TransDigm Group Markets Debt as Lowest-Rated Sales Rise: New Issue Alert

TransDigm Group Inc., the aircraft- components manufacturer that’s buying rival supplier McKechnie Aerospace Holdings Inc., is marketing debt as issuance of the lowest-rated junk bonds surges.

TransDigm plans to sell $780 million of senior subordinated notes and is seeking an additional $1.2 billion in loans to help pay for the acquisition, the Cleveland-based company said in a filing with the Securities and Exchange Commission. Moody’s Investors Service assigned the notes a grade of B3, six steps below investment grade.

Sales of high-yield, high-risk debt with rankings equivalent to or lower than TransDigm’s rose to $20.1 billion last month, the most this year, according to data compiled by Bloomberg. Investors are wagering that junk-rated companies won’t default as the Federal Reserve supports the economic recovery through a plan to buy long-term securities, said Kingman Penniman, chief executive officer of KDP Investment Advisors in Montpelier, Vermont.

“What’s giving the market some confidence is an awful lot of optimism on quantitative easing and that the Fed will backstop the economy and stop it from sliding,” Penniman said. “They’re looking at QE2 as being good for risk products.”

Quantitative Easing

The Fed previously deployed $1.7 billion to help shore up the economy in a securities-purchase program that ended in March. It will probably begin a new round of unconventional monetary easing this week by announcing a plan to buy at least $500 billion of securities, according to economists surveyed by Bloomberg News. Policy makers meeting today and tomorrow will restart a program of securities purchases to spur growth, reduce unemployment and increase inflation, said 53 of 56 economists surveyed last week.

The extra yield investors demand to buy high-yield debt widened 14 basis points to 596 basis points yesterday from Oct. 29, according to the Bank of America Merrill Lynch U.S. High Yield Master II index. Yields rose 13 basis points to 7.75 percent.

High-yield, high-risk debt is rated below Baa3 by Moody’s and less than BBB- by Standard & Poor’s. A basis point is 0.01 percentage point.

SunGard Data Systems inc. sold $1.6 billion of debt expected to be rated Caa1 by Moody’s and B by S&P, Bloomberg data show. The sale led $2.03 billion of issuance graded at least as low by one of the credit-ratings companies.

New York Times

New York Times Co. sold $225 million of six-year notes after boosting the size of its offering from $200 million, Bloomberg data show. High-yield sales totaled $500 million a week earlier.

Corporate debt graded below B3 by Moody’s and less than B- by Standard & Poor’s made up 58 percent of October’s $34.4 billion of speculative-grade issuance, Bloomberg data show. That’s the highest portion of total sales since February, when 61 percent of offerings were rated as low or lower.

In addition to financing its acquisition of McKechnie, TransDigm plans to use the proceeds of its bond offering and new loans to repay bank debt, according to the filing.

Spreads on investment-grade bonds widened 2 basis points to 179 basis points yesterday from Oct. 29, while yields on the debt rose to 3.65 percent, according to the Bank of America Merrill Lynch U.S. Corporate Master Index.

Northrop Grumman Corp., the third-largest U.S. defense contractor after Boeing Co. and Lockheed Martin Corp., sold $1.5 billion of debt and Chicago-based Northern Trust Corp. issued $500 million of notes to lead $2.35 billion of investment-grade corporate debt offerings, Bloomberg data show. That compares with $3.52 billion on Oct. 25.

The following is a description of at least $3.37 billion of pending sales of dollar-denominated bonds in the U.S.

Investment Grade

KOREA NATIONAL OIL CORP. hired Barclays Plc, BNP Paribas SA, Credit Suisse Group AG, Deutsche Bank AG and Korea Development Bank for a benchmark sale of dollar bonds, according to a person familiar with the transaction. The company started marketing the debt on Oct. 27, said the person, who declined to be identified because terms aren’t set. The company known as KNOC said in September it plans to raise $500 million to $1 billion to fund acquisitions. KNOC is rated A1 by Moody’s and A by S&P. A benchmark issue is typically at least $500 million.

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.

