Aug. 31 (Bloomberg) -- Canada is planning its first U.S. dollar-bond sale in more than a decade as investment-grade corporate bond spreads tightened this month to the narrowest in more than a year.

Canada’s offering may take place in “the near future” to boost foreign-exchange reserves and support lending by the International Monetary Fund. Finance Minister Jim Flaherty announced the sale Aug. 28 on the department’s Web site, without giving the amount to be sold. The extra yield investors demand to own investment-grade bonds instead of Treasuries tightened to 252 basis points on Aug. 28 and Aug. 10, the narrowest spread since June 19, 2008, according to Merrill Lynch & Co.’s U.S. Corporate Master index.

Even after offering a record $803 billion of investment- grade bonds during the first half of the year, issuers are tapping the market to extend debt maturities on concern the credit markets could seize up as they did after the collapse of Lehman Brothers Holdings Inc. last September, said Chuck Lieberman, chief investment officer at Advisors Capital Management in Hasbrouck Heights, New Jersey.

“Companies had the living daylights scared out of them,” Lieberman said in an interview. “My guess is it’s not quite done. Maybe some of the cash raisings from here will be for strategic purposes.”

Borrowers issued $10.4 billion of debt last week, compared with $10.2 billion of sales the week before, according to data compiled by Bloomberg. Investment-grade spreads narrowed 6 basis points last week to 252 basis points, Merrill Lynch data show. Yields fell 17 basis points to 5.26 percent, the data show. A basis point is 0.01 percentage point.

Junk Yields

The spread on high-yield, high-risk bonds narrowed 9 basis points last week to 904 basis points, according to Merrill Lynch’s U.S. High Yield Master II index. Yields declined 19 basis points to 11.46 percent, the data show. High-yield, high- risk, or junk-rated, notes are rated below BBB- by Standard & Poor’s and less than Baa3 by Moody’s Investors Service.

“The high-yield market regained its momentum this week, recouping last week’s losses on bullish economic data that seemed to suggest an economic recovery may be taking place in earnest,” Fitch Ratings said in an Aug. 28 research note. “The primary market remained quiet for the second straight week with little activity anticipated until after the upcoming Labor Day weekend.”

This year’s sales total about $891 billion, compared with $660 billion during the same period of 2008, the data show.

Borrowers seek to issue at least $4.6 billion of dollar- denominated debt, Bloomberg data show. Following is a description of pending sales of corporate and other bonds in the U.S.

Investment Grade

CANADA plans to sell U.S.-dollar bonds worldwide in “the near future,” the first such sale in more than a decade, to boost foreign-exchange reserves and support lending by the International Monetary Fund. Finance Minister Jim Flaherty announced the sale Aug. 28 on the department’s Web site, without giving the amount to be sold. “The global bond issue will prudently diversify the government’s sources of foreign currency financing,” the statement said. The government also uses swaps to fund its Exchange Fund Account where foreign currencies are held. Canada’s supply of foreign-currency bonds “has generally declined rather sharply over the years,” said Eric Lascelles, chief economist and strategist at TD Securities Inc. in Toronto, a unit of Canada’s second-biggest bank. “This is just an opportunity to reverse that trend.”

KOREA NATIONAL HOUSING CORP., the nation’s builder of public homes, hired five banks for a sale of dollar bonds, a person with direct knowledge of the matter said. Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley and UBS AG will help sell 5- or 10-year notes in a benchmark offering, according to the person, who declined to be identified as the sale plans are private. The state-run company will meet investors in Asia and Europe in late August or early September and plans to sell the notes before merging with Korea Land Corp. on Oct. 1, the person said. A benchmark sale is typically for at least $500 million.

SRI LANKA plans to sell $150 million of dollar-denominated bonds this month to pay maturing debt, the South Asian nation’s central bank said. The island will issue the so-called Sri Lanka Development Bonds, or SLDBs, maturing in two years, I.H.M.S. Herath, deputy superintendent of the public debt department, said in a telephone interview from the bank’s Colombo head office. Bidding for the debt will end Aug. 11, he said. Sri Lanka plans to raise $500 million from overseas investors to help rebuild the war-torn island after the IMF loan shored up the nation’s finances, Central Bank Governor Nivard Cabraal said July 31.

ISRAEL is still considering selling bonds abroad, a Finance Ministry spokesman said, denying a Haaretz newspaper report that it canceled plans to raise money overseas because higher yields may raise costs. Any issuance would come after Standard & Poor’s, Fitch Ratings and Moody’s Investors Service file their annual reports on Israel, the spokesman, who couldn’t be named according to the ministry’s policy, said in a June 15 telephone interview. Israeli officials were in New York to hire three debt underwriters for the country’s first dollar-denominated bond sale since March, a Finance Ministry spokesman said on June 4.

