Stericycle plans debt after July volume jumps

Stericycle Inc., the provider of regulated medical waste management services, plans to sell $400 million of debt after July issuance jumped to the highest since March.

Stericycle may sell $175 million of 3.89 percent, seven- year notes and $225 million of 4.47 percent, 10-year debt, the Lake Forest-based company said last week in a statement distributed by Business Wire.

Companies sold $90.4 billion of bonds in July, the most since March, when volume totaled $139.8 billion, according to data compiled by Bloomberg. Issuers are offering bonds as borrowing costs tumble, said Didi Weinblatt, vice president of mutual fund portfolios at San Antonio-based USAA Investment Management.

"Any corporate treasurer must be in heaven today," said Weinblatt, who helps oversee more than $44 billion in assets. "There's a lot of cash on balance sheets right now, but wouldn't you be projecting out for the next many years and raising money at these low rates? I think I would."

Absolute yields on investment-grade corporate debt fell 16 basis points last week to 4 percent on July 30, the lowest since March 17, 2004, according to Bank of America Merrill Lynch's Corporate Master index. The extra yield investors demand to own investment-grade corporate bonds rather than government debt fell 5 basis points in the week to 188 basis points, the index data show.

Investor QualmsAs borrowing costs drop, returns may not be appealing for investors, Weinblatt said."I don't know if there's value for us," she said. "The spreads aren't that bad but when you look at the absolute yield levels, it's a little hard."Volume on July 30 was $1.45 billion, Bloomberg data show. Noble Group Ltd., the commodities supplier backed by China's sovereign wealth fund, led issuance, selling $750 million of notes in a two-part offering.Last week's sales totaled $22.1 billion, the third consecutive five-day period in which issuance exceeded $20 billion, the data show. Westpac Banking Corp., Australia's second-biggest lender, sold the most debt in the five days ended July 30 in a $3 billion dollar-denominated issue. Commonwealth Bank of Australia is the nation's biggest bank.ATT Inc. led nonfinancial issuance in the week with a $2.25 billion offering of 2.5 percent, five-year notes, the data show.Sales of high-yield, high-risk debt jumped to $6.45 billion for the week, the busiest since the five days ended April 30, Bloomberg data show. High-yield, high-risk, or junk, debt is rated below Baa3 by Moody's and lower than BBB- by SP.'Appetite for New Paper'"The appetite for new paper is astonishing and indicative of continued bond fund inflows," Byron Douglass, a senior analyst with Credit Derivatives Research LLC, based in Walnut Creek, California, wrote in a research note last week. "For relative value players, we advise revisiting the secondary market as the aggressive bidding for new issues leaves little value on the table."Spreads on junk debt narrowed 2 basis points to 657 basis points for the week, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index. Yields on the debt fell 14 basis points to 8.507 percent, the least since May 5, the index data show. A basis point is 0.01 percentage point.Stericycle plans to sell debt after receiving informal commitments from 22 institutional investors to buy the securities, it said its statement.August IssuanceThe company plans to issue the securities in October, Stericycle Chief Financial Officer Frank ten Brink said in an earnings call on July 28. Proceeds will be used to repay term debt and a portion of a revolving credit line, he said. The company is unrated by Moody's Investors Service and Standard Poor's, Bloomberg data show.Issuance may be active in August "if we continue to have reasonably low Treasury yields," said Jason Brady, a managing director at Thornburg Investment Management in Santa Fe, New Mexico."There's a lot of demand from the investor side for sure," said Brady, who helps oversee about $57 billion.Following is a description of at least $7.7 billion of pending sales of dollar-denominated bonds in the U.S.