Goldman Sachs Plans 50-Year Debt as Long Bonds Beat Short: New Issue Alert

Goldman Sachs Group Inc., the most profitable securities firm in Wall Street history, is marketing 50-year debt to individual investors as returns on long-dated bonds exceed those on shorter-maturity securities.

Goldman Sachs plans to sell $250 million of notes maturing in November 2060 this week, according to a person familiar with the transaction. The $25 face value notes will be non-callable for five years and be listed on the New York Stock Exchange, the New York-based bank said yesterday in a regulatory filing.

Company debt maturing in more than 15 years has rallied 14.4 percent this year, beating the 5 percent return on notes due in one to three years, according to Bank of America Merrill Lynch index data. The longer securities have faltered this month amid speculation Federal Reserve efforts to spur the economy may reignite inflation. That is likely to be a temporary reversal, said Guy LeBas, chief fixed-income strategist and economist at Janney Montgomery Scott LLC in Philadelphia.

“Concerns of resurgent inflation are pretty overblown,” LeBas said. “There’s absolutely appetite for long bonds.”

The longer-dated corporate bonds have lost 1 percent this month, compared with a 0.4 percent gain on the shorter debt, according to Bank of America Merrill Lynch’s U.S. Corporates, 15+ Yrs index and U.S. Corporates, 1-3 Yrs index.

The extra yield investors demand to own investment-grade company debt instead of Treasuries fell 2 basis points to 179 basis points yesterday, and yields dropped 2 basis points to 3.62 percent, according to Bank of America Merrill Lynch’s U.S. Corporate Master index. A basis point is 0.01 percentage point.

National Rural

National Rural Utilities Cooperative Finance Corp. led companies issuing $1.8 billion of bonds yesterday, according to data compiled by Bloomberg.

The private, nonprofit cooperate association issued $300 million of three-year notes and $350 million of five-year notes, according to data compiled by Bloomberg. National Rural Utilities provides members, primarily rural electric utility systems in the U.S., with a source of financing to supplement the loan programs of the Rural Utilities Service.

MGM Resorts International, the biggest casino operator on the Las Vegas Strip, issued $500 million of six-year notes, the day’s only high-yield, high-risk debt sale, Bloomberg data show. High-yield bonds are rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.

Junk Spreads

Spreads on speculative-grade debt narrowed 6 basis points to 590 basis points yesterday, while yields were down 4 basis points to 7.7 percent, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index. The yield is the lowest since June 2007.

Goldman Sachs’ notes may yield 6.125 percent to 6.25 percent, said the person familiar with the offering, who declined to be identified because terms aren’t set.

“People will take 6.25 percent out to infinity these days,” LeBas said of the sale. “They’re aiming this at yield- hungry buyers.”

The debt will be marketed to individual investors, according to a second person familiar with the transaction, who declined to be identified before the debt is priced.

The following is a description of at least $7.39 billion of pending sales of dollar-denominated bonds in the U.S.

Investment Grade

GOLDMAN SACHS GROUP INC., the biggest securities firm by revenue, plans to sell $250 million of 50-year bonds in an offering directed toward individual investors, according to a person familiar with the transaction. The debt due November 2060 may yield 6.125 percent to 6.25 percent, said the person, who declined to be identified because terms aren’t set. The securities will be sold in $25 denominations and can’t be called, or redeemed, for five years, the New York-based bank said in a regulatory filing.

SAUDI BASIC INDUSTRIES CORP., the world’s largest petrochemicals maker, plans to sell five-year, dollar- denominated bonds to refinance debt, Chief Financial Officer Mutlaq al-Morished said. The notes may yield “in the high 100 basis-point range” over the benchmark mid-swap rate, according to two people with knowledge of the sale. HSBC Holdings Plc, JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc are managing the issue and the notes will be sold through SABIC I BV., said the people, who declined to be identified because the terms haven’t been set.

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, which hired five banks to help it sell notes, plans to hold investor meetings in Asia, said the person, 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.

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.

Not Rated

BNP PARIBAS HOME LOAN COVERED BONDS SA plans to sell five- year notes in dollars, according to two people with knowledge of the sale. Barclays Capital, Bank of America Corp. and Royal Bank of Scotland Group Plc are managing the sale with BNP Paribas, said the people, who declined to be identified because terms aren’t set.

TRAVELLERS INTERNATIONAL HOTEL GROUP INC., the Philippines casino operator owned by Alliance Global Group Inc. and Genting Hong Kong Ltd., hired UBS AG, Deutsche Bank AG and Banco de Oro Unibank Inc. to help it sell seven-year dollar bonds, according to a person familiar with the offering who asked not to be identified because the details are private.

UNITED BUSINESS MEDIA LTD., the owner of PR Newswire and publisher of InformationWeek, plans to sell $500 million of 10- year notes, according to two people with knowledge of the offering. Barclays Capital, Credit Suisse Group AG, HSBC Holdings Plc and JPMorgan Chase & Co. are managing the sale, said the people, who declined to be identified because terms aren’t set.

WII COMPONENTS INC., the manufacturer of wood cabinet doors owned by Behrman Capital LP, plans to sell $115 million of senior secured five-year notes, the company said in an Oct. 25 statement distributed by Business Wire. The notes may be used to help fund a tender for outstanding 10 percent senior securities due 2012, according to the statement.

