Apollo’s Momentive to Sell Debt as Companies Prepare for Growth

Momentive Performance Materials Inc., a silicone producer controlled by Apollo Management LP, plans to sell debt as companies prepare for growth amid a jump in sales of existing U.S. homes and speculation that the Federal Reserve will keep interest rates near record lows.

Momentive, which was bought by Apollo from General Electric Co. in December 2006, is selling $500 Million of first-lien senior secured notes due 2017, according to a filing yesterday with the U.S. Securities and Exchange Commission. The sale is part of an attempt to improve the Waterford, New York-based company’s ability to repay its debt.

“Corporations are rebuilding their balance sheets, they’re rebuilding them at the fastest we’ve seen this happen in decades,” Robert Schumacher, senior portfolio manager at La Defense, France-based Axa Investment Managers, said in an interview yesterday. “They’re positioning themselves for what they feel comfortable will be a return to growth.”

Companies sold at least $3.1 billion of bonds yesterday, adding to this year’s record issuance of $1.173 trillion, amid speculation the Federal Reserve will keep borrowing costs near record low levels. Charles Evans, president of the Fed Bank of Chicago, told the Financial Times in an interview that U.S. interest rates may stay near zero until “late 2010, perhaps later.”

Prospects for an effective economic recovery grew as sales of existing U.S. homes jumped 10 percent in October to the highest level since February 2007, National Association of Realtors data showed yesterday. Economists view stabilization in housing as key to any rebound from the worst recession in seven decades.

Junk Spreads

Speculative-grade bond yields narrowed 2 basis points relative to similar-maturity Treasuries to 752 basis points yesterday, according to Merrill Lynch’s index. High-yield, high-risk, or junk, bonds are rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.

Sales of investment-grade bonds this year reached $1.033 trillion yesterday, compared with $930.5 billion in the similar period in 2007, the previous record year, as Grupo Televisa SA, the world’s largest Spanish language broadcaster, sold $600 million of dollar-denominated bonds, according to data compiled by Bloomberg.

“Investment-grade corporate bond issuance has been surprisingly robust given the fact that the economy is only just now emerging from deep recession,” said Chris Sullivan, who oversees $1.4 billion as chief investment office at United Nations Federal Credit Union in New York.

‘Too Tempting’

“Investor demand for high-grade corporate assets has bolstered issuance and still remains supportive even as risk premiums have narrowed substantially since March,” Sullivan said in an interview yesterday. “Issuers find the attractive absolute interest rate levels and healthy investor demand a window of opportunity too tempting to miss.”

Investment-grade spreads were unchanged yesterday for a sixth-straight day at 215 basis points, according to Merrill Lynch’s U.S. Corporate Master index. A basis point is 0.01 percentage point.

This week’s sales compare with $10.1 billion the week earlier, according to data compiled by Bloomberg. Borrowers are marketing at least $3 billion of bonds, according to Bloomberg data. Following is a description of pending sales of corporate and other bonds in the U.S.

Investment Grade

NORTH RHINE-WESTPHALIA will sell $500 million of two-year bonds that will be priced to yield 20 basis points more than the benchmark mid-swap rate, according to a banker involved in the transaction.

SINOCHEM CORP., China’s biggest chemicals trader, started selling $500 million of five-year dollar bonds in the interbank market to fund overseas acquisitions, a sale document shows. Sinochem, based in Beijing, offered an interest rate of 65 basis points to 95 basis points more than the six-month London interbank offered rate, the document seen by Bloomberg News said. The issuer, after winning approval from China’s debt registry agency to sell $1 billion of the securities, has the option to raise the spread by as much as 2 percentage points after three years, the document said. Investors also can choose to sell the notes back to the company, it said, without giving details.

Not Rated

SENSIENT TECHNOLOGIES CORP. said it has entered into an agreement with a group of financial institutions for the issuance of $110 million in fixed-rate, senior notes, according to a Nov. 19 statement distributed by Business Wire.

PT BAKRIE & BROTHERS is considering the sale of as much as $250 million of five-year bonds, the company said in a statement posted on its Web site. There are no credit ratings available for the Indonesian metals producer and telecom operator, according to Bloomberg data.

