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PHH Plans Junk Bonds in Fastest Start to Week Since March: New Issue Alert

PHH Corp., the mortgage and auto- leasing company, is marketing high-risk, high-yield debt as corporate bond sales have the busiest start to a week since March.

The company plans to sell $250 million of senior notes due in 2016. Proceeds will be used to help repay outstanding debt, Mount Laurel, New Jersey-based PHH said in an Aug. 3 statement distributed by Business Wire.

Corporate bond sales have totaled $26.6 billion in the past three days, the fastest start to a week since the period ended March 10, when they were $32 billion, according to data compiled by Bloomberg. Companies are selling debt to take advantage of historically low borrowing rates and investor demand for the securities, said Mitchell Stapley chief fixed-income officer for Fifth Third Asset Management.

“There’s a tremendous appetite out there for the deals,” said Stapley, who helps oversee $13 billion of fixed-income investments in Grand Rapids, Michigan. “The absolute rate is compelling. Even if spreads were to widen out, the level of Treasury yields is going to be such that even if rates went up 50 basis points, you’re still going to be at historically cheap levels from a treasurer’s perspective to be issuing debt.”

The extra yield investors demand to own investment-grade bonds instead of government debt fell 1 basis point to 187 basis points, according to Bank of America Merrill Lynch index data. Yields rose 4 basis points to 4.043 percent, near the six-year low of 4.001 percent last reached on Aug. 3. A basis point is 0.01 percentage point.

Treasury Yields

Yields on two-year Treasury debt tumbled to the lowest on record earlier this week while the five-year note’s yield fell to the least in more than a year. The declines followed comments from Federal Reserve officials that signaled they will probably not provide new stimulus at their Aug. 10 meeting.

Intesa Sanpaolo SpA, Italy’s second-biggest lender, led debt sales yesterday, issuing $1 billion of 3.625 percent, 5- year notes at a 205 basis-point spread to U.S. Treasuries, Bloomberg data show. Intesa has the most debt coming due this year among banks in Portugal, Italy, Spain, Greece and Ireland, at $27.4 billion, Bloomberg data show.

The bank’s sale may spur further offerings from European banks, according to Timothy Cox, an executive director of debt capital markets at Mizuho Securities USA in New York.

‘Grease the Skids’

“I’m cautiously optimistic that this could be an excellent bank to grease the skids for other names to come to market,” Cox said in a telephone interview. “It bodes well for all the European names that have been under the cloud of the EU and what’s going on in Europe.”

Investment-grade corporate bond sales were $4.1 billion yesterday and junk issues were $2.2 billion, Bloomberg data show. Junk, or high-yield, high-risk, debt is rated below Baa3 by Moody’s and lower than BBB- by S&P. A basis point is 0.01 percentage point.

Marina District Finance Co., owner of the Borgata Hotel Casino & Spa in Atlantic City, New Jersey, and Continental Airlines Inc. led junk sales, issuing $800 million of debt each, the data show.

Spreads on high-yield, high-risk debt narrowed 6 basis points to 649 basis points, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index. Absolute yields fell 2 basis points to 8.47 percent, the lowest since May 5.

PHH plans to use proceeds from its debt sale to repay a portion of the amounts outstanding under its “amended and restated competitive advance” and revolving credit line, according to the Aug. 3 statement.

August Sales

Debt sales so far this month are 47 percent of the August average of $57.1 billion since 1999, Bloomberg data show.

“You’ve really got people that are out there and they’re saying, I think I’ll take the shot, I can issue it, it’s not going to cost me a lot of money and it just makes sense,” Stapley said in a telephone interview.

Following is a description of at least $6.76 billion of pending sales of dollar-denominated bonds in the U.S.

Investment Grade

DOHA BANK QSC, Qatar’s third-largest bank, may raise as much as $1 billion from bond sales, its chief executive officer said. The money is likely to be raised for five years and is meant to “fix the maturity mismatch” on the bank’s balance sheet, Raghavan Seetharaman said in a June 16 telephone interview from Doha. The bank will sell the bonds by the end of this year in both dollars and the local riyal currency, the CEO said in a July 25 interview. The lender said in April that it planned to sell senior notes in dollars 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. S&P assigned the notes a grade of BBB- in a March 24 report.

