Whiting Petroleum Plans Debt as Sales Endanger Spreads: New Issue Alert

Whiting Petroleum Corp., the Denver-based oil and gas company, is marketing debt amid concern that surging issuance will push relative yields higher.

Whiting Petroleum may sell $350 million of eight-year senior subordinated notes as soon as today, according to a person familiar with the transaction who declined to be identified because terms aren’t set.

The extra yields that company bonds pay relative to Treasuries have fallen to the lowest in more than four months as investors gain confidence the economy won’t slip back into recession. That decline may reverse after investors snapped up the securities at the fastest pace since 2008, according to Guy LeBas, chief fixed-income strategist and economist at Janney Montgomery Scott LLC in Philadelphia.

“While strong demand and liquidity benefits have helped to sustain credit spreads in the wake of the last several weeks’ issuance, there comes a point where supply, particularly when so concentrated, simply overwhelms demand,” LeBas wrote in a note to clients yesterday. “We see a bias towards wider credit spreads in the back half of September.”

The extra yield investors demand to own high-yield, high- risk debt climbed 1 basis point to 625 basis points yesterday, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index. Spreads on the bonds have tightened 67 basis points this month and touched 624 basis points on Sept. 17, the narrowest since May 13, the data show.

Whiting Ratings

High-yield debt is rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s. A basis point is 0.01 percentage point.

Spreads on investment-grade corporate bonds shrank 1 basis point to 183 basis points, according to the Bank of America Merrill Lynch U.S. Corporate Master Index. That’s the tightest since May 18, the index data show.

Whiting Petroleum’s notes are expected to be assigned a rank of B1 by Moody’s Investors Service and BB, two steps higher, by Standard & Poor’s, said the person.

Charter Communications Inc. issued $1 billion of seven-year notes and AbitibiBowater Inc. raised $850 million after increasing the size of their offerings to lead $4.13 billion sales by junk-rated companies, Bloomberg data show.

DuPont Co. sold $2 billion of notes in a three-part offering to lead $8.9 billion in investment-grade corporate bond issuance, according to data compiled by Bloomberg.

Sales yesterday of $13 billion follow $86.2 billion of issuance in the two-week period ended Sept. 17, the most over such a span since May 2008, Bloomberg data show.

The following is a description of at least $13.5 billion of pending sales of dollar-denominated bonds in the U.S.

Investment Grade

GERDAU SA, Latin America’s largest steelmaker, hired HSBC Holdings Plc, Banco Santander SA and JPMorgan Chase & Co. to sell benchmark bonds overseas, according to a person familiar with the transaction who declined to be identified because the terms aren’t set. Proceeds will be used to refinance debt, the company said Sept. 16 in a regulatory filing. A benchmark sale is typically at least $500 million.

TRANSPOWER NEW ZEALAND LTD., which operates New Zealand’s electricity grid, started marketing at least $150 million of bonds to U.S. private investors, according to a person familiar with the plan. National Australia Bank Ltd. and Citigroup Inc. are managing the sale, the person said, asking not to be named as the details are private.

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

WHITING PETROLEUM CORP., the Denver-based oil and gas company, plans to sell $350 million of senior subordinated notes due 2018, it said in a statement distributed by PR Newswire. Proceeds will be used to repay bank debt, according to the statement.

LODGENET INTERACTIVE CORP. plans to sell $435 million of six-year notes, according to a filing with the Securities and Exchange Commission. The senior secured second-lien debt may be issued later this week, according to a person familiar with the offering who declined to be identified because terms aren’t set.

VERTELLUS SPECIALTIES INC. plans to sell $325 million of five-year notes, according to a person familiar with the offering. Proceeds may be used to repay bank debt, said the person, who declined to be identified because terms aren’t set.

STONERIDGE INC. plans to sell $175 million of seven-year notes, according to a statement distributed by PR Newswire. Proceeds will be used to buy back the Warren, Ohio-based company’s 11.5 percent notes due 2012, it said in the statement.

SINCLAIR BROADCAST GROUP INC., the Hunt Valley, Maryland- based television-station operator, said in a statement distributed by PR Newswire that its wholly owned subsidiary, Sinclair Television Group Inc., intends to offer about $250 million aggregate principal amount of senior unsecured notes, expected to mature in 2018.

HARVEST OPERATIONS CORP., a unit of Harvest Energy Trust, may sell $500 million of seven-year notes, according to a person familiar with the offering. Proceeds may be used to repay debt and for general corporate purposes, said the person, who declined to be identified because terms aren’t set. The notes may be sold as soon as Sept. 27, the person said.

