First Data Corporation Was the Biggest Junk Bond Issuer in August
Why Did High Yield Bond Issuance Decrease?
Pricing trends
Difficult market conditions have held junk bond issuance back for two successive months—July and August. Both overall and individual deal sizes have fallen in these two months.
ETFs like the SPDR Barclays High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) invest in junk bonds.
Deal highlight of the month
First Data Corporation provides e-commerce solutions to financial institutions and card issuers. It had issued junk bonds worth $1.21 billion that were priced on August 5. The bonds were rated B1/BB- and carried a coupon of 5.375%. The bonds, which will mature on August 15, 2023, were issued at 100% of their par value with a yield-to-worst of 6.0%. First Data intends to use the proceeds of the sale for refinancing older debt.
Issuance by Post Holdings
Food products manufacturer Post Holdings (POST) had issued junk bonds worth $1.2 billion, which were priced on August 12. The B3/B rated two-tranche issue consisted of:
$800 million in 7.75% senior notes due on March 15, 2024—the notes were issued at 100% of the aggregate principal amount at a yield-to-worst of 7.75%
$400 million in 8.00% senior notes due on July 15, 2025—the notes were issued at 100% of the aggregate principal amount at a yield-to-worst of 8.00%
Issuance by Owens-Brockway Glass
Owens-Brockway Glass Container makes glass containers. It’s a subsidiary of Owens-Brockway Packaging, thus making it an indirect subsidiary of Owens-Illinois (OI). It had raised junk bonds worth $1.0 billion priced on August 11. The B1/BB- rated two-tranche issue consisted of:
$700 million in 5.875% senior notes due on August 15, 2023—the notes were issued at 99.22% of the aggregate principal amount at a yield-to-worts of 6.0%
$300 million in 6.375% senior notes due on August 15, 2025—the notes were issued at 100% of the aggregate principal amount at a yield-to-worst of 6.375%
Owens-Brockway Glass will use the proceeds of the sale to acquire the Mexico-based glass products manufacturer Vitro, S.A.B. de C.V.’s glass containers business.
Issuance by MSCI
MSCI (MSCI) issued senior notes worth $800 million on August 10. The bonds were rated Ba2/BB+ and carried a coupon of 5.75%. The senior notes, which will mature on August 15, 2025, were issued at 100% of their par value with a yield-to-worst of 5.75%. MSCI will use proceeds of the sale for general corporate purposes.
Issuance by ONEOK
ONEOK (OKE) is in the business of storing and transporting natural gas. It had issued junk bonds worth $500 million on August 18. The Ba1/BB+ rated single-tranche issue carried a coupon of 7.5%. The senior notes, which will mature on September 1, 2023, were issued at 98.52% of their par value with a yield-to-worst of 7.75%. ONEOK will use proceeds of the sale to buy additional common units from ONEOK Partners (OKS). With this additional purchase, OKE’s stake in OKS will increase from 36.8% to 41.2%.
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