Not Rated

COTT CORP., the largest North American private-label soda maker, plans to sell $375 million of notes due in 2018, it said in a statement distributed by Marketwire. The debt, which will be issued through its Cott Beverages Inc. unit, will help fund the planned purchase of nearly all assets and liabilities of Cliffstar Corp., according to the statement.

OLAM INTERNATIONAL LTD., a Singapore-based commodity trader, plans a benchmark sale of 10-year dollar bonds, according to a person familiar with the matter. The company hired HSBC Holdings Plc and JPMorgan Chase & Co. to manage the sale, it said in a statement to the Singapore stock exchange earlier today.

DIAMOND RESORTS CORP. may sell $425 million of eight-year notes, according to a person familiar with the transaction. Credit Suisse Group AG, Bank of America Corp. and Guggenheim Securities LLC are managing the sale, said the person, who declined to be identified because terms aren’t set.

OAO GAZPROMBANK, the lending unit of Russia’s gas export monopoly, is selling $500 million of bonds due December 2014 that may be priced to yield 6.25 percent to 6.375 percent, according to two people with knowledge of the sale. Barclays Capital, Royal Bank of Scotland Group Plc and UBS AG are managing the sale, which will be issued through GPB Eurobond Finance Plc.

STERICYCLE INC. plans to issue $175 million of 7-year, 3.89 percent notes and $225 million of 10-year, 4.47 percent debt after receiving informal commitments from 22 institutional investors to buy the securities, it said in a statement distributed by Business Wire.

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. The province hired Citigroup Inc. and UBS AG to arrange an overseas dollar bond sale, said a person familiar with the transaction who declined to be identified because terms aren’t set.

High Yield

KWG PROPERTY HOLDINGS LTD., a Hong Kong-based developer, plans to meet credit investors in Hong Kong, Singapore, London, New York and Boston, according to a person familiar with the matter. The company is planning to sell dollar bonds with either 5-year or 7-year maturities, the person said, asking not to be identified as details are private. The notes are rated B+ by Standard & Poor’s.

FERRO CORP. plans to sell $250 million of eight-year notes to refinance debt. Proceeds will be used to repurchase convertible securities and partly repay a term loan, the Cleveland-based company said in a statement distributed by Business Wire. The notes may yield about 8 percent, according to a person familiar with the offering who declined to be identified because terms aren’t set.

GENTIVA HEALTH SERVICES INC., the U.S. home-nursing company that is buying Odyssey HealthCare Inc., plans to sell $305 million of eight-year notes, the Atlanta-based company said in a May 24 regulatory filing. Proceeds will be used to help fund the takeover, according to the filing. Standard & Poor’s assigned the unsecured notes a B-credit rating on June 29. Moody’s Investors Service rated the notes a grade of B2 and ranked $925 million of loans three steps higher at Ba2, it said in a report.

PHH CORP., the mortgage and auto-leasing company, plans to sell $250 million of senior notes due in 2016. Proceeds will be used to help repay a portion of amounts outstanding under the company’s “amended and restated competitive advance” and a revolving credit line, the Mount Laurel, New Jersey-based company said in a statement distributed by Business Wire.

ROCK HOLDINGS INC. may sell $300 million of 5-year senior secured notes, according to a person familiar with the transaction, who declined to be identified because the terms aren’t set. Moody’s graded the debt B3 and S&P ranked it B, one step higher.

DICK CLARK PRODUCTIONS INC., through its Dcp LLC and Dcp Corp. units, may sell $150 million of five-year notes, according to a person familiar with the offering. The senior secured notes will be used to refinance the existing senior secured credit facility and fund a distribution to the parent company, said the person, who declined to be identified because terms aren’t set.

ENERGYSOLUTIONS INC., the Salt Lake City-based nuclear services company, plans to sell $300 million of senior unsecured notes due 2018, the company said a July 28 statement distributed by Marketwire. The company has amended its credit facilities and plans to refinance them with borrowings under new loans and the offering of senior notes, the company said in a July 13 statement. Standard & Poor’s assigned the proposed debt a rating of BB- on July 15.

MULTIPLAN INC. may sell $650 million to $675 million of bonds to help pay for its acquisition by BC Partners Ltd. and Silver Lake, according to a person familiar with the transaction. The health-care cost management company also seeks a $1.3 billion term loan and a $75 million revolving line of credit, said the person, who declined to be identified because terms aren’t set.

