El Paso Pipeline Plans Junk-Bond Offer Following August Freeze

El Paso Pipeline Partners LP (EPB), the natural gas limited partnership part-owned by El Paso Corp. (EP), is planning to sell $500 million of speculative-grade bonds as companies return to the market after a shutdown in August.

El Paso Pipeline Partners Operating LLC is offering 10-year notes to cut outstanding debt on its revolving credit line and for general partnership purposes, the Houston-based company said today in a statement distributed by Marketwire. The borrower is graded Ba1 by Moody’s Investors Service and BB by Standard & Poor’s, according to data compiled by Bloomberg.

The market for high-yield, high-risk debt is showing signs of reviving after sales in August plummeted to the least since December 2008 and junk bonds lost 4 percent, Bank of America Merrill Lynch index data show. Relative yields on the securities tumbled from 764 basis points on Sept. 12, the highest since November 2009, to 755 basis points yesterday, as optimism grows that policy makers will contain Europe’s sovereign debt crisis.

“The Fresenius deal last week did very well, and there is significant demand for higher quality paper,” Marc Gross, a money manager at RS Investments in New York, where he oversees $3 billion in fixed-income funds, said in an e-mail. “These are being used as a test for the market, but more than that it shows that for the right deal there is demand and there is money on the sidelines.”

Speculative-grade borrowers, including dialysis services provider Fresenius Medical Care AG, have issued $665 million of debt in the U.S. this month after $987 million in August, Bloomberg data show. That compares with the 2011 average monthly volume of $28.5 billion through July.

Omnicare, Sealed Air

Omnicare Inc. (OCR), the Covington, Kentucky-based provider of drugs to nursing homes and hospitals, is planning to sell $100 million of 7.75 percent debt due in 2020 that may be rated Ba3 by Moody’s and BB by S&P, said a person with knowledge of the offer, who declined to be identified because terms aren’t set.

Sealed Air Corp. (SEE) is marketing $1.5 billion of 8- and 10- year notes to fund its acquisition of Diversey Holdings Inc., said a separate person familiar with that offering, who declined to be identified because terms aren’t set. The company is split- rated, with a Baa3 grade from Moody’s, and BB+, the highest junk rating, from S&P.

“The $1.5 billion Sealed Air deal will be a better test for the market than these two,” Gross said.

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

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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