(Corrects year of previous low in first, ninth paragraphs.)
Companies sold $64 billion of bonds
in December, a 10 percent increase from the corresponding month
last year, taking advantage of interest rates at the lowest
levels since at least 2005.
Issuers marketed $41 billion of investment-grade debt and
$23 billion of high-yield, or junk, debt as of yesterday, the
most sold since 1999, according to data compiled by Bloomberg.
Companies sold $58 billion of debt in December 2009, the data
show.
“Investment-grade corporations are trying to get ahead of
low interest rates in anticipation of the Fed raising rates,”
said Guy LeBas, chief fixed-income strategist at Janney
Montgomery Scott LLC, in a telephone interview. “And high-yield
is taking advantage of interest rates in the first couple weeks
of December.”
Federal Reserve officials have left their target for the
federal funds rate, which covers overnight interbank loans, in a
range of zero to 0.25 percent since December 2008 as part of
their strategy to stimulate the economy.
The Fed announced its decision Nov. 3 to purchase an
additional $600 billion of Treasuries through June for the
second round of so-called quantitative easing. To date, the
central bank has purchased $156 billion of Treasuries since Nov.
12, when it began buying in its second round of quantitative
easing, known as QE2.
Fed Inaction
LeBas doesn’t expect the Fed to raise interest rates until
2012, he said in an interview on Bloomberg TV’s “InsideTrack
with Deirdre Bolton Erik Schatzker” yesterday.
“I think the focus is really going to be on QE2 and
whether to expand or terminate the program as scheduled in
June,” he said.
The extra yield investors demand to own high-yield bonds
instead of Treasuries widened 3 basis points to 540 basis points
yesterday, according to the Bank of America Merrill Lynch High
Yield Master II index.
Absolute yields on the debt fell 0.5 basis point to 7.83
percent, the index data show. The index ended as low as 7.55 on
Nov. 9, the least since March 2005.
High yield bonds are rated below Baa3 by Moody’s Investors
Service and BBB- by Standard Poor’s. A basis point is 0.01
percentage point.
Investment-grade corporate bond spreads widened 1 basis
point to 167 basis points, while yields fell 3 basis points to
4.15 percent, according to the Bank of America Merrill Lynch
U.S. Corporate Master index. The index was 3.531 on Nov. 4, the
lowest since daily data became available in October 1986.
There were no corporate bond sales in the U.S. yesterday,
Bloomberg data show.
The following is a description of at least $675 million of
pending sales of dollar-denominated bonds in the U.S.
Investment Grade
FIRST GULF BANK PJSC plans to sell five-year dollar-
denominated bonds that may yield between 3.25 percent and 3.5
percent, said three people familiar with the transaction, who
declined to be identified because terms aren’t set. BNP Paribas
SA, Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc and
National Bank of Abu Dhabi PJSC are arranging meetings with
investors, two people said on Nov. 1. The Abu Dhabi-based lender
is rated A2 by Moody’s.
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.
High Yield
IFH PERU LTD. plans to add up to $100 million to its 8.625
percent 2019 bonds, according to two people with knowledge of
the sale. Barclays Capital and IM Trust are managing the sale.
MDA LENDING SOLUTIONS, the information- and settlement-
services provider to real-estate lenders, may sell $175 million
of senior subordinated notes to help pay for its leveraged
buyout by TPG Capital, according to a Moody’s statement. The
MacDonald, Dettwiler Associates Ltd. unit is also seeking $400
million of loans.
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. SP 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, SP
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 SP. 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, SP 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.
RURAL ELECTRIFICATION CORP., India’s state-controlled
lender to power projects, hired Credit Agricole CIB, Royal Bank
of Scotland Group Plc and Standard Chartered Plc to sell $500
million of bonds. Rural Electrification aims to price 5.5-year
notes to yield between 195 basis points and 200 basis points
more than similar-maturity U.S. Treasuries Finance Director Hari Das Khunteta said in a telephone interview from New Delhi on
Nov. 10.
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:
Alexandra Harris in New York at
aharris48@bloomberg.net
To contact the editor responsible for this story:
Alan Goldstein at
agoldstein5@bloomberg.net