Thermon Industries Plans Debt as B Rated Bond Returns Lag: New Issue Alert

Thermon Industries Inc., the maker of heating systems for petroleum and chemical processing, is marketing debt as middle-graded high-yield, high-risk bonds underperform.

Thermon Industries plans to sell $300 million of eight-year notes, according to a person familiar with the transaction who declined to be identified because terms aren’t set. Standard & Poor’s assigned San Marcos, Texas-based Thermon Industries’ notes a grade of B+, it said in a report.

Corporate debt graded B by S&P has returned less this month than notes ranked BB, the highest-rated junk bonds, and riskier securities rated CCC or lower, according to Bank of America Merrill Lynch index data. Allbritton Communications Inc., Syncreon Holdings Plc and Glorious Property Holdings Ltd. are also among companies marketing such debt, according to data compiled by Bloomberg.

“Single-B-rated debt risks getting caught between chairs,” said Christopher Garman, president of Orinda, California-based Garman Research LLC. “On a spread basis and a risk basis, double-B’s look more attractive, while triple-C’s are more appealing to investors interested in capital appreciation.”

Bonds rated B by S&P have gained 1.51 percent in April, while debt graded BB has returned 1.59 percent graded and notes ranked CCC or lower have climbed 3.13 percent, Bank of America Merrill Lynch index data show.

High-Yield Spread

The extra yield investors demand to own all categories of high-yield debt instead of U.S. Treasuries rose 1 basis point to 555 basis points, according to the Bank of America Merrill Lynch High-Yield Master II Index. Absolute yields fell 3 basis points to 8.28 percent, the lowest since July 2007 as the credit crisis was beginning. A basis point is 0.01 percentage point.

High-yield debt is rated below BBB- by S&P and Baa3 by Moody’s Investors Service.

Thermon’s dependence on capital expenditures by oil and gas companies for sales contributes to a “weak business profile,” according to an April 20 report from S&P analysts led by Sarah Wyeth in New York.

“We could lower the ratings if a cyclical downturn in Thermon’s end markets resulted in fewer heat-tracing projects and weak operating performance,” Wyeth wrote. “The company’s weak business profile limits the prospect of an upgrade.”

Moody’s assigned Thermon a rating of B1, equivalent to the S&P ranking and four steps below investment grade.

Spreads on investment-grade bonds tightened to 1 basis point to 151 basis points, the lowest since October 2007, and yields fell 5 basis points to 4.40 percent, according to the Bank of America Merrill Lynch U.S. Corporate Master Index.

B-Rated Issues

Kemet Corp. sold $230 million of eight-year debt, DTEK Finance BV issued $500 million of notes due in 2015 and Cleaver- Brooks Inc. sold $185 million of six-year bonds yesterday, Bloomberg data show. Each company’s notes are rated between B+ and B- by S&P, or B1 and B3 by Moody’s.

Companies sold $9.4 billion of investment-grade debt and $3.73 billion of high-yield bonds yesterday, Bloomberg data show.

Following is a description of at least $9.58 billion of pending sales of dollar-denominated bonds in the U.S.

Investment Grade

BELGIUM plans to add $500 million to its 2.75 percent 2015 bonds, according to a banker involved in the transaction. Deutsche Bank AG and Goldman Sachs Group Inc. are managing the sale, the banker said.

PREMIER AIRCRAFT LEASING 1 LTD. may sell $188.2 million of secured notes due in 2022, according to a person familiar with the transaction. The offering is sponsored by General Electric Capital Corp.’s aircraft leasing unit, GE Capital Aviation Funding, and guaranteed by the Export-Import Bank of the United States.

DOHA BANK QSC, Qatar’s third-largest bank, plans to sell senior notes in U.S. dollars, the lender said in a statement on the Qatari bourse, without disclosing the size of the offering.

SWEDEN plans to sell $1.4 billion of bonds due 2011, according to people with knowledge of the sale. Goldman Sachs Group Inc. and Nordea are managing the transaction, the people said.

EUROPEAN INVESTMENT BANK plans to sell $3 billion of three- year debt, according to a banker involved in the deal. The notes may be priced to yield about 5 basis points more than the benchmark mid-swap rate. Barclays Capital, Goldman Sachs Group Inc. and RBC Capital Markets are managing the issue.

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

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

AMERICAN RENAL HOLDINGS INC. may sell $225 million of eight-year notes, according to a person familiar with the transaction, who declined to be identified because terms aren’t set.

COOPER-STANDARD AUTOMOTIVE INC. may sell $450 million of eight-year notes, according to a person familiar with the offering. Deutsche Bank AG, Bank of America Corp., Barclays Plc, and UBS AG are managing the sale, said the person, who declined to be identified because terms aren’t set.

