Oct. 27 (Bloomberg) -- Carrizo Oil Gas Inc., a Houston- based energy exploration and production company, plans to sell notes as record issuance of high-yield, high-risk corporate bonds helps to reduce a "daunting" amount of debt.
Carrizo plans to use proceeds from its $325 million offering of eight-year notes to repay bank debt and buy back its convertible bonds due in June 2028, according to a person familiar with the offering who declined to be identified because terms aren't set.
Companies face about $800 million of speculative-grade bonds and loans maturing in the next five years, according to Moody's Investors Service. Borrowers have sold $226.8 billion of junk-rated debt this year, the most on record, according to data compiled by Bloomberg. Issuance must keep up its pace to help companies manage upcoming maturities, CreditSights Inc. analysts Glenn Reynolds, Chris Taggert and Louise Purtle wrote in an Oct. 25 note to clients.
"There is no way around the reality that ongoing record issuance will be required---even if in fits and starts---to parallel the record refinancing need," the analysts wrote. "The wave of maturities that linger from the recent credit cycle and especially the leveraged loan explosion of 2006-2007 are nothing short of daunting."
Near-Term Debt
Issuers have succeeded in eroding the wall of debt that will mature the soonest, Moody's said in September. About $55 billion of speculative-grade bonds were set to mature through 2012 at the time of the Sept. 14 report, down from $87 billion in February.
The extra yield investors demand to own high-yield debt instead of Treasuries fell 11 basis points, the most since Sept. 9, to 579 basis points yesterday, according to the Bank of America Merrill Lynch High Yield Master II Index. Yields declined 3 basis points to 7.67 percent.
High-yield debt is rated below Baa3 by Moody's and BBB- by Standard & Poor's. A basis point is 0.01 percentage point.
Fortescue Metals Group Ltd., the Australian iron-ore producer, sold $2.04 billion of five-year notes in yesterday's only junk-bond offering, Bloomberg data show. Companies have sold $5.54 billion of high-yield debt this week, compared with $4.58 billion over the similar period a week earlier.
Moody's assigned Carrizo's notes a rank of B3, while S&P graded them B, one step higher, the credit raters said in separate statements.
Investment-grade spreads tightened 1 basis point to 178 basis points, according to the Bank of America Merrill Lynch U.S. Corporate Master Index. Yields on the debt climbed 6 basis points to 3.68 percent, the index data show.
Morgan Stanley sold $1.5 billion of five-year notes and BNP Paribas SA issued $2 billion of covered bonds to lead $5.8 billion of investment-grade offerings, Bloomberg data show.
The following is a description of at least $6.54 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 international markets to pay for expansion. Transnet has 35.2 billion rand ($5 billion) of debt outstanding.
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.
Not Rated
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.
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