Split-Rated

KAZMUNAIGAZ NATIONAL CO., a Kazakh state-owned oil and gas producer, hired Credit Suisse Group AG, Royal Bank of Scotland Group Plc and UBS AG to manage a sale of bonds denominated in U.S. dollars, according to a person familiar with the offering, who declined to be identified because terms aren’t set. Moody’s grades the company Baa3 and S&P ranks it BB+, one step lower.

(Added Nov. 2. See KMGZ KZ .)

Not Rated

CYRELA BRAZIL REALTY SA EMPREENDIMENTOS E PARTICIPACOES, Brazil’s biggest homebuilder, hired Banco do Brasil SA, Credit Suisse Group AG, Itau Unibanco Holding SA and Morgan Stanley to arrange bond investor meetings, according to a person familiar with the matter. Cyrela will meet with investors in Asia, Europe and the U.S., said the person, who declined to be identified because the conversations are private.

(Added Nov. 2. See CYRE3 BZ .)

SPANSION INC., the maker of flash-memory chips that emerged from bankruptcy in May, plans to sell $200 million of seven-year notes, the company said in an Oct. 28 statement distributed by PR Newsire Proceeds will be used to repay borrowings under a $450 million term loan, Spansion 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

TRANSDIGM GROUP INC., the aircraft-components manufacturer that’s buying rival supplier McKechnie Aerospace Holdings Inc., plans to sell $780 million of senior subordinated notes to help fund the acquisition, the Cleveland-based company said in a filing with the Securities and Exchange Commission. The company is also planning a $900 million term loan and a $300 million revolving credit line, according to the filing. The notes were rated B3 by Moody’s.

FRAC TECH SERVICES LLC plans to sell $550 million of senior notes due in 2018, according to a statement on its website. Proceeds may be used for general corporate purposes and to repay debt, fund capital spending and return capital to equity owners, the Cisco, Texas-based company said. The notes may be issued through the company’s Frac Tech Finance Inc. unit, according to the statement.

(Added Nov. 2. See {www.fractech.net})

PT MNC SKY VISION, an Indonesian provider of pay-television services, hired HSBC Holdings Plc and Standard Chartered Bank for a sale of five-year senior secured guaranteed notes that are callable after three years, according to two people with knowledge of the sale, 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. S&P assigned the debt a grade of B-, it said in a statement.

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.

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 .)

Offerings in Pipeline

PTT EXPLORATION & PRODUCTION PCL, Thailand’s only listed oil and gas explorer, plans to sell bonds denominated in U.S. dollars, according to a person familiar with the transaction. PTT Exploration hired Barclays Plc to manage the sale, said the person, who declined to be identified because terms aren’t set. Barclays is arranging a U.S. dollar-denominated medium-term note program for the company, the person said.

INTERNATIONAL PETROLEUM INVESTMENT CO. plans to meet bond investors in the United Arab Emirates, according to two people with knowledge of the marketing. Goldman Sachs Group Inc., Bank of America Corp., HSBC Holdings Plc, National Bank of Abu Dhabi, Standard Chartered Bank and Royal Bank of Scotland Group Plc are arranging the meetings, said the people, who declined to be identified because terms aren’t set.

QATAR NATIONAL BANK plans to sell dollar-denominated bonds, according to two people with knowledge of the sale. The company will meet with investors in Asia and Europe, said the people, who declined to be identified because terms aren’t set. Barclays Capital, BNP Paribas SA, JPMorgan Chase & Co. and Standard Chartered Bank will manage the issue with QNB Capital, the people said.

MB PETROLEUM SERVICES, a Middle East oilfield services provider, plans to sell $350 million of bonds, according to a banker involved in the transaction. Barclays Capital, HSBC Holdings Plc and Standard Chartered Plc are managing the issue, which will follow investor meetings in Asia, the United Arab Emirates, Europe and the U.S., the banker said, declining to be identified because terms aren’t set. The notes will be guaranteed by Mohamed Al Barwani Holding Co.

(Added Oct. 28. See website: http://www.mbpetroleum.com )

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.

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.

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 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.

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: Timothy 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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