Diamond Resorts Plans Debt Sale as Junk Offerings Surge: New Issue Alert

Diamond Resorts Corp., the time- share company with destinations in North America, Europe and the Caribbean, is marketing high-yield, high-risk debt as sales of the securities jumped to the most since March.

The company plans to sell $425 million of eight-year notes as soon as today, according to a person familiar with the transaction, who declined to be identified because terms aren’t set.

Corporations sold $4.85 billion of high-yield, high-risk debt in dollars yesterday, the most since March 10, when issuance was $5.45 billion, according to data compiled by Bloomberg. Chesapeake Energy Corp., the second-biggest U.S. natural-gas producer behind ConocoPhillips, sold $2 billion of debt yesterday in the biggest junk offering since March 26, Bloomberg data show.

“As the markets have continued to rally and spreads have tightened, I think issuers are again taking advantage of a pretty hot market, a pretty liquid market,” Sabur Moini, who manages $1.7 billion of high-yield debt at Payden & Rygel in Los Angeles, said in a telephone interview. “There’s speculation you could have $12 to $15 billion of new high-yield issuance this week.”

Junk debt sales rose to $6.05 billion last week, a 5.3 percent increase from the prior period and the most since the five days ended April 30, according to data compiled by Bloomberg. Companies sold $9.58 billion of junk-rated debt in that week, Bloomberg data show.

Spreads Narrow

The busiest week for speculative-trade issuance this year was the five days ended March 26, when companies sold $12.4 billion of bonds, the data show. High-yield, or junk, bonds are rated below Baa3 by Moody’s Investors Service and BBB- by S&P. A basis point is 0.01 percentage point.

The extra yield investors demand to own junk debt fell 3 basis points to 654 basis points, according to Bank of America Merrill Lynch index data, down from the 2010 high of 727 basis points on June 11. Absolute yields fell 2 basis points to 8.43 percent, the lowest since May 4, the index data show.

“Deals are typically oversubscribed and are generally trading up in the aftermarket,” Moini said of high-yield, high- risk new issues. “Both new issuers and existing issuers like Chesapeake, for instance, are taking advantage of the environment to refinance debt, to extend their maturities.”

Chesapeake Energy boosted its offering of eight- and 10- year notes from a previously marketed $1.6 billion, according to data compiled by Bloomberg and a person familiar with the transaction who asked not to be identified citing lack of authorization to publicly discuss the matter. The issue was the biggest sale of high-yield, high-risk debt since Frontier Communications Corp., the phone company serving rural U.S. markets, sold $3.2 billion of junk bonds on March 26, Bloomberg data show.

Tender Offer

Proceeds will be used to finance a tender offer for Chesapeake Energy’s 7 percent notes due in 2014, 6.625 percent notes due in 2016, and 6.25 percent notes due in 2018 and for general corporate purposes, according to a company statement distributed by Business Wire.

Anadarko Petroleum Corp., the oil company that owns a stake in BP Plc’s damaged Gulf of Mexico well, sold $2 billion of debt yesterday in a split-rated offering that was boosted from $1.5 billion, according to Bloomberg data and a person familiar with the transaction. The Woodlands, Texas-based company’s seven-year notes are rated BBB-, or investment-grade, by S&P and Ba1, or junk, by Moody’s, Bloomberg data show.

Developers Diversified Realty Corp. also sold split-rated debt, offering $300 million of 10-year notes, the data show.

WellPoint, Toyota

WellPoint Inc., the largest U.S. health insurer by enrollment, and Toyota Motor Credit Corp., the U.S. finance arm of the world’s largest automaker, helped lead $6.82 billion of investment-grade issuance, Bloomberg data show.

WellPoint sold $1 billion of 10- and 30-year bonds, and Toyota Motor Credit issued $1 billion of senior unsecured three- year notes, Bloomberg data show.

Overall issuance was $11.7 billion yesterday, with at least five companies boosting their offerings, the data show. That compares with $11.9 billion of sales last week on Aug. 2.

Investment-grade spreads fell 1 basis point to 186 basis points, while yields of 3.95 percent remained near the lowest since June 2003, according to the Bank of America Merrill Lynch U.S. Corporate Master Index.

