Freescale bond sale boosted by HCA-Blackstone

By Walden Siew

NEW YORK (Reuters) - Freescale Semiconductor Inc.'s FSL.N $5.95 billion bond sale, the biggest to finance a buyout since 1989, is getting a boost from increasing appetite for high-yield bonds, a Blackstone Group executive said on Tuesday.

The Austin, Texas-based chip maker is selling debt to help finance its $17.6 billion takeover by a Blackstone Group-led consortium. Investor demand has been strong in the wake of HCA Inc.'s HCA.N $5.7 billion sale last week, according to Hamilton "Tony" James, president of the Blackstone Group.

"It feels good," said James at the Reuters Investment Banking Summit. "HCA trading up the way it did helped the perception of high-yield deals a lot."

James also views technology as a growing industry and said Blackstone has added staff to anticipate that growth, he said.

Even investment-grade technology firms, which typically have not tapped the debt markets, have had some of the biggest sales this year. Internet equipment maker Cisco Systems Inc. (CSCO.O: Quote, Profile, Research, Stock Buzz) issued $6.5 billion and software giant Oracle Corp. (ORCL.O: Quote, Profile, Research, Stock Buzz) sold $5.75 billion of debt to lead technology and telecom company sales.

James also said he was concerned about companies bypassing the U.S. market to hold initial public offerings in other markets. Blackstone and three other buyout firms agreed to buy Freescale this year.

"It wouldn't surprise me if we listed Freescale in Hong Kong," James said.

Freescale's sale is being marketed to investors in Los Angeles, San Francisco, Chicago and New York leading up to expected pricing on Thursday.

HCA Inc.'s bonds gained HCA.N last week after the company sold $5.7 billion in debt, the second-largest U.S. junk bond offering ever to finance its own leveraged buyout by a private equity group.

HCA's notes rose about 3 percentage points after the sale, traders said, after the No. 1 hospital operator sold debt last week to finance its LBO.

Freescale's sale would top that and become the largest by a U.S. company since a $6.1 billion issue for KKR's buyout of RJR Nabisco in 1989, according to Thomson Financial.

The Freescale debt sale includes eight-year notes expected to yield 9 percent to 9.25 percent; eight-year senior "toggle" notes to yield 25-50 basis points behind eight-year fixed notes, according to a market source who did not want to be named. Toggle notes may be payable in cash or new notes.

The deal will also include senior floating-rate notes that have a coupon rate of 400 basis points to 425 basis points over the London interbank offered rate and senior eight-year euro notes expected to yield 8.125 percent to 8.375 percent, the source said.

"Every deal is just coming in oversubscribed," said Mirko Mikelic, a senior portfolio manager who helps oversee $13 billion in fixed-income assets at Fifth Third Asset Management in Grand Rapids, Michigan. "Everyone's searching for yield, not just in the U.S. but globally."

Relatively tight credit spreads also are helping spur demand, he said. The yield gap between investment-grade bonds and U.S. Treasuries and for high-yield bonds is about the smallest since June, according to Merrill Lynch & Co. data.

"There's a lot of money chasing deals," Mikelic said. "It's a good time to come out if you're an issuer."