MEMC Plans Debt as Junk-Bond Spreads Widen: New Issue Alert

MEMC Electronic Materials Inc., the maker of wafers for the semiconductor and solar industries, plans to sell $500 million of senior notes as spreads on high- yield debt widened for the first time this year.

MEMC will issue debt due 2019, the St. Peters, Missouri- based manufacturer said in a Feb. 23 statement distributed by PR Newswire. Proceeds may be used for working capital, capital expenditures, constructing solar-power projects, acquisitions, investments, strategic transactions and joint ventures, according to the statement.

The extra yield investors demand to hold speculative-grade bonds instead of Treasuries widened 19 basis points to 472, the first weekly increase since December, according to the Bank of America Merrill Lynch High Yield Master Index. Spreads tightened 1 basis point on Feb. 25.

“On the positive side, economic growth in the U.S. likely will continue to support stabilization of credit quality,” according to a report by Diane Vazza, Cameron Miller and Evan Gunter at Standard & Poor’s Global Fixed Income Research in New York. “On the negative side, an increase in volatility in the financial markets, influenced partially by Middle East unrest, and sovereign rating concerns, could continue to weigh on risky assets.”

Vazza didn’t return a phone call seeking comment.

Junk-Bond Yields

Yields on junk bonds have fallen from 7.85 percent at the end of last year, reaching a record low 7.285 percent Feb. 22, according to Bank of America Merrill Lynch index data. They fell 2 basis points on Feb. 25 to 7.31 percent. Issuers have brought at least $53.2 billion of junk bonds to market this year, compared with $28.5 billion through Feb. 25, 2010.

High-yield, or junk, bonds are rated below Baa3 by Moody’s Investors Service and less than BBB- by Standard & Poor’s.

The MEMC notes may be graded B1 by Moody’s, according to data compiled by Bloomberg.

Investment-grade spreads were unchanged at 151 basis points on Feb. 25, leaving their gain for the week at 3 basis points, according to the Bank of America Merrill Lynch U.S. Corporate Master Index. Yields on the debt fell 2 basis points to 4.04 percent, down 10 basis points for the week.

The following is a description of at least $4.65 billion of pending sales of dollar-denominated bonds in the U.S.

Investment Grade

KOREAN DEVELOPMENT BANK plans to sell 5.5-year U.S. dollar- denominated notes, according to a person familiar with the transaction. The state-run lender hired Bank of America Merrill Lynch, HSBC Holdings Plc, Royal Bank of Scotland Group Plc and UBS AG to manage the sale, said the person, who declined to be identified because terms aren’t set.

High Yield

HUNTINGTON INGALLS INDUSTRIES, a unit of Northrop Grumman Corp., plans to issue as much as $1.18 billion in senior unsecured notes due 2018, according to a statement distributed by PR Newswire. The debt may be rated Ba3 by Moody’s and B+ by Standard & Poor’s, according to a person familiar with the transaction who declined to be identified because terms aren’t set.

JMC STEEL GROUP, a unit of Carlyle Group, plans to issue $725 million of 7-year senior notes, according to a person familiar with the offering. The notes may receive junk ratings, said the person, who declined to be identified because terms aren’t set.

MEMC ELECTRONIC MATERIALS INC., the St. Peters, Missouri- based maker of wafers for the semiconductor and solar industries, plans to sell $500 million of senior notes due 2019 through a private offering, the company said in a statement distributed by PR Newswire. Proceeds may be used for working capital, capital expenditures, constructing solar-power projects, acquisitions, investments, strategic transactions and joint ventures, according to the statement.

DELUXE CORP., a provider of personalized checks, plans to sell at least $200 million of notes through a private placement to help fund a cash tender offer for its 5 percent senior notes due 2012, according to a Feb. 22 statement distributed by PR Newswire.

NEEDLE MERGER SUB CORP. plans to issue $450 million of eight-year senior notes to help back the leveraged buyout of Jo- Ann Stores Inc., the retailer of fabrics and crafts goods, by Leonard Green & Partners LP, according to a Feb. 23 statement distributed by Business Wire.

BAKER & TAYLOR INC., the Charlotte, North Carolina-based book distributor, may sell $240 million of senior secured five- year notes, according to a person familiar with the offering. Proceeds may be used to pay back debt, said the person, who declined to be identified because terms aren’t set.

J. CREW GROUP INC., the retailer being acquired by TPG Capital and Leonard Green & Partners LP in a leveraged buyout, plans to sell $400 million of eight-year notes, according to a person familiar with the offering, who declined to be identified because terms aren’t set. The notes were rated Caa1 by Moody’s and CCC+ by S&P.