YASAR HOLDING AS, a Turkish company that makes dairy and meat products, paint and paper, plans to sell five-year notes denominated in U.S. dollars, said a person familiar with the matter. Barclays Plc is managing the sale, which will be used to fund a senior loan to Yasar from Barclays Bank Plc, said the person, who asked not to be identified because the details are private.

CHC HELICOPTER CORP., the provider of flights to offshore rigs and platforms purchased by First Reserve Corp. in 2008, plans to sell $1.1 billion of 10-year notes denominated in U.S. dollars, according to a person familiar with the transaction. Proceeds may be used to repay bank borrowings and for breakage fees on interest-rate swap agreements, said the person, who declined to be identified because terms aren’t set.

EVERTEC INC., the processing unit of Popular Inc., a Hato Rey, Puerto Rico-based bank holding company, plans to sell $220 million of seven-year notes, according to a person familiar with the offering. Proceeds will help pay for the acquisition of 51 percent of the company by Apollo Management LP, said the person, who declined to be identified because terms aren’t set.

LIBERTY TIRE RECYCLING plans to sell $200 million of six- year notes, according to a person familiar with the offering. Proceeds may be used to repay bank debt and for general corporate purposes, said the person, who declined to be identified because terms aren’t set.

WEST CORP., the call-center operator taken private by Thomas H. Lee Partners LP and Quadrangle Group LLC in 2006, plans to sell $500 million of notes due 2018 to repay bank debt, according to Standard & Poor’s. S&P assigned the debt a grade of B, the credit rater said in a statement. Moody’s Investors Service ranked the notes B3, on step lower, it said in a separate statement.

TITAN INTERNATIONAL INC., the maker of tires and wheels for off-highway vehicles, plans to sell $175 million of senior secured notes due 2017, it said in a Sept. 15 statement distributed by Business Wire. The Quincy, Illinois-based company plans to buy back up to $139.9 million of notes maturing in 2012, it said in a separate statement. The company withdrew a proposed $150 million offering announced in May because of adverse market conditions, Chief Financial Officer Paul Reitz said in a telephone interview.

PINAFORE LLC and PINAFORE INC., entities created by Onex Corp. and Canada Pension Plan Investment Board, plan to sell $1.15 billion of senior secured second-lien notes due in 2018 to fund the acquisition of Tomkins Plc, according to a person familiar with the transaction. The company canceled a planned $600 million portion of the offering consisting of seven-year notes in favor of increasing the size of its bank loans, the person said.

VALEANT PHARMACEUTICALS INTERNATIONAL, the U.S. company merging with Biovail Corp., Canada’s largest publicly traded drugmaker, plans to offer about $1 billion of senior unsecured notes, it said in a statement. Aliso Viejo, California-based Valeant is also seeking $1.875 billion of loans to finance the transaction and pay a dividend, according to a person familiar with the situation.

DINEEQUITY INC., the owner of Applebee’s Neighborhood Grill & Bar and the IHOP pancake chain, plans to sell senior unsecured notes, the company said in a statement distributed by Marketwire. Proceeds may be used to help fund tender offers for “certain series of its subsidiaries’ outstanding securitization notes,” the Glendale, California-based company said in the statement.

REYNOLDS GROUP HOLDINGS LTD., the maker of Reynolds Wrap aluminum foil, may sell $2 billion of senior secured notes and $1.5 billion of senior unsecured notes to help pay for its purchase of Pactiv Corp., according to a person familiar with the transaction who declined to be identified because terms aren’t set. Reynolds Group is also seeking $1.5 billion in loans to pay for the acquisition, the person said.

VISANT HOLDING CORP., the U.S. marketing and publishing firm owned by KKR & Co., plans to sell $750 million of notes due in 2017 through its Visant Corp. unit, according to a statement distributed by PR Newswire. Visant is also seeking a $1.25 billion term loan and a $175 million revolving line of credit, the Armonk, New York-based company said in the statement. Proceeds from the borrowings may be used to repay debt and pay a dividend to investors in Visant’s stock and options.

NBTY INC., the maker of Nature’s Bounty and MET-Rx nutritional supplements, may issue $650 million of bonds that yield 9 percent to 9.25 percent 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. The company earlier marketed $900 million of the debt, the person said.

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. 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

SYDNEY AIRPORTS CORP. hired Bank of America Merrill Lynch, JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc to arrange debt investor meetings in Asia and the U.S., according to a person familiar with the matter.

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.

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, 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.

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.

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

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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