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Integra Telecom Plans Debt as Short Bonds Lag: New Issue Alert

Integra Telecom Holdings Inc., a provider of telephone and internet services to small businesses, is marketing $500 million of six-year notes as debt due in less than three years underperforms longer-maturity issues.

Integra plans to use proceeds along with bank loans to repay existing debt, it said in a statement. The Portland, Oregon-based company has $630 million of bank loans coming due by August 2013, according to data compiled by Bloomberg.

High-yield, high-risk bonds maturing in five to seven years returned 7 percent in the first quarter, compared with 5.6 percent for securities due in one to three years, wrote James Kochan, chief fixed-income strategist at Wells Fargo Fund Management, in an April 6 note to clients. Companies are taking advantage of the returns to issue bonds and refinance debt, Kochan said.

“For many borderline companies, this rally has saved them,” Kochan said in a telephone interview from Menomonee Falls, Wisconsin. “Companies have taken advantage of the market to repay short-term debt and repair their balance sheets.”

The extra yield investors demand to own bonds rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s widened 7 basis points to 572 basis points after ending last year at 639 basis points, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index. A basis point is 0.01 percentage point.

Absolute yields on junk-rated debt fell to 8.55 percent, near the lowest in more than two years, as Treasury prices rose after an auction of 10-year government bonds drew the strongest demand since 1994.

Integra Ratings

Moody’s assigned Integra Telecom’s notes a rating of B2, five steps below investment grade, and said its outlook was negative, citing “higher debt servicing costs and ramping up of growth initiatives,” analysts led by Gerald Granovsky wrote in a report.

Freescale Semiconductor Inc., the computer chipmaker bought in a 2006 leveraged buyout led by Blackstone Group LP, sold $1.38 billion of eight-year notes to lead $1.88 billion of high-yield bond sales yesterday, according to data compiled by Bloomberg.

Companies have sold $4.48 billion of high-yield debt this week, compared with $5.41 billion in the comparable period last week, Bloomberg data show.

Spreads Widen

Spreads on investment-grade U.S. corporate debt expanded 1 basis point to 158 basis points, according to the Bank of America Merrill Lynch U.S Corporate Master Index. Absolute yields fell 9 basis points to 4.57 percent, the index data show.

Lorillard Tobacco Co., the cigarette maker based in Greensboro, North Carolina, sold $1 billion of debt due in 10 and 30 years and Credit Agricole, France’s largest bank by assets, sold $1.25 billion of five-year notes, among $5.75 billion of investment-grade issues.

Investment-grade sales totaled $7.27 billion this week through yesterday, compared with $7.37 billion over the same period a week ago, Bloomberg data show.

Following is a description of at least $5.95 billion of pending sales of dollar-denominated bonds in the U.S.

Investment Grade

INTERNATIONAL FINANCE CORP., the private-sector arm of the World Bank, plans a benchmark offering of five-year notes, according to a person familiar with the sale. Deutsche Bank AG, HSBC Holdings Plc and UBS AG are underwriting the issuance, said the person, who declined to be identified because terms aren’t set. A benchmark offering is typically at least $500 million.

ITAU UNIBANCO HOLDING SA (ITUB4), Brazil’s biggest non-governmental lender, plans to sell 10-year subordinated dollar bonds, said a person familiar with the offering. Itau may issue the 10-year bonds to yield from 237.5 basis points to 250 basis points more than U.S. Treasuries, said the person, who declined to be identified because terms aren’t set. Goldman Sachs Group Inc., Morgan Stanley and Itau Securities are arranging the bond sale. A benchmark offering is typically at least $500 million in size.

FORETHOUGHT FINANCIAL GROUP INC. plans to sell $150 million of 10-year bonds, according to a person familiar with the transaction, who declined to be identified because terms aren’t set. Standard & Poor’s assigned the notes a grade of BBB-in a March 24 report.

TRANSNET LTD. plans to sell $2 billion of international debt to help fund infrastructure spending, the company said in an e-mailed statement. A global medium-term note program set up on the London Stock Exchange will allow the South African state-owned transportation company to issue bonds in the U.S. or European debt markets.

Not Rated

RENAISSANCE CAPITAL, the commercial banking arm of Renaissance Group, is selling $225 million of three-year bonds with a 13 percent coupon, according to a banker with knowledge of the transaction.

The PROVINCE OF CORDOBA, Argentina, plans to sell as much as $350 million of bonds in international markets once the federal government completes a restructuring of defaulted debt, Banco de Cordoba said.

SENSIENT TECHNOLOGIES CORP. said it entered into an agreement with a group of four financial institutions for the issuance of $110 million in fixed-rate, senior notes, according to a Nov. 19 statement distributed by Business Wire. The company will issue seven-year debt in May with a fixed coupon rate of 4.91 percent and proceeds will be used to repay existing indebtedness, Sensient said in a March 1 regulatory filing.

High Yield

INTEGRA TELECOM HOLDINGS INC. plans to sell $500 million of senior secured notes, according to a person familiar with the offering. Proceeds from the issuance, which may be priced as soon as this week, will be used to repay existing debt, said the person, who declined to be identified because terms aren’t set.

