Alta Mesa Plans Eight-Year Debt as Junk Maturities Grow: New Issue Alert

Alta Mesa Holdings LP, the Houston- based energy company, is marketing debt as speculative-grade bonds maturing in eight years or more climbed to the most this year relative to all new issues.

Alta Mesa plans to sell $300 million of senior notes due in 2018, according to a person familiar with the transaction. The debt may be priced as soon as this week, said the person.

Issuance volume of high-risk, high-yield debt maturing in at least eight years climbed to 72 percent of the market in September, the highest this year and up from 68 percent in August, according to data compiled by Bloomberg. Issuers are taking advantage of the lowest junk yields in more than three years to issue longer-dated securities, said Sabur Moini, who manages the $1 billion Payden High Income Fund.

“With interest rates being low for some time going forward and a lot of cash in the market, companies will continue to take advantage to extend their debt-maturity profiles,” Moini said in a telephone interview from Los Angeles. ”There’s a risk to waiting, and right now with liquidity so bountiful, it behooves a company with debt maturing in the next two or three years to refinance it and extend it out.”

Yields on junk-rated corporate bonds fell 2 basis points yesterday to 8.03 percent, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index. The extra yield investors demanded to buy junk debt instead of Treasuries rose 1 basis point to 623 basis points, the index data show.

‘Global Uncertainties’

“There are still concerns of a slow global economy, there’s still talk of a double dip, and clearly there are global uncertainties, so why not take advantage of a hot market,” Moini said. “The further out your debt structure is, the better the markets feel.”

Manufacturing orders in the U.S. declined 0.5 percent in August, the Commerce Department said yesterday in Washington, following a revised 0.5 percent increase a month earlier. The Dow Jones Industrial Average had its biggest decline in a month and European shares slipped for a sixth day.

Alta Mesa may use proceeds to repay a second-lien term loan, reduce borrowings under a revolving credit line, make a distribution to Alta Mesa Investment Holdings Inc. and for general corporate purposes, said the person familiar with the sale, who declined to be identified because terms aren’t set. The securities may be rated B3 by Moody’s Investors Service and B by Standard & Poor’s, according to separate statements from those companies. High-yield, high-risk debt is rated below Baa3 by Moody’s and BBB- by S&P.

Investment-grade corporate bond spreads were unchanged for the ninth straight day at 184 basis points yesterday, according to the Bank of America Merrill Lynch U.S. Corporate Master Index. Absolute yields on the debt fell 3 basis points to 3.66 percent.

Companies sold $3.26 billion of debt yesterday, Bloomberg data show, including $955 million of high-yield securities. A basis point is 0.01 percentage point.

Celgene Corp., the maker of blood-cancer drugs, was the biggest issuer, selling $1.25 billion of notes, Bloomberg data show.

The following is a description of at least $11 billion of pending sales of dollar-denominated bonds in the U.S.

Investment Grade

ISLAMIC DEVELOPMENT BANK plans to sell sukuk in dollars, according to two people with knowledge of the sale. CIMB Holdings Bhd., Citigroup Inc., HSBC Holdings Plc and Standard Chartered Plc are managing the issue, the people said.

ENTERGY ARKANSAS INC. may sell $150 million of 30-year first-mortgage bonds, according to a person familiar with the offering. The debt may yield 5.75 percent to 5.875 percent, said the person, who declined to be identified because terms aren’t set.

RELIANCE INDUSTRIES LTD., India’s biggest company by market value, approached banks to help it raise at least $1 billion from a bond sale, according to three people with direct knowledge of the matter. The petrochemicals and textile company, whose chairman is billionaire Mukesh Ambani, may use the money for acquisitions, one of the people said, asking not to be identified as the matter is private.

QATAR TELECOM QSC hired banks to organize meetings with investors ahead of a planned dollar bond sale, according to an e-mailed statement from the company. The meetings will occur in Singapore, Hong Kong, Los Angeles, New York, Boston, Dubai and London, a person familiar with the matter said, asking not to be identified because he isn’t authorized to discuss the details.

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

EVRAZ INC. NA CANADA plans to sell $650 million of seven- year bonds that are callable after four years, according to two people with knowledge of the sale. Barclays Capital and Credit Suisse Group AG are managing the issue, which will help refinance existing debt of the parent, Evraz Group SA.

ALTA MESA HOLDINGS LP, a Houston-based oil and natural gas company, plans to sell $300 million of senior notes due 2018, according to a person familiar with the transaction. Proceeds may be used to repay a second-lien term loan, reduce borrowings under a revolving credit line, make a distribution to Alta Mesa Investment Holdings Inc. and for general corporate purposes, said the person, who declined to be identified because terms aren’t set.

