FriendFinder Networks Plans to Join Senior Secured Surge: New Issue Alert

FriendFinder Networks Inc., the publisher of Penthouse magazine, is marketing debt as sales of senior secured notes rise toward a record.

The company may issue $296 million of senior secured bonds due in 2013 to recapitalize, simplify its capital structure and extend maturities, according to Standard & Poor’s.

Senior secured issuance this year has totaled $60.2 billion through September, more than double any year prior to 2009, according to JPMorgan Chase & Co. analysts led by Peter Acciavatti. Senior secured sales were $62.4 billion last year, and averaged $11 billion annually from 2005 to 2008.

“Companies are being very proactive at this point to refinance the mountain of bank loans that are coming to maturity in 2013 and 2014, and that’s a positive,” said Wesley Sparks, head of U.S. fixed income at Schroder Investment Management North America Inc. in New York. “It justifies tighter spreads in the high-yield bond universe as we now have a higher percentage of notes that are senior secured bonds.”

Senior secured bonds have priority over other classes of debt and equity on a corporation’s assets in the event of liquidation.

Syndicated U.S. leveraged loans peaked at $878 billion in 2007, the year the financial crisis began, and fell to $169 billion last year, according to data compiled by Bloomberg. The total this year is $261.4 billion, the data show.

Bond-Market Demand

“The leveraged loan market had really ballooned a few years ago,” Sparks said. “But the space is shrinking, and therefore companies are financing themselves in the market where there is demand and that is in the bond market.”

The extra yield investors demand to own speculative-grade debt instead of Treasuries fell 6 basis points to 602 basis points yesterday, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index. Absolute yields fell 6 basis points to 7.77 percent, the lowest since June 6, 2007.

“There’s still a fair amount of refinancing left to go, but there’s also a fair bit of time to work on this,” Sparks said. “At the same time, high-yield companies cannot wait until 2012 to refinance, because investors might not lend at that point.”

Companies sold $10.1 billion of debt yesterday, Bloomberg data show.

Raytheon Co., the world’s biggest missile maker, and ING Bank NV, a unit of the largest Dutch financial-services firm ING Groep NV, led investment-grade issuance of $7.84 billion, each selling $2 billion of notes.

The average yield on investment-grade bonds fell 1 basis point to 3.57 percent, according to the Bank of America Merrill Lynch U.S. Corporate Master Index. Investment-grade spreads were unchanged at 180 basis points, the index data show.

Junk-Bond Sales

XM Satellite led high-yield issuance of $2.28 billion, selling $700 million of eight-year notes.

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.

Standard & Poor’s assigned Boca Raton, Florida-based FriendFinder’s notes a grade of B, the rating company said in a statement.

The following is a description of at least $5.94 billion of pending sales of dollar-denominated bonds in the U.S.

Investment Grade

ROYAL BANK OF CANADA, the country’s biggest lender, plans to sell debt due in December 2015 in a reopening of an earlier offering, according to a person familiar with the transaction. The notes may yield 68 basis points more than similar-maturity U.S. Treasuries, said the person, who declined to be identified because terms aren’t set.

LLOYDS TSB BANK PLC plans to sell U.K. mortgage-backed securities in dollars, pounds, yen and euros, according to two people with knowledge of the sale.

TRANSNET LTD., South Africa’s state-owned ports, rail and pipeline operator, said it may sell $1 billion worth of bonds in international markets to pay for expansion. Transnet has 35.2 billion rand ($5 billion) of debt outstanding.

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.

RELIANCE INDUSTRIES LTD., India’s biggest company by market value, plans to sell 10- and 30-year bonds in dollars, according to a person familiar with the plan, who asked not to be identified before a public announcement. Bank of America Corp., Citigroup Inc., HSBC Holdings Plc and Royal Bank of Scotland Group Plc are managing the sale, the person said. Reliance intends to raise at least $1 billion from the issue, three people familiar with the transaction said Oct. 1.

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.

KOREA GAS CORP., the world’s biggest buyer of liquefied natural gas, plans to raise as much as $1 billion from dollar- denominated bonds to fund overseas investments, according to a person with knowledge of the matter. The Seongnam-based company hired five banks to help it sell notes, the person said, declining to name the banks and asking not to be identified because the information is confidential. Deutsche Bank AG, Goldman Sachs Group Inc. and UBS AG arranged the meetings, the person said.