GLOBAL GEOPHYSICAL SERVICES INC. may sell $200 million of notes due in 2017, according to a person familiar with the transaction. Proceeds from the sale will be used to repay debt and for general corporate purposes, said the person, who declined to be identified because terms aren’t set.

MERGE HEALTHCARE INC. (MRGE) plans to sell $200 million of senior secured notes due in 2015, according to a company statement. Proceeds will be used to fund its proposed acquisition of Amicas Inc., the company said.

RADIATION THERAPY SERVICES INC. plans to sell $310 million of senior subordinated notes due in 2017, according to a person familiar with the transaction who declined to be identified because terms aren’t set.

ROSETTA RESOURCES INC. (ROSE), an oil and natural gas company, plans to sell $200 million of senior unsecured notes due in 2018, according to a company statement. Proceeds will be used to repay debt, the company said. Moody’s assigned the debt a grade of Caa1 and Standard & Poor’s rated it B+, three steps higher.

MANTECH INTERNATIONAL CORP. (MANT), a military contractor that provides technology to the U.S. government, plans to sell $200 million of 8-year notes, according to a company statement distributed by Business Wire. Proceeds will be used for general corporate purposes and to support future growth through acquisitions, the Fairfax, Virginia-based company said. Moody’s Investors Service assigned the notes a rating of Ba1.

NEXSTAR BROADCASTING GROUP INC. (NXST), which owns or provides services to 62 U.S. television stations, plans to sell $325 million of senior secured second-lien notes, the company said in a statement. Proceeds will be used to repay debt and for general corporate purposes. Moody’s assigned the notes a grade of B3 and Standard & Poor’s graded them an equivalent B-, one step lower.

PATHEON INC., the Mississauga, Ontario-based pharmaceutical outsourcing company, plans to sell $280 million of senior secured notes due in 2017, according to a company statement. Proceeds will be used to repay debt and for general corporate purposes, the company said.

AMERICAN RESIDENTIAL SERVICES LLC plans to sell $150 million of senior secured notes due in 2015, according to a person familiar with the transaction who declined to be identified because terms aren’t set.

WESTERN EXPRESS INC. plans to sell $275 million of 8-year senior secured notes, according to a person familiar with the transaction. Proceeds will be used to repay outstanding indebtedness and for general corporate purposes, said the person, who declined to be identified because terms aren’t set. Standard & Poor’s assigned the notes a rating of B-.

LEARNING CARE GROUP NO. 2 INC. is planning to sell $265 million of payment-in-kind notes that can pay interest in the form of added debt, according to a person familiar with the transaction. The company plans to issue five-year senior secured notes, of which 10.5 percent can be paid in cash and 2.5 percent in additional debt, said the person, who declined to be identified because terms aren’t set.

COMMUNITY EDUCATION CENTERS INC. plans to sell $210 million of six-year, senior secured notes that may yield 12.75 percent to 13 percent, according to a person familiar with the offering. The notes, which can’t be called for the first 3.5 years, will be sold in a private placement, said the person familiar with the transaction. The company initially planned to sell the debt in a so-called 144A offering, will borrow the money through a private offering. Proceeds from the sale may be used to repay debt, the person said. Jefferies & Co. is underwriting the sale, the person said.

PT CILIANDRA PERKASA, an Indonesian palm-oil company, may sell dollar bonds, a person familiar with the matter said. Ciliandra is a unit of Singapore-based First Resources Ltd.

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 may sell as much as $600 million of bonds, said Roberto Cabanas, head of general financing at the Public Credit Office. The government hired Barclays Plc and Citigroup Inc. to arrange the country’s first international dollar bond sale in more than three years. The country is rated B2 by Moody’s and B by S&P.

Offerings in Pipeline

UNION BANK OF INDIA LTD. (UNBK) plans to sell bonds denominated in U.S. dollars, according to a person familiar with the matter. Barclays Plc, Citigroup Inc., Deutsche Bank AG and Standard Chartered Plc will manage the sale, the person said.

MALAYSIA will “most probably” sell global Islamic bonds denominated in dollars, Prime Minister Najib Razak said.

POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORP. of the Philippines may sell $1 billion of dollar-denominated bonds and more local-currency notes to refinance maturing debt this year, Vice President Lou Alzona said. The company manages the finances of state utility National Power Corp.

BRAZIL plans a bond sale that may be denominated in reais, dollars or euros, Treasury Secretary Arno Augustin said.

BRISBANE AIRPORT CORP., owner of Australia’s third-busiest airport, may sell bonds in the U.S. later this year as it pursues new markets to help refinance debt and pay for a new runway. The company is considering a 10- or 15-year U.S. private placement and a five- to seven-year Australian dollar bond sale in late 2010 or early 2011, Chief Financial Officer Tim Rothwell said in a phone interview from Brisbane.

VIETNAM NATIONAL COAL-MINERAL INDUSTRIES GROUP, the state-owned coal producer known as Vinacomin, plans to sell as much as $500 million of bonds overseas this year to fund mining and energy projects, according to Deputy Chief Executive Officer Nguyen Van Hai.

