a U.K. oil and gas explorer focused on West Africa, hired Deutsche Bank AG, Goldman Sachs Group Inc. and BNP Paribas SA to manage a sale of senior secured bonds in dollars, according to two people with knowledge of the sale. The company will meet bond investors in Europe and the U.S., said the people, who declined to be identified because terms aren?t set.
CYRELA BRAZIL REALTY SA EMPREENDIMENTOS E PARTICIPACOES, Brazil?s biggest homebuilder, hired Banco do Brasil SA, Credit Suisse Group AG, Itau Unibanco Holding SA and Morgan Stanley to arrange bond investor meetings, according to a person familiar with the matter. Cyrela will meet with investors in Asia, Europe and the U.S., said the person, who declined to be identified because the conversations are private. S&P raised its rating on the company one step to BB on Sept. 30.
DELONG HOLDINGS LTD., a Singapore-based steel trader, hired Credit Suisse Group AG to help it organize meetings with investors ahead of an international sale of guaranteed senior notes. Money raised will be used to redeem 5 percent convertible bonds due 2012, to repay bank loans and for acquisitions relating to iron ore and other raw materials used by the steel industry, the company said in a statement to Singapore?s stock exchange. The dollar-denominated notes were assigned a provisional rating of B3 by Moody?s, the ratings company said in a note.
FLAKEBOARD CO., the Canadian producer of fiberboard and particleboard used to build furniture and countertops, plans to sell $225 million of senior secured notes maturing in 2017, S&P said in a statement. The ratings company grades the proposed U.S. dollar-denominated debt as B, according to the statement.
PT ENERGI MEGA PERSADA, Indonesia?s second-biggest listed oil company, hired Nomura Holdings Inc. to help it with a dollar bond sale, according to a person familiar with the matter who declined to be identified because terms aren?t set.
SI ORGANIZATION INC., the Lockheed Martin Corp. unit formerly known as Enterprise Integration Group, may sell $175 million of senior subordinated notes, according to S&P. The proceeds may be used with $340 million of bank debt and $370 million of new common stock to pay for its acquisition by Veritas Capital, S&P said.
Offerings in Pipeline
AMERICAN INTERNATIONAL GROUP, the insurer rescued by the U.S. government, is contemplating a new debt sale, a person familiar with the matter said. The firm hasn?t considered a timeline for when it might sell more bonds, said the person, who declined to be identified because the terms aren?t set. AIG sold $2 billion of bonds Dec. 1 in its first offering since it was rescued by the U.S. government in 2008.
PTT EXPLORATION & PRODUCTION PCL, Thailand?s only listed oil and gas explorer, plans to sell bonds denominated in dollars, according to a person familiar with the transaction. PTT Exploration hired Barclays Plc to manage the sale, said the person, who declined to be identified because terms aren?t set. Barclays is arranging a U.S. dollar-denominated medium-term note program for the company, the person said.
PTA BANK, or Eastern and Southern African Trade and Development Bank, hired HSBC Holdings Plc and Standard Bank Group Ltd. to arrange bond investor meetings in Europe and Asia, according to two people with knowledge of the sale. The meetings will be held in Hong Kong, Singapore, Zurich, Geneva and London, said the people, who declined to be identified because terms aren?t set. The company may sell dollar bonds after the meetings, the people said.
MAQUINARIA ESPECIALIZADA MXO TRUST, a special-purpose company expected to provide construction machinery services to Corporacion GEO SAB de CV, hired Banco Santander SA to arrange bond investor meetings, according to a person with knowledge of the sale. A dollar bond sale may follow the meetings, to be held in London, Boston, New York and Los Angeles, said the person, who declined to be identified because terms aren?t set.
CREDIT BANK OF MOSCOW plans to sell five-year dollar bonds, according to a person familiar with the transaction. The sale of Reg S securities is being arranged by Commerzbank AG, ING Groep NV and Raiffeisen Bank International, the banker said.
DOHA BANK QSC, Qatar?s third-largest bank, hired Morgan Stanley and JPMorgan Chase & Co. to manage a planned $500 million bond sale, its chief executive officer said. The offering, announced on the Qatar Exchange website, will be marketed to investors in the U.S., Europe and the Middle East, Raghavan Seetharaman said in an Oct. 20 telephone interview.
BELARUS may sell debt in the U.S. and Asia, according to Finance Minister Andrei Kharkovets. ?We will undoubtedly enter the Asian and the American markets,? Kharkovets said in an Oct. 15 interview in Moscow, declining to comment on the timing of possible sales.
AL BARAKA BANK EGYPT ESC, a unit of Bahrain-based Albaraka Banking Group, may sell dollar-denominated Islamic bonds in the second half of 2011, the bank?s chairman said Sept. 29. The bank hasn?t decided on the size of the bond, he said.
JSW STEEL LTD., India?s third-largest steelmaker, plans to sell dollar bonds to help build a 200 billion-rupee ($4.4 billion) steel and power plant in West Bengal, Chief Financial Officer Seshagiri Rao said.
GHANA is considering selling its second dollar bond in 2011 to tap investor demand as the start-up of oil production boosts economic growth and narrows the budget deficit, Deputy Finance Minister Fifi Kwetey said. The government was considering a ?no-deal roadshow? to gauge international investors? appetite, Kwetey said in a May 26 interview in Abidjan. Ghana sold its first global bond in 2007, raising $750 million to help fund the construction of roads and power plants.
MONGOLIA plans to raise $500 million selling bonds in 2010 and the remainder of a planned $1.2 billion program will be sold according to market conditions, Batbayar Balgan, director general of the financial and economic policy department of Mongolia, said at a forum in Ulan Bator on June 16. The government scaled back its plans for global bond sales after Europe?s debt crisis drove up borrowing costs. Investment banks are advising Mongolia to issue debt with maturities of 5 years to 10 years, Finance Minister Sangajav Bayartsogt said in a Feb. 9 interview. The securities may yield 8 percent to 11 percent, he said.
To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net.
To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.
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