Hanger Orthopedic Plans Debt as High-Yield Inflows Surge: New Issue Alert
Hanger Orthopedic Group Inc., the operator of orthotic and prosthetic patient-care centers, plans to sell debt after six straight weeks of investor cash flows into high-yield bond funds.
Hanger Orthopedic may sell $200 million of eight-year notes and use proceeds to repay outstanding debt and for general corporate purposes, the Austin, Texas-based company said yesterday in a statement distributed by PR Newswire.
Investors are increasing deposits in junk-bond mutual funds as the yields on the 10-year U.S. Treasury note, the market bellwether, hovers near the lowest since January 2009. Flows into the funds are driving up demand for speculative-grade securities and will help push down the extra yield investors demand to own the debt, said Marc Gross, a money manager at RS Investments in New York.
“People continue to put money into high-yield because it’s one of the only games in town that’s really accessible to investors where you can pick up extra yield,” said Gross, who helps oversee the $124 million RS High Yield Bond Fund. “Rates are historically low across the board, so on a relative basis high-yield makes tremendous sense.”
Funds investing in high-yield debt have seen six straight weeks of inflows, including $773 million last week, according to EPFR, a Cambridge, Massachusetts-based research firm.
Junk Yields
Yields on speculative-grade corporate bonds were unchanged at 7.77 percent yesterday, the lowest this year, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index. That was 604 basis points more than the average Treasury, 2 basis points wider, the index showed.
High-yield, high-risk bonds are rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s. A basis point is 0.01 percentage point.
S&P raised its rating on Hanger Orthopedic one level to BB- yesterday, citing the company’s “demonstrated ability to extend its record of steady revenue growth and margin expansion despite weak economic conditions and minimal reimbursement rate increases.” It assigned Hanger Orthopedic’s notes a grade of B, two steps lower. Moody’s ranked the debt B3.
Abengoa SA, the Seville, Spain-based engineering and biofuel company, sold $650 million of seven-year notes through its Abengoa Finance SAU unit to lead $1.65 billion of high-yield issuance yesterday, Bloomberg data show. Sales of $4.58 billion this week compare with none on Oct. 11 and Oct. 12.
Investment-grade corporate bond spreads were unchanged at 182 basis points yesterday, according to the Bank of America Merrill Lynch U.S. Corporate Master Index. Yields on the debt fell 2 basis points to 3.6 percent, the index data show.
PepsiCo Inc., the world’s largest snack-food maker, sold $2.25 billion of debt in a three-part offering as investment- grade companies issued $8.15 billion of bonds yesterday, Bloomberg data show.
The following is a description of at least $7.44 billion of pending sales of dollar-denominated bonds in the U.S.
Investment Grade
POSCO, the world’s third-largest steelmaker by production, is planning a benchmark-size sale of 10-year fixed-rate senior unsecured bonds denominated in U.S. dollars, according to a person familiar with the transaction, who declined to be identified because the matter is private.
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 five-year sukuk in dollars that yield 40 basis points to 50 basis points more than the benchmark midswap rate, according to three 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.
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.
AVANGARDCO INVESTMENTS PUBLIC LTD., Ukraine’s biggest egg producer, plans to sell $250 million to $350 million of five- year bonds that may yield less than 9 percent, according to a person familiar with the transaction, who declined to be identified because terms aren’t set.
High Yield
HANGER ORTHOPEDIC GROUP INC., the operator of orthotic and prosthetic patient-care centers, plans to sell $200 million of eight-year debt, according to a statement distributed by PR Newswire. Proceeds from the sale may be used repay its 10.25 percent notes due in June 2014, it said in the statement.
FORTESCUE METALS GROUP LTD., Australia’s third-biggest producer of iron ore, plans to sell $2.04 billion of U.S. dollar-denominated bonds to repay outstanding debt, according to a statement to the Australian stock exchange. The senior unsecured notes will be rated BB+ and will mature in October 2015, Fitch Ratings said in a separate statement.
(Added Oct. 19. See FMG AU .)
AMERICAN ACHIEVEMENT CORP., the maker of class rings and yearbooks for the educational institution market, plans to sell $365 million of senior secured notes due 2016. The debt will be guaranteed on a second-priority senior secured basis by parent company AAC Holding Corp., the company said in an Oct. 18 statement distributed by Business Wire.
(Added Oct. 19. See 75407Z US .)
RURAL/METRO CORP., the provider of medical transportation and fire protection, plans to sell $200 million of senior notes due 2018 through a private offering, the company said in an Oct. 18 statement distributed by Marketwire.
{Added Oct. 19. See RURL US .)
HIDILI INDUSTRY INTERNATIONAL DEVELOPMENT LTD., the Chinese coal mining company, plans to sell $400 million of five-year dollar bonds, according to a person familiar with the matter, who asked not to be identified as details are private. Moody’s rated the debt B1 and S&P ranked it BB-, one step higher.
(Added Oct. 19. See 1393 HK .)
ACCELLENT INC., the medical device manufacturer owned by private-equity firm KKR & Co., plans to sell $315 million of senior subordinated notes due in 2017, the company said in an Oct. 14 statement distributed by Business Wire. Proceeds may be used to finance a tender offer for Accellent’s 10.5 percent senior subordinated notes due in 2013, according to the statement.
SUN HEALTHCARE INC., a provider of nursing and health-care services to senior citizens, plans to sell $225 million of notes due 2018 through Sabra Health Care REIT Inc., the company said in a statement distributed by Marketwire. Sun Healthcare will guarantee the senior notes until it completes its separation of Sabra Health Care into a publicly traded company, according to the statement. Proceeds may be used to repurchase Sun Healthcare’s outstanding 9.125 percent senior subordinated debt due 2015, the company said.
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.
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.
Offerings in Pipeline
BELARUS may sell debt in the U.S. and Asia, according to Finance Minister Andrei Kharkovets. “We will undoubtedly enter the Asian and the American markets,” Kharkovets said in an Oct. 15 interview in Moscow, declining to comment on the timing of possible sales.
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.
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.
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: 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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