DSW HOLDINGS INC., a unit of DS Waters Enterprises LP, plans to sell $475 million of seven-year senior secured notes, according to a person familiar with the transaction. Proceeds will be used to help repay outstanding debt, said the person, who declined to be identified because terms aren’t set. Morgan Stanley, JPMorgan Chase & Co. and Barclays Plc are managing the sale, the person said.

EGYPT plans to sell $1 billion of 10-year bonds that may be priced to yield about 5.875 percent, according to a banker involved in the transaction. The country is also selling $500 million of 30-year bonds that may be priced to yield about 7 percent, the banker said.

THERMON INDUSTRIES INC., the maker of heat tracing systems, plans a $200 million of 7-year senior secured notes, according to a person familiar with the transaction. Proceeds will be used to partly fund the acquisition of the company and to repay certain existing indebtedness, the person said. Moody’s rates the debt B1 and S&P ranks it B+.

AMERICOLD REALTY TRUST, the operator of temperature- controlled warehouses owned by billionaire Ron Burkle’s Yucaipa Cos., plans to sell $300 million of 10-year notes, according to a person familiar with the transaction. Proceeds from the sale of senior secured debt will be used to purchase assets from Versacold International Corp., said the person, who declined to be identified because terms aren’t set. Yucaipa owns 49 percent of Versacold with an option to purchase the rest, according to an April 15 filing with the Securities and Exchange Commission. Moody’s ranks the debt Ba3.

PENN VIRGINIA RESOURCE PARTNERS LP plans to sell $300 million of senior notes due in 2018, according to a statement distributed by Business Wire. Bank of America Merrill Lynch, JPMorgan Chase & Co., Royal Bank of Canada and Wells Fargo & Co. are underwriting the offering, the company said. Moody’s rates the notes B2 and S&P ranks them B

REYNOLDS GROUP HOLDINGS LTD., the maker of Reynolds Wrap plastic wrap, said it plans to acquire the Evergreen Packaging group of companies and a New Zealand paper mill from Carter Holt Harvey Ltd. Reynolds Group plans to borrow $1.75 billion to pay for the acquisition of Evergreen and the Whakatane Mill, it said in a statement distributed by Business Wire. The Auckland, New Zealand-based company plans to sell $1 billion of bonds and will seek $750 million of bank loans, said a person familiar with the offering who declined to be identified because terms aren’t set. Moody’s rates the debt B2 and S&P ranks it B+.

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. Moody’s assigned Renaissance an issuer rating of B2 and S&P affirmed its B ranking on the company.

PENSON WORLDWIDE INC. plans to sell $200 million of senior secured second-lien debt, the company said in a statement distributed by Business Wire. The notes due in due in 2017 may be sold as soon as April 28, according to a person familiar with the transaction. The provider of services to securities brokers will use proceeds to repay about $100 million of existing debt and to bolster capital of regulated subsidiaries, the company said.

PHILLIPS-VAN HEUSEN CORP. plans to sell $525 million of senior notes due in 2020. Proceeds will be used to retire its $150 million of outstanding 7.25 percent notes due in 2011 and $150 million of outstanding 8.125 percent notes due in 2013, and to fund its acquisition of Tommy Hilfiger, the company said in a statement distributed by Business Wire.

BANCO FIBRA SA plans to sell $150 million of three-year, dollar-denominated notes, according to a person familiar with the offering. The Sao Paulo-based bank hired Banco Espirito Santo SA, BNP Paribas and HSBC Holdings Plc to arrange the sale of senior unsecured notes, said the person, who declined to be identified because terms aren’t set.

LIVE NATION ENTERTAINMENT INC. plans to offer $250 million of senior notes, according to a company statement distributed by PR Newswire.

SYNCREON GLOBAL, a subsidiary of Auburn Hills, Michigan- based Syncreon Holdings Plc, plans to sell $300 million of eight-year senior notes, according to a person familiar with the transaction. Proceeds will be used to repay existing debt, the person said. Syncreon, a logistics and supply chain services provider, was formed by Walsh Western International’s acquisition of TDS Logistics in 2007.

(Added April 20. See {www.syncreon.com})

ALLBRITTON COMMUNICATIONS CO. plans to sell $455 million of eight-year notes in a private placement, the company said in an e-mailed statement. Proceeds from the sale will be used to buy back the broadcast company’s 7.75 percent notes maturing in 2012, the company said.

BANCO INDUSTRIAL E COMERCIAL SA, the Sao Paulo-based lender known as BicBanco, may pay a yield of about 8.75 percent on its offering of 10-year dollar bonds, according to a person familiar with the offering. HSBC Holdings Plc, JPMorgan Chase & Co. and Standard Chartered Plc are underwriting the sale of unsecured subordinated notes, said the person, who declined to be identified because terms aren’t set.