KCA DEUTAG DRILLING GROUP LTD., a unit of private-equity investor First Reserve Corp., is planning to sell $500 million of eight-year bonds through Turbo Beta Plc, according to Alex Christou, an Aberdeen, Scotland-based spokesman for the oil- services company. Goldman Sachs Group Inc. is managing the sale with HSBC Holdings Plc, Lloyds TSB Banking Group Plc, Royal Bank of Scotland Group Plc and Natixis, a person with knowledge of the transaction said. The notes may be rated CCC by S&P and Caa2 by Moody’s, according to a statement on the company’s website.

UNIVERSAL HEALTH SERVICES INC., the operator of more than 100 U.S. medical facilities that’s buying Psychiatric Solutions Inc., cut its offering of senior unsecured notes to $250 million, according to a person familiar with the transaction. It increased the size of the term loans it’s seeking by $100 million, said the person, who declined to be identified because terms aren’t set. The King of Prussia, Pennsylvania-based company previously planned to issue $400 million of senior unsecured debt to help finance the acquisition, according to a filing with the Securities and Exchange Commission.

E-LAND FASHION CHINA HOLDINGS LTD, the Hong Kong-based apparel products provider, hired Morgan Stanley to help it sell $200 million of three-year bonds, according to a person familiar with the matter. The company plans to begin meeting with investors in Asia, Europe and the U.S. on July 19, said the person who declined to be identified because terms aren’t set. Moody’s Investors Service assigned the proposed notes a Ba2, citing growing personal consumption in China, E-Land Fashion’s moderate scale and significant business volatility. Proceeds will be used for mainly for capital expenditures and general corporate purposes, Moody’s said in the report.

Offerings in Pipeline

RURAL ELECTRIFICATION CORP., India’s state-owned lender to power projects, may sell as much as $300 million of bonds denominated in U.S. dollars, Finance Director Hari Das Khunteta said in a telephone interview. Rural Electrification plans to raise $500 million from debt sales in the period, he had said on April 16.

THE PHILIPPINES hired eight banks to help arrange the sale of 10-year bonds, which may also include five- and seven-year issues, Treasurer Roberto Tan wrote in a mobile-phone message. “There may be appetite for 10-year debt based on feedback we’re receiving from arrangers,” he said. The Philippines is also preparing to seek central bank approval for a planned sale of new dollar-denominated debt to exchange for older, shorter-dated notes, Finance Secretary Cesar Purisima said on August 2. The government will be “opportunistic” in borrowing as it aims to reduce foreign-currency risks and prevent bunching of maturities, the finance chief said.

EMPRESA NACIONAL DEL PETROLEO, Chile’s state-owned oil refiner, hired Bank of America Corp., Banco Bilbao Vizcaya Argentaria SA, BNP Paribas SA and Scotia Capital to arrange meetings with bond investors, according to a person familiar with the matter. The Santiago-based company plans to meet with investors Aug. 2 to Aug. 4, said the person, who declined to be identified because he wasn’t authorized to comment.

UKRAINE may sell bonds in the international capital markets, according to Dragon Capital, the former Soviet republic’s biggest brokerage. The government may sell $1.5 billion to $2 billion of 10-year, dollar-denominated debt with a yield of 7 percent to 7.5 percent after getting approval for a new International Monetary Fund loan and having its credit rating raised by Standard & Poor’s, said Olena Bilan, Dragon’s chief economist, at a press briefing in Kiev on July 30.

CZECH REPUBLIC plans to sell as much as $2 billion of dollar bonds to diversify from koruna and euro debt, Eduard Janota, former finance minister, said in an interview for Mlada Fronta Dnes newspaper.

POTASH CORPORATION OF SASKATCHEWAN INC., the world’s largest fertilizer company by capacity, filed a registration statement with the U.S. Securities and Exchange Commission for $2 billion of debt securities.

INDONESIA plans to name three banks to help it sell approximately $650 million of Islamic bonds in October, Dahlan Siamat, director for Islamic financing at the finance ministry, said in a telephone interview in Jakarta. The government sold its first international Islamic dollar bonds in April 2009.