The PHILIPPINES plans to sell $500 million of dollar-denominated bonds to overseas nationals and may sell up to $1 billion, Deputy National Treasurer Eduardo Mendiola said. The bond sale gives the government “flexibility” in domestic borrowing, Mendiola said in an interview. It may reduce second-and third-quarter domestic borrowing and reject bids at Treasury auctions, he said.

UNO RESTAURANT HOLDINGS CORP., the operator and franchisor of 170 pizzerias, filed a Chapter 11 reorganization plan that calls for a $27 million offering of notes. The Boston-based company’s rights offering of second-lien notes would enable it to repay an outstanding loan and exit Chapter 11, it said in court papers filed in U.S. Bankruptcy Court in Manhattan. Secured debt holders Twin Haven Capital Partners LLC and Coliseum Capital Management LLC have agreed to backstop the notes offering.

FINLAND may sell five-year bonds denominated in dollars this year, the Finnish Treasury said in a document posted on its Web site.

POLAND may sell around $1 billion of bonds in dollars and about $500 million denominated in yen by the middle of the year, Deputy Finance Minister Dominik Radziwill told Dziennik Gazeta Prawna in an interview. Poland is unlikely to sell more bonds to international investors after the sales, which will meet the country’s foreign debt-service needs for this year, Radziwill told the newspaper.

HYUNDAI MOTOR CO. (005380), South Korea’s largest automaker, is considering a benchmark sale of five- to 5 1/2-year dollar bonds, according to two people familiar with the matter. Barclays Capital, Bank of America Merrill Lynch, Citigroup Inc., Goldman Sachs Group Inc. and Nomura Holdings Inc. are organizing meetings with investors. A benchmark sale typically means at least $500 million.

SONGA OFFSHORE SE (SONG) postponed its plans to issue $200 million of debt, but may return to the market in March with a larger offer, according to a person familiar with the transaction. In January, Songa hired Citigroup Inc. to issue seven-year bonds to repay existing debt and for general corporate purposes, it said in a statement.

HUDSON PRODUCTS HOLDINGS INC. postponed its $250 million sale of six-year notes due to market conditions, according to a person familiar with the transaction. Hudson began marketing the six-year senior secured second-lien notes on Jan. 26, according to a person familiar with the offering. It has not specified when it plans to return to the debt market to sell high-yield notes.

MONGOLIA plans to sell as much as $1.2 billion of bonds overseas later this year to fund infrastructure to support its mining industry, Finance Minister Sangajav Bayartsogt said. This is Mongolia’s first benchmark offering of dollar-denominated debt. Investment banks are advising Mongolia to issue debt with maturities of between five and 10 years, Bayartsogt said in an interview. The securities may offer a yield of between 8 percent and 11 percent, he said.

KOREA HYDRO & NUCLEAR POWER CO., a unit of state-run Korea Electric Power Corp., delayed a planned foreign-currency bond sale until after the first quarter, according to two people with direct knowledge of the matter. The Seoul-based company will meet this quarter’s needs with bonds or loans denominated in won instead, said one of the people, citing deteriorating funding conditions in foreign currencies.

BIRCH COMMUNICATIONS INC. is offering $100 million of senior secured notes due in 2015, with proceeds going toward refinancing debt, buying outstanding warrants for its common stock and general corporate purposes, including acquisitions, the Atlanta-based company said Nov. 30 in a statement. On Feb. 1, Moody’s withdrew its B3 rating assigned to the company’s notes, citing “recent indications” that Birch “will complete its note issuance under terms that are different than those that supported the rating assignment,” analysts Gerald Grnovsky and Russell Solomon wrote in a note. Birch is rated B- by S&P, the ratings company wrote Dec. 4 in a statement. “We’re currently holding discussions with interested parties and expect to finalize our offering in the near term,” Greg Corwin, director of marketing for Birch, said in a Jan. 11 telephone interview. Corwin said the status of the deal was “unchanged” in a Feb. 17 interview.

(Updated Feb. 17.)

VIETNAM SHIPBUILDING INDUSTRY GROUP, the state-owned company known as Vinashin, won government approval to sell as much as $600 million of bonds overseas to fund construction of ships. Vinashin plans to raise between $400 million and $600 million in a dollar-denominated bond sale, “hopefully” in the first quarter “and with a government guarantee,” Chief Business Officer Nguyen Quoc Anh said in a phone interview from the northern port province of Quang Ninh.

ANGOLA may begin the sale of international bonds by the end of June, Reuters reported, citing people it didn’t identify. The African country “is on course to get” its first credit rating from an international agency as it prepares to sell bonds abroad, Aguinaldo Jaime, director of state-run National Investment Agency, said Feb. 12. Angola previously sought to sell $4 billion of debt in an offering first announced in August. The deal was later postponed.

ALROSA, Russia’s diamond monopoly, may sell as much as $1 billion in foreign-currency bonds in the second half of 2010, RIA Novosti reported, citing Chief Executive Officer Fyodor Andreyev. The company is rated Ba3 by Moody’s.

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net

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

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