Beazer Homes USA Inc. (BZH), the Atlanta-based builder, is marketing debt as issuers take advantage of investor demand for the lowest-graded corporate bonds before their increased presence in the market raises default rates.
Beazer Homes plans to sell $300 million of notes due in 2018, the company said in a statement. Moody’s Investors Service ranked the notes Caa2, eight steps below investment-grade quality, the credit rater said in a report.
Companies have sold $17.3 billion of debt rated Caa1 or less by Moody’s or the equivalent CCC+ or below by Standard & Poor’s this year, according to data compiled by Bloomberg. That compares with $1.15 billion over the same span last year. Issuance of such debt will likely peak next year before defaults begin to rise as borrowers struggle to manage their new borrowings, wrote Christopher Garman, president of Garman Research LLC in Orinda, California.
“This makes 2012 a vulnerable year once the new-issue machine exhausts the healthiest candidates for new issuance and begins to suffer from past CCC issuance-generated credit failures,” Garman wrote in an April 30 note to clients.
The extra yield investors demand to own high-yield, high-risk bonds fell 4 basis points yesterday to 557 basis points, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index. Absolute yields rose to 8.3 percent from 8.29 percent, the index data show. A basis point is 0.01 percentage point.
High-yield bonds are rated below Baa3 by Moody’s and BBB-by Standard & Poor’s.
Spreads on debt rated CCC or lower narrowed 4 basis points to 874, Bank of America Merrill Lynch index data show. They have tightened 203 basis points since reaching 1,077 on Feb. 12.
Moody’s raised its rating on Beazer Homes to Caa1, one step higher than it graded the notes, citing the company’s plans to use proceeds from the sale to repay debt. The rating reflects Moody’s expectation that “cash flow performance will weaken in 2010 and be followed by an even weaker 2011, as the benefits of inventory liquidation have largely played out,” analysts led by Joseph A. Snider wrote. Beazer specializes in homes for first-and second-time purchasers.
The default rate for U.S. issuers of high-yield debt will fall to 3.1 percent at the end of this year, compared with 13 percent in 2009, according to a Moody’s report on April 7.
Investment-grade spreads widened 2 basis points to 157 basis points, according to the Bank of American Merrill Lynch U.S. Corporate Master Index. They have expanded 6 basis points since touching 151 basis points on April 21, the narrowest since October 2007.
Lennox International Inc., the maker of heating and air-conditioning systems, sold $200 million of debt due in 2017 in yesterday’s only U.S. corporate bond sale, according to data compiled by Bloomberg. That compares with $5.3 billion of investment-grade sales and $300 million of high-yield issuance a week ago, Bloomberg data show.
Following is a description of $6.55 billion of pending sales of dollar-denominated bonds in the U.S.
CHILE plans to sell $1 billion of dollar-denominated 10-year bonds, along with its debut sale of peso securities, Finance Minister Felipe Larrain said. The country will “certainly” issue the debt this year, Larrain said.
DOHA BANK QSC, Qatar’s third-largest bank, plans to sell senior notes in dollars, the lender said in a statement on the Qatari bourse, without disclosing the size of the offering.
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., the South African state-owned transportation company, plans to sell U.S. dollar-denominated debt in a benchmark offering, according to a person familiar with the transaction. Transnet said in February that it planned to sell $2 billion of international debt to help fund infrastructure. Barclays Capital and Goldman Sachs Group Inc. are joint bookrunners for the offering, said the person, who declined to be identified because terms aren’t set.
INTERNATIONAL CONTAINER TERMINAL SERVICES INC. (ICT), the Philippines’ largest port operator, plans to sell as much as $200 million of 10-year bonds, according to a person familiar with the matter. The company said in a regulatory filing it will add the notes to the $250 million of 7.375 percent bonds it sold in March. The filing didn’t disclose the planned size.
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 plans to 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.
OMNICARE INC. (OCR), the provider of pharmacy services for U.S. nursing homes, plans to sell $300 million of bonds, the company said. Proceeds from the sale of the senior subordinated notes will be used to buy back $225 million of debt due in 2013 and for general corporate purposes, including repurchasing its common stock, it said.
BEAZER HOMES USA INC. plans to sell $300 million of notes due in 2018, according to a statement. Proceeds from the sale of senior unsecured notes, along with offerings of common stock and tangible equity units, will be used to repay debt and for general corporate purposes, the company said. Moody’s rated the notes Caa2.
KRATOS DEFENSE & SECURITY SOLUTIONS INC. (KTOS) may sell $200 million of seven-year notes, according to a person familiar with the offering. Proceeds from the sale may be used to pay for the acquisition of Gichner Holdings Inc. and for general corporate purposes, said the person, who declined to be identified because terms aren’t set.
MCE FINANCE LTD., (MPEL) a unit of Melco Crown Entertainment Ltd., plans to sell $600 million of senior notes in an international offering, according to a company statement.
