(Removes extraneous word from headline)
SYDNEY, July 22 (Reuters) - TFS Corp TFC.AX , the world's leading grower of Indian sandalwood trees, sold $250 million of high yield debt to a small group of asset managers in a rare issue from an Australian timber industry borrower.
Forestry has been given the cold shoulder by investors following the collapse of Australia's Timbercorp and Great Southern in the late 2000s which left many retirees with severe losses after they borrowed heavily to invest in the high-risk timber operations.
TFS sold this week an issue of seven-year secured notes yielding 8.75 percent to a targeted group of existing investors.
The issue is expected to be rated B+ by Standard & Poor's and B2 by Moody's.
Alistair Stevens, chief financial officer at TFS, said on Thursday the 144a issue was similar to a private placement with fewer than 10 fund managers participating in the offer, including two of the world's largest fixed-income investors.
Around 80 percent of the issue was placed in the United States, 10 percent in Britain and the balance in Australia, he said.
"We considered other debt markets but the 144a was the most suitable to us in terms of tenor, rates and covenants," Stevens said, adding that with revenues largely denominated in U.S. dollars, the greenback was a natural market to TFS.
He said the proceeds will refinance $200 million of notes issued in 2011 with the balance used for general purposes.
TFS considered coming to the market earlier but preferred to wait after July 15, 2016 when its prepayment penalty rate halved to 4 percent, allowing the company to save $8 million, Stevens said.
Stevens said TFS has no other borrowing requirements and declined to comment on the company's acquisition appetite.
The new issue, jointly managed by JPMorgan (NYSE:JPM) and National Australia Bank, will mature in August 2023 and can be repaid in three years.
The company's credit ratings were recently upgraded by one notch by both S&P and Moody's, reflecting TFS's forecast in harvest volumes of Indian sandalwood.
Moody's anticipated a 35 percent to 40 percent increase in oil and wood sale revenues in fiscal 2017, up from 15 percent in 2015. Australia is one of the major producers of sandalwood as India, a top consumer, faces a dwindling harvest due to overexploitation.
The timber is used in pharmaceutical products, religious practices and fine fragrance.
TFS's share price jumped nearly 4 percent on Thursday to touch the highest since early May.