Offerings in Pipeline

MICHAELS STORES INC. said it entered into a third amendment to credit agreement to its $2.4 billion senior secured term loan facility with Deutsche Bank AG New York Branch, as administrative agent, and the other lenders party to it. The amendment changes the term loan credit facility to permit the issuance or incurrence of indebtedness for the purpose of the repayment of existing term loans under the facility, which new indebtedness could take the form of additional term loans under the facility or secured or unsecured bonds or other loans, the company said in an Aug. 21 filing with the Securities and Exchange Commission.

MEXICHEM SAB, the largest maker of plastic pipes in Latin America, is preparing to sell bonds in the U.S. for the first time. Chief Executive Officer Ricardo Gutierrez said in an interview July 10 the company may sell $500 million in bonds in August or September. The company may delay the international bond sale by as many as two weeks because of “paperwork,” spokesman Enrique Ortega said in an Aug. 26 telephone interview. The international bond sale “is still on track,” Ortega said. Mexichem announced plans in 2007 to spend $1 billion in five years to buy chemical, resin and pipe-making businesses in Latin America. The bond sale is meant to reduce short-term debt, Gutierrez said.

The PHILIPPINES may sell about $2 billion of dollar and yen debt to plug its budge deficit in 2010, Treasurer Roberto Tan said in an Aug. 14 interview.

BELGIUM may sell dollar-denominated bonds for the second time this year as it seeks to tap rising demand for its securities among foreign investors. The nation would hire banks to manage a transaction “if market conditions allow,” Anne LeClercq, head of the Belgian debt agency’s treasury and capital-markets division, said Aug. 10 in a telephone interview from Brussels. Belgium’s bonds, rated AA+ by Standard & Poor’s, have rebounded this year as investors’ aversion to anything but AAA rated debt eased on signs the global economy is recovering. The nation has raised 31 billion euros ($44 billion), or 93 percent, of its total funding needs for this year, including $2 billion of dollar-denominated floating-rate securities on Aug. 6 under the so-called Euro Medium Term Note, or EMTN, program.

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ENERGY FUTURE HOLDINGS CORP., formerly known as TXU Corp., amended its credit agreement to reduce the company’s first-lien capacity by $1.25 billion in exchange for the ability to issue an additional $4 billion of debt, according to a regulatory filing. The Dallas-based company also is allowed to issue new secured notes or loans, provided the proceeds are used to prepay certain borrowings at par under its existing credit agreement, according to the Aug. 10 filing.

South Korea’s NATIONAL AGRICULTURAL COOPERATIVE FEDERATION, also known as Nonghyup, plans to sell as much as $700 million of bonds in September or October, according to a person with direct knowledge of the matter. The dollar-denominated securities may have maturities of three or five years, said the person, who declined to be identified because the plans are private. Seoul- based Nonghyup was established in 1961 to aid farmers by providing agricultural and commercial credit and banking services. The federation has the equivalent of $14.8 billion in bonds outstanding, according to data compiled by Bloomberg.

LAS VEGAS SANDS CORP. founder and Chief Executive Officer Sheldon Adelson said he’s considering a bond sale following a rally that boosted the price of the company’s corporate bonds. “The yield on our bonds has gone to less than half of what it was,” Adelson said in a May 12 interview. “When it gets down another three points, we may consider selling some bonds.”

BAHRAIN plans to raise $1.16 billion by selling dollar and local currency bonds, joining a surge in borrowing from Abu Dhabi and Qatar as emerging-market investors return. The country will start selling $500 million of five-year notes compliant with Islamic law from May 27, central bank spokeswoman Nayla Ali Al Khalifa said in an e-mailed response to questions from Bloomberg. Bahrain will also issue three-year debt in local currency to raise an additional 250 million Bahrain dinar ($663 million).

The DETROIT INTERNATIONAL BRIDGE CO., owner and operator of the Ambassador Bridge connecting Detroit and Windsor, Ontario, plans to sell bonds in a private transaction to finance enhancements to the bridge. The Warren, Michigan-based company will issue the bonds, according to a person familiar with the offering who declined to be identified.

RUSSIA may sell bonds worth “a few hundred billion rubles” this year to cover a budget shortfall, the Moscow Times said, citing an interview with Arkady Dvorkovich, an economic adviser to President Dmitry Medvedev. The government may partly finance the deficit by selling dollar-denominated bonds, the newspaper said, citing Dvorkovich.

NIKE INC., the world’s largest athletic-shoe maker, may sell as much as $760 million of debt in the company’s first offering in more than five years. Proceeds may be used for debt refinancing, working capital, capital expenditures, investments in units and other general corporate purposes, Beaverton, Oregon-based Nike said in a Dec. 22 shelf filing with the U.S. Securities and Exchange Commission. Derek Kent, a company spokesman, said April 7 that there are no new updates to last year’s announcement.

To contact the reporters on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net.

Last Updated: August 31, 2009 09:40 EDT