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

OMNOVA SOLUTIONS INC., the maker of specialty chemicals used in paper and carpets, plans to sell $250 million of senior notes to help fund its purchase of Eliokem International SAS and to repay or replace bank debt, the Fairlawn, Ohio-based company said in a statement. A new $200 million term loan will also help pay for the acquisition, the company said. Omnova has no outstanding bonds, said company spokeswoman Sandi Noah.

SINO-FOREST CORP. plans to sell $500 million of seven-year bonds, according to a person familiar with the matter. Bank of America Corp. and Credit Suisse Group AG will manage the sale of debt, said the person, who asked not to be identified because the details are private. Sino-Forest has the right to buy the bonds back after four years, the person said.

FRIENDFINDER NETWORKS INC., the publisher of Penthouse magazine, plans to sell $296 million of secured first-lien notes due 2013, according to a note from Standard & Poor’s. S&P rated the debt from the private Boca Raton, Florida-based company B.

ABENGOA SA, the Seville, Spain-based engineering and biofuel production company, plans to sell $600 million of seven- year senior bonds, according to a person familiar with the transaction. Bank of America Corp., Citigroup Inc., Credit Suisse Group AG and Deutsche Bank AG are managing the issue, according to the person, who declined to be identified because terms weren’t set.

NOMOS BANK, a Russian lender, plans to sell between $300 million and $500 million of three-year bonds at a yield of about 6.5 percent, according to a banker with knowledge of the transaction. The Moscow-based bank is meeting bond investors for the offering in a roadshow organized by UBS AG and Royal Bank of Scotland Group Plc, the banker said.

AVANGARDCO INVESTMENTS PUBLIC LTD., Ukraine’s biggest egg producer, hired Troika Dialog and JPMorgan Chase & Co. to organize its debut sale of dollar bonds under Regulation S, which bars sales in the United States, Troika said.

AIR MEDICAL GROUP HOLDINGS INC., the provider of emergency transportation services in the Southern and Midwestern parts of the U.S., plans to sell $545 million of eight-year notes to pay for its acquisition by Bain Capital LLC, according to a person familiar with the offering, who declined to be identified because terms aren’t set. The notes may yield 9.25 percent to 9.5 percent, the person said.

TUTOR PERINI CORP. plans to sell as much as $300 million of senior unsecured notes, the construction company said in an Oct. 6 statement distributed by Business Wire. Proceeds may be used for acquisitions and stock repurchases, according to the statement.

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 roadshow. 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.

Offerings in Pipeline

GEORGIAN RAILWAY LLC, the former Soviet republic’s state- owned rail company, is preparing a bond roadshow in the U.S., Giorgi Gagnidze, the company’s financial director, said in comments broadcast on Rustavi-2 television.

CENTRAL CHINA REAL ESTATE LTD., part-owned by Singapore’s CapitaLand Ltd., plans to sell bonds denominated in U.S. dollars to fund property projects, according to a statement to the Hong Kong stock exchange. Deutsche Bank AG, Nomura Holdings Inc. and ING Groep NV will manage the sale and help arrange meetings with investors, according to the statement.

ICICI BANK LTD., India’s second-largest lender, hired Barclays Capital, Citigroup Inc. and Deutsche Bank AG to sell as much as $1 billion of bonds with maturities between five and 10 years, according to three people familiar with the offering. India’s second-biggest lender is rated Ba1 by Moody’s Investors Service and BBB- by S&P.

IRVING PLACE CAPITAL may issue $250 million of senior secured notes to help pay for its leveraged buyout of Thermadyne Holdings Corp. and refinance the company’s debt, Thermadyne Chief Financial Officer Steven Schumm said in an Oct. 5 interview. The company will also arrange a $60 million asset- based revolving credit line. Jefferies Group Inc. and Royal Bank of Canada will manage the sale of six-year bonds, Schumm said.

KOREA NATIONAL OIL CORP. hired Barclays Plc, BNP Paribas SA, Credit Suisse Group AG, Deutsche Bank AG and Korea Development Bank for a sale of dollar bonds, a person familiar with the deal said on Oct. 6. The company known as KNOC said in September it plans to raise between $500 million and $1 billion to fund acquisitions. KNOC is rated A1 by Moody’s Investors Service and A by Standard & Poor’s.

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.

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

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

To contact the editor responsible for this story: Alan Goldstein at

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