CORPORACION FINANCIERA DE DESAROLLO SA Peru’s state development bank known as Cofide, plans to sell as much as $250 million of dollar-denominated bonds, according to Chief Financial Officer Carlos Linares. Linares said in an interview in Lima, that the lender is selling long-term debt as it boosts lending to local infrastructure projects. “Peru’s need for infrastructure is huge,” Linares said. “The government is trying to promote foreign investment in a long list of projects.”

SRI LANKA plans to sell dollar-denominated bonds, according to its central bank. The South Asian country’s third-ever overseas offering is likely after August, Central Bank of Sri Lanka Assistant Governor C.J.P. Siriwardena said in a telephone interview on June 30.

JORDAN plans to sell about $500 million of bonds, Finance Minister Mohammad Abu Hammour said in an interview on June 23. The sale will be denominated in U.S. dollars “as it’s a stable currency and the Jordanian dinar is pegged to it,” Abu Hammour said.

URUGUAY may sell as much as $1 billion of bonds in 2011, including $500 million of dollar-denominated debt, Carlos Steneri, director of public credit at Uruguay’s Ministry of Economy and Finance, said June 3 at a LatinFinance conference in London. The dollar-denominated bonds may have a maturity of 20 years or more, Steneri said.

MALAYSIA plans to raise about $1 billion from its first sale of conventional dollar bonds in eight years after drawing bids for five times the Islamic debt it offered, a finance ministry official said. The government may hire the same banks, including CIMB Group Holdings Bhd. and HSBC Holdings Plc, to arrange the sale by Sept. 30, said the official, who declined to be named as the discussions are private. Malaysia raised $1.25 billion from a Shariah-compliant dollar bond on May 27. Malaysia is rated A3 by Moody’s and A- by S&P.

SABIC CAPITAL, a unit of Saudi Basic Industries Corp., will sell bonds when market conditions and rates are favorable, its vice president for corporate finance Mutlaq al-Morished told al- Arabiya television in Dubai on June 16. Sabic delayed a bond sale because of unfavorable spreads, al-Morished said in a May 26 telephone interview. Sabic Capital had hired HSBC Holdings Plc, JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc to manage a benchmark-sized offering.

GHANA is considering selling its second dollar bond in 2011 to tap investor demand as the start-up of oil production boosts economic growth and narrows the budget deficit, Deputy Finance Minister Fifi Kwetey said. The government is considering a “no- deal roadshow” to gauge international investors’ appetite, Kwetey said in a May 26 interview in Abidjan. Ghana sold its first global bond in 2007, raising $750 million to help fund the construction of roads and power plants.

ANGOLA received credit ratings from Moody’s, S&P, and Fitch Ratings that put it on par with Nigeria, Lebanon and Belarus, and paved the way for a planned sale of international bonds. The southern African nation’s creditworthiness was rated at B+ by S&P and Fitch, four levels below investment grade. Moody’s assigned an equivalent ranking of B1.

EURASIAN NATURAL RESOURCES CORP., a London-based iron ore and alumina producer with operations in China and Russia, said it delayed its first dollar bond sale. The company is “postponing meetings with investors regarding a potential bond issuance under its Euro Medium Term Note program until further notice,” Charlotte Kirkham, a spokeswoman for ENRC, said in an e-mail. The company had hired Deutsche Bank AG and Morgan Stanley to manage the sale, according to a person familiar with the transaction.

CHINA ORIENTAL GROUP CO. plans to sell senior notes to provide working capital and 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.

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 of dollar- denominated notes in 2010, according to a statement on State Bank of Vietnam’s Web site.

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.

POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORP. of the Philippines may sell between $750 million and $1.5 billion of dollar-denominated bonds “anytime” to help refinance maturing debt, 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. 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 to fund mining and energy projects, according to Deputy Chief Executive Officer Nguyen Van Hai.

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

MONGOLIA plans to raise $500 million selling bonds this year and the remainder of a planned $1.2 billion program will be sold according to market conditions, Batbayar Balgan, director general of the financial and economic policy department of Mongolia, said at a forum in Ulan Bator on June 16. The government scaled back its plans for global bond sales after Europe’s debt crisis drove up borrowing costs. Investment banks are advising Mongolia to issue debt with maturities of 5 to 10 years, Bayartsogt said in a Feb. 9 interview. The securities may yield 8 percent to 11 percent, he said.

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net.

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