KEY ENERGY SERVICES INC. may sell debt in one or more offerings to help fund a tender offer for $425 million of outstanding 8.375 percent notes due in 2014, the Houston-based company said in a statement distributed by PR Newswire. The company also plans to use borrowings under a credit facility to help fund the offer, according to the statement.

KRATOS DEFENSE & SECURITY SOLUTIONS INC. plans to sell as much as $325 million of senior secured notes due 2017, the company said in a Feb. 7 regulatory filing. A majority of bondholders that own the company’s existing 10 percent senior secured notes due 2017 will permit Kratos to offer the new notes in connection with its purchase of Herley Industries Inc., according to the filing.

CAPEX SA, an Argentine energy company, will issue up to $200 million in bonds, the Buenos Aires-based company said in a statement on the country’s securities regulator’s website.

MAXUM PETROLEUM OPERATING CO., a marketer and distributor of fuel, plans to sell $250 million of eight-year bonds, according to a person familiar with the transaction. The Greenwich, Connecticut-based company is selling corporate bonds for the first time, according to data compiled by Bloomberg. Proceeds may be used to repay Maxum’s bank loan and for general corporate purposes, said the person, who declined to be identified because terms aren’t set.

SI ORGANIZATION INC., the former Lockheed Martin Corp. unit once known as Enterprise Integration Group, may sell $175 million of senior subordinated notes, according to S&P. The proceeds may be used with $340 million of bank debt and $370 million of new common stock to pay for its acquisition by Veritas Capital, S&P said.

Offerings in Pipeline

BAA LTD., the owner of London’s Heathrow airport, said it plans to sell bonds in dollars for the first time this year as it seeks to fund the renovation of Europe’s biggest hub. The company is owned by Spain’s Ferrovial SA.

THE PHILLIPINES plans to sell dollar bonds this year as part of its 2011 borrowing program, Finance Secretary Cesar Purisima said Feb. 9 in Manila. The country is sticking to a plan to narrow the budget deficit to 3.2 percent of gross domestic product, Purisima said in an interview.

AVG TECHNOLOGIES, the Czech maker of internet security software, plans to sell bonds to U.S. investors to raise money for dividends and acquisitions, said Siobhan MacDermott, AVG’s Prague-based investor relations officer, in an interview Feb. 10. The producer of a free antivirus program that competes with McAfee Inc. and Symantec Corp. is seeking to raise $300 million of debt, MacDermott said.

TATA STEEL LTD., India’s biggest producer of the alloy, plans to sell $500 million of debt by the middle of this year, CNBC-TV18 news channel reported, without saying where it got the information.

RODOPA EXPORTACAO DE ALIMENTOS & LOGISTICA LTDA, a Brazilian beef producer, may sell as much as $100 million in five-year bonds in the second half of this year or early next year, Chief Executive Officer Sergio Longo said Feb. 4 in an interview at the company’s headquarters in Sao Paulo.

(Added Feb. 8. See http://www.tatuibi.com.br/ )

GAIL LTD., a government-run gas distributor in India, may sell $200 million of dollar-denominated bonds, Finance Director Raj Kumar Goel said in New Delhi.

PT SULFINDO ADIUSAHA, an Indonesian company which makes chlorine and chemicals, hired Barclays Plc and Standard Chartered Plc to help it sell five-year, fixed-rate dollar bonds, according to a person familiar with the matter.

INKIA ENERGY, a unit of Israel Corp., may sell bonds in the U.S. to finance expansion of its electricity generation business, according to a spokesman for the holding company. The company plans to raise $250 million from the sale and is in discussions with several foreign banks, Calcalist reported Jan. 9, without saying where it obtained the information.

AMERICAN INTERNATIONAL GROUP, the insurer rescued by the U.S. government, is contemplating a new debt sale, a person familiar with the matter said. The firm hasn’t considered a timeline for when it might sell more bonds, said the person, who declined to be identified because the terms aren’t set. AIG sold $2 billion of bonds Dec. 1 in its first offering since it was rescued by the U.S. government in 2008.

PTT EXPLORATION & PRODUCTION PCL, Thailand’s only listed oil and gas explorer, plans to sell bonds denominated in 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.

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 hasn’t decided on the size of the bond, he said.

To contact the reporter on this story: Ashley Lutz in New York at alutz8@bloomberg.net.

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

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