GFI Plans Sale as High-Grade Yields at Lowest in 23 Years: New Issue Alert

GFI Group Inc., which matches securities and derivatives trades between banks, may sell notes as the lowest interest rates on investment-grade debt in at least 23 years allow companies to pare debt payments.

GFI plans to sell $250 million of 10-year notes to repay debt and help pay for its acquisition of Kyte Group Ltd. and Kyte Asset Management, according to a statement by Standard & Poor’s.

Average yields on investment-grade corporate bonds are plunging, allowing companies including Johnson & Johnson, International Business Machines Corp. and McDonald’s Corp. to sell debt at the lowest interest rates on record. Investment- grade borrowers may save 5 percent of their annual interest costs, a “small number” given yearly payments of $225 billion, wrote JPMorgan Chase & CO. analysts led by Eric Beinstein.

“This amount is not insignificant, but less than one might expect given the sharp drop in new-issue coupons,” Beinstein wrote in an Aug. 13 note to clients. “The beneficial effect on corporate interest expense of these low coupons is very limited in the near term.”

Companies could use access to the low rates to boost investment, either expanding their own operations or through acquisitions. “It will be interesting to see whether capex and M&A trends increase after the most recent fall in borrowing costs,” Beinstein wrote.

Falling Yields

The extra yield investors demand to own investment-grade corporate debt instead of Treasuries was unchanged at 190 basis points yesterday, according to Bank of America Merrill Lynch index data. Absolute yields on the debt rose fell to 3.80 percent, the lowest since the daily index began in 1986, from 3.89 percent on Aug. 13, the data show.

Moody’s Corp., whose founder John Moody invented credit ratings in 1909, sold $500 million of 10-year notes and Santa Ana, California-based Ingram Micro Inc. issued $300 million of seven-year debt in yesterday’s investment-grade U.S. corporate bond sales, according to data compiled by Bloomberg.

GFI’s notes were rated BBB-, the lowest investment grade, by S&P, the credit rater said in its statement yesterday. New York-based GFI had $105 million outstanding under a credit agreement maturing in 2011 and $60 million of 8.17 percent notes due in 2013 as of June 30, according to an Aug. 9 filing with the Securities and Exchange Commission.

Spreads on high-yield, high-risk bonds rose 4 basis points to 691 basis points, according to Bank of America Merrill Lynch index data. Yields on the debt fell 4 basis points to 8.57 percent, the data show. High-yield debt is rated below Baa3 by Moody’s and BBB- by S&P. A basis point is 0.01 percentage point.

Toys “R” Us Inc. sold $350 million of six-year notes in the only junk bond sale, Bloomberg data show.

Following is a description of at least $4.28 billion of pending sales of dollar-denominated bonds in the U.S.

Investment Grade

GFI GROUP INC., which matches securities and derivatives trades between banks, plans to sell $250 million of notes due in 2020, according to a ratings statement by Standard & Poor’s. Proceeds will be used to repay $165 million of debt and help finance the acquisition of Kyte Group Ltd. and Kyte Capital Management, S&P said. S&P rated the issue BBB-.

AON CORP., the world’s largest insurance brokerage, plans to sell up to $1.5 billion of senior notes to help finance its acquisition of Hewitt Associates Inc., the Chicago-based company said in an Aug. 16 regulatory filing. Aon may also use proceeds to refinance Hewitt’s existing debt and to pay related expenses, it said in the filing.

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 in dollars and the local riyal currency, the CEO said in a July 25 interview.

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

MUELLER WATER PRODUCTS INC., the maker of pipes and valves for water distribution and treatment centers, plans to sell $225 million of senior notes due in 2020. The Atlanta-based company plans to use proceeds to help repay outstanding amounts under its existing credit facilities and related expenses, Mueller Water said today in a statement distributed by Business Wire.

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.

High Yield

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

JSW STEEL LTD, India’s third-largest steelmaker, plans to dollar bonds for the first time in three years and as rupee- denominated finance costs rise. JSW has applied for credit ratings beforea possible offshore bond sale to help build a 200 billion rupee ($4.3 billion) steel and power plant in West Bengal, Chief Financial Officer Seshagiri Rao said.

ARGENTINA may sell $1 billion of bonds due in 2017 by the end of August, El Cronista newspaper reported, without saying how it obtained the information. The government is also planning to offer an exchange for dollar bonds due in 2011 and 2012, the Buenos Aires-based publication said.

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. 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.

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 hired HSBC, Bank of America Merrill Lynch and Royal Bank of Scotland to sell $1 billion of bonds, the Central Bank of Sri Lanka said on its website on Aug 12.

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.

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 in 2010 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 years 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: Tim Catts in New York at tcatts1@bloomberg.net; Katie Evans in New York at kevans28@bloomberg.net.

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