Diamond Resorts, based in Las Vegas, may pay a yield of 11.75 percent to 12 percent on its notes, the person familiar with the sale said. Moody’s rated the debt B3, according to an Aug. 6 note from the ratings company.

Following is a description of at least $8.61 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.

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.

STERICYCLE INC. plans to issue $175 million of seven-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.

Split-Rated

INTERNATIONAL LEASE FINANCE CORP. plans to sell $2.5 billion of senior secured debt in three parts as the plane- leasing business of American International Group Inc. seeks to repay a portion of outstanding loans from the insurer. The Los Angeles-based unit will offer up to $900 million of debt due 2014, $800 million of notes due 2016, and $800 million of debt due 2018, ILFC said in a statement distributed by Business Wire. The debt may be rated Ba3 by Moody’s Investors Service and BBB- by Standard & Poor’s, said a person familiar with the transaction, who declined to be identified because terms aren’t set.

High Yield

CHEMTURA CORP., the plastic-additives maker, plans to sell $450 million of unsecured senior notes due 2018 as part of its exit from bankruptcy, the company said in a statement distributed by Business Wire. Chemtura, based in Middlebury, Connecticut, also plans to arrange a senior term loan facility of $300 million and enter into a $275 million senior asset-based revolving credit facility for working capital and general corporate purposes, according to the statement.

PETROQUEST ENERGY INC., an oil and gas explorer operating on the U.S. Gulf Coast, plans to sell $150 million of senior notes due in 2017, the company said in a statement distributed by PR Newswire. Proceeds will be used to fund a tender offer and consent solicitation for the company’s existing 10.375 percent senior notes due 2012, according to the statement.

NEW ENTERPRISE STONE & LIME CO., the miner and producer of materials used for residential driveways, commercial parking lots, government highways and railroads in the U.S., plans $250 million of eight-year notes, according to a person familiar with the transaction. Proceeds will be used to repay debt, said the person, who declined to be identified because terms aren’t set.

TARGA RESOURCES PARTNERS LP, the U.S. pipeline partnership that sold units to the public in 2007, plans to sell $250 million of senior unsecured notes due in 2018, according to a statement distributed by Globe Newswire. Proceeds will be used to reduce borrowings under a senior secured credit facility and for general partnership purposes, including redeeming or repurchasing some outstanding notes, working capital and acquisitions, according to the statement.

TEMBEC INDUSTRIES, a unit of the Canadian forest-products company Tembec Inc., plans to sell $250 million of senior secured eight-year notes, according to a person familiar with the transaction, who declined to be identified because terms aren’t set.

VENEZUELA plans to sell $3 billion of dollar-denominated bonds maturing in 2022, the Finance Ministry said. The bonds will pay an interest rate of 12.75 percent, the ministry said on its website. Credit Suisse Group AG and Deutsche Bank AG will manage the offering. Venezuela will sell half of the bonds to large companies registered with the Foreign Exchange Board, known as Cadivi, and the other half to individual investors and small companies, the ministry said.

MULTIPLAN INC. may sell $675 million of eight-year notes to help pay for its acquisition by BC Partners Ltd. and Silver Lake, according to a person familiar with the transaction, who declined to be identified because terms aren’t set.

EXIDE TECHNOLOGIES, the maker of auto batteries, may sell $675 million of debt in a two-part offering, according to a person familiar with the transaction. Proceeds from the five- and seven-year senior secured notes will be used to repay debt and for working capital and general corporate purposes, according to the statement. Standard & Poor’s assigned the proposed notes a B rating.

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 five- year or seven-year maturities, the person said, asking not to be identified as details are private. The notes are rated B+ by Standard & Poor’s.

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.

ROCK HOLDINGS INC. may sell $300 million of five-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.

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

KCA DEUTAG DRILLING GROUP LTD., a unit of private-equity investor First Reserve Corp., postponed a planned sale of $500 million of eight-year debt, according to Alex Christou, an Aberdeen, Scotland-based spokesman for the oil-services company., citing “market conditions.” The company planned to issue the notes through Turbo Beta Plc. The notes may be rated CCC by S&P and Caa2 by Moody’s, according to a statement on the company’s website.

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.

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 reporters on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net.

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