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Titan Plans Debt as High-Yield Bond Sales Poised to Rise: New Issue Alert
Titan International Inc., the maker of tires and wheels for off-highway vehicles, plans to sell debt as sales of high-yield, high-risk company bonds may be poised to surge.
Titan International may issue notes this month or next to repay debt, Chief Financial Officer Paul Reitz said in a telephone interview. The Quincy, Illinois-based company plans to buy back $139.9 million of notes maturing in 2012, it said in a statement distributed by Business Wire on Aug. 31.
Bank of America Merrill Lynch boosted its forecast for junk-bond issuance this year to $240 billion from $210 billion after sales of the debt climbed last month to the most since April. Signs that the economic recovery may restart and yields on the debt near the lowest this year are luring borrowers, said Eric Peiffer, managing director at KeyBanc Capital Markets.
“Issuance is going to be very, very strong over the last three-and-a-half months of the year,” said Peiffer, who is based in Cleveland. “Our sense at the beginning of the year was that it was going to be on pace with 2009, but if the rest of it plays out in a manner that many would like to see, we could be a good 20 percent above that level.”
Companies have sold $159.7 billion of speculative-grade debt in the U.S. this year, compared with a record $162.7 billion last year, according to data compiled by Bloomberg.
The extra yield investors demand to own high-yield bonds instead of Treasuries fell 12 basis points to 680 basis points, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index. Absolute yields declined 4 basis points to 8.56 percent, the index data show.
Manufacturing Expands
High-yield, high-risk debt is rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s. A basis point is 0.01 percentage point.
Manufacturing in the U.S. expanded at a faster pace than forecast in August, as the Institute for Supply Management’s factory index rose to a three-month high of 56.3 from 55.5 in July, the Tempe, Arizona-based group said today. The figure was projected to drop to 52.8, according to the median forecast in a Bloomberg News survey. Readings greater than 50 signal growth.
Titan International canceled a sale of at least $150 million of notes announced in May because of adverse market conditions, Reitz said. Moody’s assigns the company a grade of B2 and S&P ranks it B+, one step higher.
Corporate bond sales may reach $125 billion this month as finance and utility companies seek to take advantage of the lowest borrowing costs on record, according to Aladdin Capital LLC.
Weekly Issuance
Korea Development Bank sold $900 million of 5.5-year notes and Nederlandse Waterschapsbank issued $1 billion of debt due in 2015 in yesterday’s only company debt sales, Bloomberg data show. Issuance of $3.36 billion this week compares with $5.31 billion in the same period through Aug. 25.
Spreads on investment-grade corporate bonds narrowed 1 basis point to 194 basis points, according to the Bank of America Merrill Lynch U.S. Corporate Master Index. Yields fell 3 basis points to 3.87 after touching 3.74 percent, the lowest since at least 1986, on Aug. 24.
The following is a description of at least $4.25 billion of pending sales of dollar-denominated bonds in the U.S.
Investment Grade
LANDWIRTSCHAFTLICHE RENTENBANK, Germany’s development agency for agribusiness, plans to sell seven-year global notes in U.S. dollars in a benchmark offering, according to a person familiar with the transaction. Benchmark sales are typically at least $500 million.
AON CORP., the world’s largest insurance brokerage, plans to sell as much as $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 debt is likely to be 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.
Not Rated
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
TITAN INTERNATIONAL INC., the maker of tires and wheels for off-highway vehicles, plans to sell bonds in September or October and will use the proceeds to repay debt, Chief Financial Officer Paul Reitz said in a telephone interview. The Quincy, Illinois-based company plans to buy back up to $139.9 million of notes maturing in 2012, it said in a statement distributed by Business Wire. The company withdrew a proposed $150 million offering announced in May because of adverse market conditions, Reitz said.
NBTY INC., the maker of Nature’s Bounty and MET-Rx nutritional supplements, may issue $900 million of bonds in addition to seeking a $1.5 billion term loan and a $200 million revolving line of credit to help pay for its acquisition by Carlyle Group, according to a person familiar with the transaction who declined to be identified because terms aren’t set. S&P assigned the notes, or borrowings under a bridge credit facility in their place, a rank of B.
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 ranked the proposed notes at Ba2, citing growing personal consumption in China, E-Land Fashion’s moderate scale and significant business volatility. Proceeds will be used mainly for capital expenditures and general corporate purposes, Moody’s said in the report.
Offerings in Pipeline
BANCO DE CREDITO DEL PERU, the nation’s largest bank, may sell benchmark 10-year dollar-denominated notes in the country’s first corporate international bond issue in four months. BCP, a unit of Credicorp Ltd., hired Bank of America Corp. and Deutsche Bank AG to arrange meetings with bond investors, according to a person familiar with the transaction who declined to be identified because terms aren’t set. A benchmark sale is typically at least $500 million.
TELEMAR NORTE LESTE SA, Brazil’s biggest fixed-line phone company, hired Bank of America Corp., BNP Paribas SA, BTG Pactual SA and Itau Unibanco Holding SA to sell benchmark dollar bonds, according to a person familiar with the transaction. Telemar, known as Oi, plans to start meeting with bond investors Sept. 6, said the person, who declined to be identified because terms aren’t set.
RENHE COMMERCIAL HOLDINGS CO. may sell dollar bonds after it hired Bank of America Corp., BOC International Holdings Ltd. and UBS AG to arrange talks with bond investors in Asia, Europe and the U.S. starting Aug. 30, said a person familiar with the matter. The developer of shopping centers in China is rated Ba2 at Moody’s and BB at S&P.
AEGIS LTD., an outsourcing unit of Essar Group, may sell the first non-convertible dollar bonds from an Indian information technology company. The company, which bought PeopleSupport Inc. in 2008, may sell its bonds as part of a financing package that would include a loan of as much as $350 million to consolidate debt, Chief Financial Officer C.M. Sharma said. The money would go to fund expansion
AMERICAN INTERNATIONAL GROUP INC., the insurer that’s majority owned by the U.S., may sell bonds to help repay its government bailout, it said in an Aug. 9 registration statement filed with the Securities and Exchange Commission.
GATX CORP., a Chicago-based company that leases railroad cars and other equipment, filed a shelf registration with the Securities and Exchange Commission to sell debt securities and pass-through certificates. The debt securities may be senior or subordinated, according to the filing.
JSW STEEL LTD, India’s third-largest steelmaker, plans to sell dollar bonds for the first time in three years and as rupee-denominated finance costs rise. JSW has applied for credit ratings before a 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, 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 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 year ending March 31, 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 about $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 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 Latin Finance 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 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.
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 was 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.
BANK FOR INVESTMENT & DEVELOPMENT OF VIETNAM received approval from the central bank to issue 7 trillion dong ($359 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 5- to 7-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, Finance Minister Sangajav 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.
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