ONCURE HOLDINGS INC., the manager of radiation oncology treatment centers for cancer patients, plans to sell $210 million of seven-year senior unsecured notes, according to a person familiar with the transaction, who declined to be identified because terms aren’t set. Proceeds will be used to refinance existing debt and for general corporate purposes, the person said. OnCure was acquired by Genstar Capital LLC in 2006, according to Bloomberg data.
HILLMAN COS. plans to sell $150 million of senior unsecured notes in connection with Oak Hill Capital Partners’ acquisition of the company, according to a statement. Oak Hill is acquiring the company from Code Hennessy & Simmons LLC, Ontario Teachers’ Pension Plan and members of company management, Hillman said.
LANTHEUS MEDICAL IMAGING INC. plans to sell $225 million of 7-year senior notes, according to a person familiar with the offering. Proceeds will be used to refinance the company’s credit facilities and to repurchase a portion of its outstanding preferred stock, said the person, who declined to be identified because terms aren’t set.
AMERICOLD REALTY TRUST (ACRE), 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.
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.
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.
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 additional 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 1/2 years, will be sold in a private placement, said the person familiar with the transaction. The company, which initially planned to sell the debt in a 144A transaction, 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.
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.
Offerings in Pipeline
BANCO CRUZEIRO DO SUL SA plans to sell 10-year U.S. dollar-denominated bonds, according to a person familiar with the transaction. The debt may be rated Ba2 by Moody’s Investors Service, said the person, who declined to be identified because terms aren’t set.
CHINA ORIENTAL GROUP CO. plans to sell senior notes to provide working capital and the possibly to finance the purchase of steel mills and iron ore assets in China. Deutsche Bank AG will manage the sale with ING Groep NV, according to a statement to the Hong Kong stock exchange.
DSW HOLDINGS INC., a unit of DS Waters Enterprises LP, postponed a $475 million sale of senior secured notes due in 2017, according to a person familiar with the transaction, who declined to be identified because the marketing is private.
OAO SBERBANK hired DZ Bank AG, JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc to organize meetings with bond investors, according to a banker involved in the transaction.
TPG CAPITAL is planning to sell high-yield bonds to back its purchase of American Tire Distributors Holdings Inc., according to people familiar with the financing. Bank of America Corp. is leading both the asset-based loan and the bond offering, said the people, who declined to be identified because the discussions are private.
INEOS GROUP HOLDINGS PLC, the world’s third-largest chemicals company, said it’s raising 700 million euros ($927 million) from high-yield bonds to refinance some of its senior debt. The five-year senior-secured notes will be issued in euros and dollars though finance unit Ineos Finance Plc, the Lyndhurst, England-based company said in a statement.
RENHE COMMERCIAL HOLDINGS CO. (1387), a developer of underground shopping malls in China, plans to sell bonds denominated in U.S. dollars, according to a person familiar with the offering. The Harbin, China-based company hired Bank of America Corp., Bank of China Ltd., JPMorgan Chase & Co. and UBS AG to manage the sale, according to a filing to the Hong Kong stock exchange.
FANTASIA HOLDINGS GROUP CO. (1777) plans to sell bonds denominated in U.S. dollars, according to a person familiar with the matter. The Shenzhen, China-based property developer hired Bank of America Corp., Citigroup Inc. and UBS AG to manage the sale, the person said.
BANK FOR INVESTMENT & DEVELOPMENT OF VIETNAM received approval from the central bank to issue 7 trillion dong ($369 million) of notes and another 3 trillion dong ($158 million) worth of dollar-denominated notes in 2010, according to a statement on State Bank of Vietnam’s Web site.
METINVEST HOLDING LLC, Ukraine’s largest steelmaker, plans to sell dollar-denominated bonds in its first offering of international debt, according to a person with knowledge of the transaction. The Donetsk-based company controlled by Ukrainian billionaire Rinat Akhmetov appointed BNP Paribas SA, Credit Suisse Group AG, ING Groep NV, Royal Bank of Scotland Group Plc and VTB Capital to organize meetings with potential investors, the banker said.
BOLIVIA plans its first international bond sale in more than 70 years as early as the end of 2011, Finance Minister Luis Arce said. He didn’t disclose the size of the offering.
GLORIOUS PROPERTY HOLDINGS LTD. (845) postponed its first sale of dollar-denominated bonds, citing unfavorable market conditions. The postponement was disclosed in an e-mailed statement by an external spokeswoman for the Hong Kong-based bank. Glorious Property had planned 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.
FIRSTRAND LTD. (FSR), South Africa’s second-largest banking group, said it postponed a planned sale of dollar bonds because of volatile market conditions. The sale may now take place later this year, Andries du Toit, group treasurer at FirstRand in Johannesburg, said in an interview.
AXIATA GROUP BHD. (AXIATA), 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.
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.
PTT PRODUCTION & EXPLORATION PCL (PTTEP), 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. (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 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.
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 five-year dollar bonds in May “at the earliest” and yen-denominated debt by the end of the year, Deputy Finance Minister Dominik Radziwill said. The country is rated A2 at Moody’s and A- at S&P and Fitch Ratings.
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 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.
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