Momentive to Sell Debt Amid Plunging Defaults: New Issue Alert

Momentive Performance Materials Inc. and Momentive Specialty Chemicals Inc., the chemical makers owned by Apollo Management LP, are planning to sell debt as the number of defaults on high-yield, high-risk bonds slides.

Momentive Specialty Chemicals, formerly known as Hexion Specialty Chemicals Inc., will sell $440 million of 10-year notes and Albany, New York-based Momentive Performance Materials plans to issue $840 million of debt of the same maturity in dollars and euros as soon as Oct. 27, according to a person familiar with the offerings.

Defaults on speculative-grade corporate bonds may fall to about 1 percent by the end of 2010 as companies take advantage of the lowest borrowing costs in more than three years to refinance their debt, according to an Oct. 20 report by Fitch Ratings.

“By replacing loans with longer-debt bonds, companies are pushing out debt maturities overall,” said Mariarosa Verde, a managing director at Fitch. “It is beneficial from the point of view of putting downward pressure on default rates.”

The high-yield default rate for the 12 months through September was 3.5 percent, Fitch said, down from 4.5 percent at the end of June and 13.7 percent at the end of last year.

Companies have sold $224.4 billion of junk bonds this year, the most on record, according to data compiled by Bloomberg. Debt maturing in 2016 or later accounts for 87 percent of new issues this year, while bonds due in 2018 or later make up 65 percent, the Fitch report said.

Spreads, Yields Decline

The extra yield investors demand to own high-yield bonds fell 4 basis points to 596 basis points on Oct. 25 while yields declined 2 basis points to 7.74 percent, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index. Spreads widened 1 basis point on the week, the index data show as yields fell 3 basis points. The yield was the lowest since June 2007.

High-yield bonds are rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s. A basis point is 0.01 percentage point.

Momentive Performance Materials and Momentive Specialty Chemicals each plan to use proceeds from their sales to repay debt maturing in 2014, they said in separate statements on Oct. 22. Apollo Management combined the companies under Momentive Performance Materials Holdings LLC, according to an Oct. 1 statement distributed by Business Wire. They maintain separate legal identities, according to the statement.

Omnova Notes

Investment-grade corporate debt spreads tightened 1 basis point to 181 basis points Oct. 22, while yields were unchanged at 3.63 percent, according to the Bank of America Merrill Lynch U.S. Corporate Index. Spreads contracted 1 basis point and yields fell 5 basis points for the week, the index data show.

Omnova Solutions Inc. sold $250 million of eight-year notes to lead $575 million of high-yield bond sales on Oct. 22, bringing issuance of the debt last week to $6.93 billion, while investment-grade sales reached $23.2 billion, Bloomberg data show.

The following is a description of at least $5.33 billion of pending sales of dollar-denominated bonds in the U.S.

Investment Grade

TRANSNET LTD., South Africa’s state-owned ports, rail and pipeline operator, said it may sell $1 billion worth of bonds in

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,

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

High Yield

MOMENTIVE PERFORMANCE MATERIALS INC., a unit of Apollo Management LP, plans to sell the equivalent of $840 million of

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

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

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

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 .)

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 .)

FRIENDFINDER NETWORKS INC., the publisher of Penthouse magazine, plans to sell $296 million of secured first-lien notes

Offerings in Pipeline

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

CREDIT BANK OF MOSCOW plans to sell five-year dollar bonds, according to a person familiar with the transaction. The sale

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

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

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.

GEORGIAN RAILWAY LLC, the former Soviet republic’s state-owned rail company, is preparing a bond roadshow in the U.S.,

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.

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-

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

AL BARAKA BANK EGYPT ESC, a unit of Bahrain-based Albaraka Banking Group, may sell dollar-denominated Islamic bonds in the

AMERICAN INTERNATIONAL GROUP INC. is planning its first debt offering since its bailout two years ago as the insurer

TURKIYE IS BANKASI AS, a Turkish bank, applied to Turkey’s

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

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

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

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

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

CZECH REPUBLIC plans to sell as much as $2 billion of dollar bonds to diversify from koruna and euro debt, Eduard

POTASH CORPORATION OF SASKATCHEWAN INC., the world’s largest fertilizer company by capacity, filed a registration

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

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

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

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

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

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

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.

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