High Yield

MOMENTIVE PERFORMANCE MATERIALS INC. is planning to sell $500 Million of first-lien senior secured notes due 2017, according to a filing today with the U.S. Securities and Exchange Commission. Proceeds will be used to repay some of the company’s term loans and for general corporate purposes, according to the filing. Momentive Performance Materials, a silicone producer controlled by Apollo Management LP, also is planning to amend its senior secured credit facility to extend the maturities of its term-loan and revolving-loan commitments, the filing said.

FIRST SHIP LEASE TRUST (FSLT) plans to sell as much as $200 million in notes maturing in 2016 to repay debt and fund future vessel purchases, according to a Nov. 23 statement to the Singapore exchange.

STANDARD BANK PLC (SBK) plans to sell lower Tier 2 bonds in dollars, according to a banker involved in the transaction. Credit Suisse Group AG and Royal Bank of Scotland Group Plc will manage the sale with Standard Bank, the banker said.

PT CILIANDRA PERKASA, an Indonesian oil palm grower, may sell dollar bonds this month after meeting fixed-income investors in Hong Kong and Singapore, a person familiar with the matter said. Ciliandra, a unit of Singapore-based First Resources Ltd., hired Citigroup Inc. to help it meet with investors on Nov. 10 and Nov. 11, the person said, without wanting to be identified before a public announcement. Ciliandra has $160 million of 10.75 percent five-year bonds maturing in December 2011 and 500 billion rupiah ($53 million) of 11.5 percent, five-year bonds due November 2012, according to First Resources’ Web site.

AK BARS BANK, a lender in Russia’s Tatarstan region, plans to sell bonds in dollars, a banker involved in the sale said. The Kazan-based lender seeks to sell the notes by the end of the year, according to the banker, who declined to be identified before the sale is completed. AK Bars last offered dollar debt to investors in June 2008, when the bank sold $300 million of 9.25 percent notes maturing in 2011, Bloomberg data show.

PT CHANDRA ASRI, the Indonesian petrochemical company, plans sell five-year dollar bonds, according to two people with direct knowledge of the transaction. Jakarta-based Chandra Asri aims to raise as much as $250 million from the sale, said the people, who asked not to be identified as they’re not authorized to discuss the matter. DBS Group Holdings Ltd. and Deutsche Bank AG are arranging the sale, said another person familiar with the plans. Standard & Poor’s said it assigned a B+ rating to the senior secured notes, which will be issued by Chandra Asri’s wholly owned Altus Capital Ltd. unit. Moody’s Investors Service assigned them a provisional rating of B2, its fifth-highest non-investment grade.

PT MEDCO ENERGI INTERNASIONAL plans to sell $300 million of bonds soon, Bisnis Indonesia reported, citing unnamed people. Indonesia’s largest publicly traded oil company, which is rated B at S&P, has invited banks to bid to manage the bond sale.

AO ASTANA FINANCE will offer senior creditors $350 million of new bonds, as well as recovery notes and 58.9 percent of voting shares, the lender said in a statement published through the Kazakhstan Stock Exchange. Holders of Astana Finance’s domestic notes will be offered 20-year tenge-denominated bonds with an 8 percent coupon, the lender said in the statement, which was dated Oct. 16.

The DOMINICAN REPUBLIC hired Barclays Plc and Citigroup Inc. to arrange the country’s first international dollar bond sale in more than three years, according to a person familiar with the transaction. There were no additional details on the size and maturity of the offering, said the person, who declined to be identified because he’s not allowed to speak publicly. The country last sold dollar bonds abroad in 2006, a year after defaulting on $1.1 billion of debt. In December, the Dominican Republic’s credit rating was cut one level by Standard & Poor’s on concern a slowing economy will hurt the government’s finances. The government’s long-term debt rating was lowered to B, five levels below investment grade, from B+. The country has a B2 rating from Moody’s Investors Service.

VIETNAM plans to fund energy projects with a $1 billion bond, its first since an inaugural sale in 2005, Deputy Prime Minister Nguyen Sinh Hung said. The government is pushing ahead with the offering after a delay of two years amid signs of improving markets. “We are aiming at $1 billion for the sale, however, it will be decided based on specific projects,” Hung, 63, said in an interview in Hanoi.

Offerings in Pipeline

HANESBRANDS INC. (HBI) is planning to refinance a portion of its existing debt to increase financial and operating flexibility. The refinancing may include a registered debt offering. The company said it may use the net proceeds to repay all or a portion of its outstanding debt under its existing senior secured credit facility and its senior secured second-lien credit facility.