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

VIKING ACQUISITION INC., the Avista Capital Partners-owned entity that’s buying Clorox Co.’s auto-care business, plans to sell $250 million of notes to pay for the acquisition, according to a statement from Moody’s Investors Service. Moody’s assigned the senior unsecured debt a grade of Caa1, according to the statement. Standard & Poor’s rates the securities due in 2018 an equivalent CCC+, it said on Oct. 21. Avista Capital Partners is also seeking a $300 million term loan and a $50 million revolving credit line to help pay for the transaction.

CARRIZO OIL & GAS, a Houston-based energy exploration and production company, plans to sell $325 million of notes maturing in 2018 in a private offering, it said in a statement distributed by Marketwire. Proceeds may be used to repay bank debt and to finance a $300 million tender offer for the company’s 4.375 percent convertible senior notes due in June 2028, according to the statement. Credit Suisse Group AG, Wells Fargo & Co. and Royal Bank of Canada are managing the sale, according to a person familiar with the transaction, who declined to be identified because terms aren’t set.

DUNKIN’ BRANDS INC., owner of Dunkin’ Donuts and Baskin- Robbins restaurants, plans to sell $625 million of senior notes and obtain a $1.35 billion senior credit line to repay securitized debt and help fund a dividend, the company said in an Oct. 25 statement distributed by Business Wire. The notes will be issued through Dunkin’ Finance Corp., according to the statement. JPMorgan Chase & Co. and Deutsche Bank AG will manage the bond sale, according to a person familiar with the negotiations, who declined to be identified because the terms are private.

MOMENTIVE PERFORMANCE MATERIALS INC., a unit of Apollo Management LP, plans to sell the equivalent of $840 million of debt in dollars and euros through a private offering, the company said in a statement distributed by Business Wire.

MOMENTIVE SPECIALTY CHEMICALS INC., the Apollo Management LP-owned chemical maker formerly known as Hexion Specialty Chemicals Inc., plans to issue $440 million of 10-year notes, according to a statement distributed by Business Wire. The debt may be sold through its Hexion U.S. Finance Corp. and Hexion Nova Scotia Finance ULC units, it said the statement.

SIMMONS FOODS INC. plans to sell $250 million of second- lien senior secured notes, according to a person familiar with the offering. Proceeds from the debt due in 2017 may be used to help pay for the acquisition of Menu Foods Ltd., said the person, who declined to be identified because terms aren’t set.

PACNET LTD., the operator of undersea phone and Internet cables in Asia, plans to sell $300 million of five-year bonds, according to a person familiar with the matter. Barclays Plc, Credit Suisse Group AG, DBS Group Holdings Ltd. and Standard Chartered Plc are managing the sale of bonds, said the person, who asked not to be identified because the details are private.

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. The notes may yield 7 percent to 7.125 percent, according to three people with knowledge of the transaction, who declined to be identified because terms aren’t set.

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.

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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.

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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

PTA BANK, or Eastern and Southern African Trade and Development Bank, hired HSBC Holdings Plc and Standard Bank Group Ltd. to arrange bond investor meetings in Europe and Asia, according to two people with knowledge of the sale. The meetings will be held in Hong Kong, Singapore, Zurich, Geneva and London, said the people, who declined to be identified because terms aren’t set. The company may sell dollar bonds after the meetings, the people said.

MAQUINARIA ESPECIALIZADA MXO TRUST, a special-purpose company expected to provide construction machinery services to Corporacion GEO SAB de CV, hired Banco Santander SA to arrange bond investor meetings, according to a person with knowledge of the sale. A dollar bond sale may follow the meetings, to be held in London, Boston, New York and Los Angeles, said the person, who declined to be identified because terms aren’t set.

NOBLE GROUP LTD., the commodities supplier that counts China’s sovereign wealth fund as a shareholder, is marketing a sale of perpetual bonds in U.S. dollars, according to a person familiar with the matter. Noble is offering the notes to investors to yield about 8.5 percent, said the person, who asked not to be identified because the details are private. JPMorgan Chase & Co., Royal Bank of Scotland Group Plc and Standard Chartered Plc are managing the benchmark sale, the person said.

CODELCO, the world’s biggest copper producer, hired Deutsche Bank AG and HSBC Holdings Plc to manage a bond sale, said a person familiar with the transaction who declined to be identified because terms aren’t set. The state-owned company led the rescue of 33 miners trapped half a mile below Chile’s Atacama Desert.

CREDIT BANK OF MOSCOW plans to sell five-year dollar bonds, according to a person familiar with the transaction. The sale of Reg S securities is being arranged by Commerzbank AG, ING Groep NV and Raiffeisen Bank International, the banker said.

DOHA BANK QSC, Qatar’s third-largest bank, hired Morgan Stanley and JPMorgan Chase & Co. to manage a planned $500 million bond sale, its chief executive officer said. The offering, announced on the Qatar Exchange website, will be marketed to investors in the U.S., Europe and the Middle East, Raghavan Seetharaman said in an Oct. 20 telephone interview.

SANTANDER U.K. PLC, a unit of Spain’s largest bank, plans to sell mortgage-backed securities, according to two people familiar with the transaction. The lender hired Barclays Capital, Bank of America Merrill Lynch and JPMorgan Chase & Co. to help its investment banking unit to arrange the transaction, said the people, who declined to be named before the deal is completed. The notes will be issued in dollars, pounds and euros and sold through Holmes Master Issuer PLC Series 2010-1.

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: Sapna Maheshwari in New York at sapnam@bloomberg.net.

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

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