VTB GROUP, Russia’s second-largest lender, hired Citigroup Inc., Deutsche Bank AG and its VTB Capital unit to manage the sale of dollar bonds, a banker involved in the deal said. The sale is benchmark in size and may yield a basis-point spread to comparably dated U.S. Treasuries in the low 400s, said the banker, who declined to be identified because the deal is not complete. Benchmark sales are typically at least $500 million.

VOTORANTIM CIMENTOS SA plans to sell perpetual bonds in dollars, which are callable after five years, years, according to a banker involved in the transaction. Bank of America Corp., HSBC Holdings Plc, Itau Unibanco Holding SA and Morgan Stanley are managing the issue, which will be guaranteed by Votorantim Participacoes SA and Votorantim Industrial SA, the banker said.

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

DAVITA INC. plans to sell $1.45 billion of senior notes, according to a person familiar with the transaction. The issue will be split between 8- and 10-year notes, said the person, who declined to be identified because terms aren’t set. Proceeds will help purchase outstanding debt, the company said Oct. 1 in a statement distributed by Business Wire that didn’t specify the timing or split of the sale.

NAVIOS MARITIME ACQUISITION CORP., an owner and operator of petroleum tankers, plans to sell about $375 million of ship- mortgage, seven-year notes denominated in U.S. dollars, the company said Sept. 30 in a statement distributed by PR Newswire.

BRICKMAN GROUP HOLDINGS INC. may sell $300 million of eight-year notes, according to a person familiar with the offering, who declined to be identified because terms aren’t set.

OSO SEVERSTAL, Russia’s largest steelmaker, plans to meet investors in Europe, Asia and the U.S. to discuss a sale of dollar bonds, according to a banker with knowledge of the road show. The company offered to buy back $450 million of bonds on Sept. 30., more than a third of its 9.75 percent notes due in 2013, aiming to refinance the amount with less expensive debt.

CLEARWATER PAPER CORP. plans to sell $350 million of senior unsecured notes, the Spokane, Washington-based company said in a filing with the Securities and Exchange Commission. The maker of consumer tissue, bleached paperboard and wood products plans to use proceeds, along with $210 million of cash on hand to finance its purchase of Cellu Tissue Holdings Inc., the filing said.

TPC INC. plans to sell $325 million of seven-year notes through its TPC Group LLC unit, according to a statement distributed by PR Newswire. Proceeds may be used to repay debt and finance a dividend, the company said in the statement. Moody’s ranked the debt B1 and S&P assigned the notes an equivalent grade of B+.

REYNOLDS GROUP HOLDINGS LTD. may sell $3 billion of 8.5- year notes to help pay for its acquisition of Pactiv Corp., according to a person familiar with the offering. The issue may be evenly split between secured and unsecured debt maturing in March 2019, said the person, 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.

CHINA MEDICAL TECHNOLOGIES INC., which makes devices for tumor treatments, plans to sell as much as $200 million of five- year senior notes denominated in dollars, the company said in a statement distributed by PR Newswire. Proceeds will be used to buy back convertible notes due in 2011 and 2013, Fitch Ratings said in a statement. Deutsche Bank AG and Standard Chartered Plc will help the Beijing-based company arrange meetings with investors in Hong Kong, Singapore, London and the U.S., said a person familiar with the transaction who asked not to be identified because terms aren’t set.

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.

DINEEQUITY INC., the owner of Applebee’s Neighborhood Grill & Bar and the IHOP pancake chain, plans to sell as much as $825 million of eight-year 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.

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

AL BARAKA BANK EGYPT ESC, a unit of Bahrain-based Albaraka Banking Group, may sell dollar-denominated Islamic bonds in the second half of 2011, the bank’s chairman said Sept. 29. The bank has not decided on the size of the bond, he said.

AMERICAN INTERNATIONAL GROUP INC. is planning its first debt offering since its bailout two years ago as the insurer moves toward independence from the U.S. government, Chairman Steve Miller said Sept. 29.

TURKIYE IS BANKASI AS, a Turkish bank, applied to Turkey’s capital markets regulator to sell dollar-denominated bonds abroad, according to a filing with the Istanbul Stock Exchange.

BANCO DE CREDITO E INVERSIONES, Chile’s fourth-largest lender by assets, postponed the sale of five-year notes in U.S. dollars, according to a person familiar with the offering.

The company had planned to sell the notes as soon as Sept. 24, said the person, who declined to be identified because the marketing was private.

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.

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 reporters on this story: Boris Korby in New York at bkorby1@bloomberg.net.

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

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