GLORIOUS PROPERTY HOLDINGS LTD. plans to sell five-year bonds denominated in U.S. dollars, according to a person familiar with the matter who declined to be identified before a public announcement. Glorious said in a filing that it had hired Deutsche Bank AG, JPMorgan Chase & Co. and Standard Chartered Bank to manage the offering.

EXPORT-IMPORT BANK OF UKRAINE plans to sell $500 million of five-year bonds that may be priced to yield about 8.5 percent, according to people with knowledge of the sale. Citigroup Inc. and Credit Suisse Group AG are managing the sale of the notes, which will be issued through Biz Finance Plc.

ESSAR STEEL HOLDINGS LTD. plans to raise at least $750 million through a sale of bonds denominated in U.S. dollars, according to a person familiar with the matter. Essar said in an e-mailed statement that it plans to issue senior unsecured notes due 2017. The company said it intends to use proceeds to refinance existing debt and for potential acquisitions.

TELCORDIA TECHNOLOGIES INC. may sell $300 million of second-lien notes to refinance debt, according to two people familiar with the transactions who declined to be identified because the details aren’t set. The Piscataway, New Jersey-based developer of communications software and services said in an April 9 statement that it’s weighing a new credit agreement and note sale to purchase $809.7 million of bonds. Graham Ackerman, a company spokesman, said April 13, that the company was seeking a $500 million term loan and $80 million revolving line of credit.

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.

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 country, which hired Barclays Plc and Citigroup Inc. to arrange the offering, will begin meeting with bond investors April 23, said the person, who declined to be identified because terms aren’t set.

Offerings in Pipeline

FIRSTRAND LTD., South Africa’s second-largest banking group, said it postponed a planned sale of dollar bonds because a case filed against Goldman Sachs Group Inc. by the Securities & Exchange Commission in the U.S. and a volcanic ash cloud that disrupted global air travel made market conditions too volatile. The sale may now take place later this year, Andries du Toit, group treasurer at FirstRand in Johannesburg, said in an interview.

RUSSIA plans to sell $4 billion of bonds in two parts, according to a banker involved in the transaction. Russia will sell at least $2 billion of five-year notes, and at least $2 billion of 10-year bonds, the banker said.

AXIATA GROUP BHD., Southeast Asia’s second-largest mobile- phone operator, plans to raise $300 million to strengthen its capital through the first dollar bond sale by a Malaysian company in 2010. Goldman Sachs Group Inc. and Morgan Stanley will help the Kuala Lumpur-based company issue 10-year, fixed- rate notes, Axiata said in a stock exchange filing.

KAZMUNAIGAZ NATIONAL CO., a Kazakh state-owned energy company, has hired Citigroup Inc., Credit Suisse Group AG and Royal Bank of Scotland Group Plc to arrange a sale of dollar bonds, according to a banker with knowledge of the transaction. The bonds are expected to be sold following investor meetings in Europe and the U.S., the banker said.

KOREA FINANCE CORP. plans to sell $100 million to $200 million of foreign-currency bonds next month in its first overseas debt sale since October, Edaily reported, without citing anyone. The state-run agency also plans to sell $1 billion of global bonds in the U.S. in the second half of the year, the Korean-language online newspaper said.

NATIONAL AGRICULTURAL COOPERATIVE FEDERATION of South Korea, also known as Nonghyup, plans to raise as much as $500 million from foreign-currency bonds to repay debt, according to a person with direct knowledge of the matter. The federation, which provides credit and banking services to farmers, plans to sell notes to help refinance about $600 million of bonds and loans, said the person, who asked not to be named as the plan is private. The bonds will probably be denominated in dollars, they said.

YANLORD LAND GROUP LTD., a Singapore-based developer of residential projects in China, hired HSBC Holdings Plc and Royal Bank of Scotland Group Plc to help it sell dollar bonds.

PTT PRODUCTION & EXPLORATION PCL, the Thai oil explorer, hired Credit Suisse Group AG and Royal Bank of Scotland Group Plc to help it sell global bonds, according to two people familiar with the matter who asked not to be identified as the plan is private.

UNION BANK OF INDIA LTD. 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 sell between $750 million and $1.5 billion of dollar-denominated bonds “anytime” to help refinance maturing debt thru next year, Vice Chairman Jose Ibazeta said. The company manages the finances of state utility National Power Corp.

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 may sell another $500 million of bonds aimed at overseas Filipinos in the second half of 2010, according to one of the arrangers for the transaction.

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.

SONGA OFFSHORE SE 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.

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 “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: Craig Trudell in New York at ctrudell1@bloomberg.net; Tian Huang in New York at thuang57@bloomberg.net.

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