DOLLAR FINANCIAL CORP. plans to sell $250 million of senior notes in a private offering through its indirect wholly owned subsidiary National Money Mart. The Berwyn, Pennsylvania-based company said it expects to issue the notes in December, according to a statement dated Nov. 12. Proceed will be used to finance its acquisition of Military Financial Services, LLC.

ANGOLA, which vies with Nigeria as Africa’s biggest oil producer, is seeking to raise $4 billion in what might be sub-Saharan Africa’s largest sale of bonds. The debt will be sold in two parts in December and June next year, John Coulter, chief executive officer of JPMorgan Chase & Co. (JPM)’s South African unit, which is managing the deal, said in a phone interview on Nov. 6. Angola is seeking its first international bond sale after a slump in the oil price from last year’s record high triggered a budget deficit for the southwest African nation’s government, which gets about 80 percent of its revenue from crude. The nation’s currency, the kwanza, dropped more than 10 percent against the dollar last month after the central bank abandoned its currency peg.

RUSSIA may sell “considerably” less debt than the $18 billion it previously announced, Deputy Finance Minister Dmitry Pankin said, citing this year’s growth in the oil price as a reason for the reduced need to borrow. The country is rated Baa1 at Moody’s and BBB at S&P.

ARGENTINA’S PROVINCE OF CORDOBA plans to raise as much as $150 million in a local sale of 12 percent bonds due in 2017, the regional government’s bank said in an advertisement in La Nacion. The sale, part of a program to raise $500 million by selling debt, will take place from Nov. 2 to Nov. 10. Argentina is rated B3 at Moody’s and B-at Standard & Poor’s.

CEMEX SAB (CX), the world’s third-largest cement maker, is considering selling a 5-year to 10-year bond within six months to pay bank debt and push out maturities beyond 2014, Chief Executive Officer Lorenzo Zambrano said in an Oct. 30 interview. Capital markets have opened enough for the company to try to sell a bond only months after completing an agreement with banks to refinance $15 billion of debt in August, Zambrano said in an interview in Monterrey, Mexico. The sale would be in addition to a convertible bond Cemex announced it will sell.

MICHAELS STORES INC. (MIK), the world’s largest arts-and-crafts retailer, amended its credit agreement on Aug. 21 to allow the private equity-owned company to issue bonds to repay its existing term loan under a $2.4 billion facility with Deutsche Bank AG and other lenders. The amendment changes also allow Irving, Texas-based Michaels to take out other loans, including additional term loans under the facility, to repay the borrowings, according to an Aug. 21 filing with the Securities and Exchange Commission

AXIS BANK LTD. (AXSB) hired Barclays Plc, HSBC Holdings Plc, JPMorgan Chase & Co. and Standard Chartered Plc to help sell its first dollar bonds in two years, according to a person familiar with the transaction. The banks will help Mumbai-based Axis meet bond investors in Singapore on Oct. 26, Hong Kong on Oct. 27 and London on Oct. 28 ahead of a so-called benchmark size sale, said the person, who declined to be identified before a public announcement. Benchmark typically means at least $500 million. Axis Executive Director Srinivasan Vardharajan declined to comment on the bank’s funding plans. Axis was the first private bank established after India’s government allowed such lenders to be formed in 1994, according to its Web site. It last sold dollar bonds in June 2007 when it raised $60 million from variable-rate notes due 2022, according to data compiled by Bloomberg. The notes were sold to investors at 99.6 cents on the dollar and were last quoted at 87.1 cents on the dollar to yield 9.55 percent, according to BNP Paribas SA prices. Moody’s Investors Service ranks Axis at Ba2, its second-highest junk grade. Standard & Poor’s grades it two levels higher at BBB-, the lowest investment grade.

BANK OF EAST ASIA LTD. (23) said in a statement that while it’s considering a potential fundraising exercise neither it nor its units have entered into any “definitive” agreement. The bank, Hong Kong’s third-biggest by value, plans to sell as much as $600 million of debt to help boost capital, Apple Daily said, without attribution. The lender has appointed investment banks including UBS AG to help on the sale, the Hong Kong-based Chinese-language newspaper said.

The PHILIPPINES plans to sell $500 million of yen-denominated debt as well as dollar bonds by early 2010 as it seeks to raise funds before a presidential election in May, officials said. A so-called samurai bond sale “is still on the cards,” Treasurer Roberto Tan said Oct. 19 in a phone interview in Manila. The Philippines will probably sell U.S. currency bonds again next quarter as part of plans to raise $2 billion overseas in 2010, Finance Secretary Gary Teves told reporters Oct. 19.

LEBANON plans to issue $500 million in Eurobonds “soon” to help the country service its existing debt, the finance minister said. “We will send a request for proposals to banks in the coming days,” caretaker Finance Minister Mohamad Chatah said in a telephone interview from Beirut.

TOURISM DEVELOPMENT & INVESTMENT CO., a state-owned developer of hotels in Abu Dhabi, may raise $1 billion from a five-year Islamic bond issue that could be the biggest international sale from the Gulf this year, bankers familiar with the deal said. The Islamic bond, also known as sukuk, may be priced to yield around 240 basis points above the benchmark mid-swap rate, according to one banker who didn’t want to be identified because the details are private. The bids for the issue exceed $4 billion, he said. The company is rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s.

STATE BANK OF INDIA will meet with investors to market its sale of five-year bonds denominated in U.S. dollars, according to two people familiar with the transaction. The bank is seeking to raise $700 million to $1 billion from the bond sale, Chief Financial Officer S.S. Ranjan said in a telephone interview on Oct. 2. The bank hired Barclays Capital, Citigroup Inc., HSBC Holdings Plc, JPMorgan Chase & Co. and UBS AG to manage the transaction, the people said. India is rated Baa3 by Moody’s and BBB- by S&P.

INDONESIA will sell dollar-denominated Islamic bonds in the second quarter, Dahlan Siamat, director of Islamic financing policy at the nation’s finance ministry, said in Jakarta on Oct. 6. The nation is rated Ba2 by Moody’s and BB-by S&P.

ALROSA, Russia’s diamond monopoly, may sell as much as $1 billion in foreign-currency bonds in the second half of next year, RIA Novosti reported, citing Chief Executive Officer Fyodor Andreyev. The company is rated Ba3 by Moody’s Investors Service.

AGRIUM INC., (AGU) North America’s third-largest fertilizer producer, said it may raise as much as $1 billion by issuing various securities as it attempts to acquire competitor CF Industries Holdings Inc. The registration, filed Sept. 10, “has nothing to do with CF whatsoever,” Richard Downey, a company spokesman, said in a phone interview. Calgary-based Agrium is refiling a similar registration from 25 months ago that is about to expire and the company doesn’t plan to issue the securities, he said. Chief Executive Officer Mike Wilson repeated in August that Agrium is committed to buying CF Industries, offering $40 a share in cash plus one U.S. dollar-denominated Agrium share. Agrium has twice raised the cash portion since it launched the buyout bid in February. The regulatory filing on Sept. 11 said an issuance may include common and preferred shares, debt and subscription receipts. The proceeds would be used to repay debt, make acquisitions or finance capital spending, Agrium’s filing said.

MEXICAN BANKS Nacional Financiera SNC and Banco Nacional de Comercio Exterior SNC may sell bonds in international markets for the first time since 2004 as they seek $1 billion in long-term funding, the banks’ president Hector Rangel said in an interview in Mexico City on Aug. 13. The banks expect to announce their financing plans by the end of the year, he said.

ENERGY FUTURE HOLDINGS CORP., the electricity provider formerly known as TXU Corp., reduced the maximum amount of its bond exchange offers to $3 billion from $4 billion. The expiration date for the exchange offers and the deadline for consent solicitations to waive restrictions contained in company bond indentures was extended to Nov. 10, the Dallas-based utility said Oct. 23 in a statement distributed by Business Wire. Energy Future said it would swap as much as $1.35 billion of 9.75 percent senior secured Energy Future notes due 2019 for 45 percent of securities tendered and as much as $1.65 billion of 9.75 percent senior secured Energy Future Intermediate Holding Co. notes due 2019 for the rest. The old notes that Energy Future is seeking to swap are the Energy Future 5.55 percent senior notes due 2014, the 6.5 percent senior notes due 2024, the 6.55 percent senior notes due 2034, the 11.25 percent/12 percent senior toggle notes due 2017 and the 10.875 percent senior notes due 2017, as well as its Electric Holdings Co. unit’s 10.25 percent senior notes due 2015 and TCEH Finance Inc.’s 10.25 percent senior notes due 2015.

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.

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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