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Fiat Chrysler, GM Financial Issue Largest Bonds in April 10 Week

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Pricing trends

Investors showed interest in buying high-yield bonds that were priced in the market in the week ended April 10. Most high-rated issuers were able to get better deals than the price talk, but some issuers could find takers only at the tight end of the price talk. ETFs such as the SPDR Barclays Capital High Yield Bond ETF (JNK) invest in junk bonds.

Bond yields were affected by the release of the Federal Reserve’s March 2015 meeting minutes. The minutes showed that policymakers did not agree that June is the appropriate time to hike interest rates. This led to a rise in Treasury yields, thus leading to a fall in ETFs such as the iShares Barclays 20+ Year Treasury Bond Fund (TLT).

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Deal highlights of the week

Fiat Chrysler Automobiles (FCAU) is a designer, manufacturer, and seller of automobiles and components. It issued B2/BB- rated junk bonds worth $3 billion in the following two tranches:

  • $1.5 billion in 4.500% senior notes due on April 15, 2020 – The notes were issued at 100.00 at a yield to worst of 4.500%.
  • $1.5 billion in 5.250% senior notes due on April 15, 2023 – The notes were issued at 100.00 at a yield to worst of 5.250%.

Fiat Chrysler Automobiles will use the proceeds from the sale for general corporate purposes, which may include refinancing debt of its unit FCA US.

Issuances by GM Financial and Mallinckrodt

GM Financial is the financial services unit of automaker General Motors (GM). It issued Ba1/BBB- rated bonds worth $2.4 billion in the following three tranches:

  • $300 million in senior floating-rate notes with a coupon of LIBOR + 135 basis points
  • $850 million in 2.400% senior notes due on April 10, 2018 – The notes were issued at 99.91 at a yield to worst of 2.430%.
  • $1.25 billion in 3.450% senior notes due on April 10, 2022 – The notes were issued at 99.80 at a yield to worst of 3.482%.

GM Financial plans to use the proceeds of the sales for general corporate purposes.

Mallinckrodt International is a subsidiary of specialty pharma and medical imaging agent manufacturer Mallinckrodt PLC (MNK). It issued B1/BB- rated bonds worth $1.4 billion in the following two tranches:

  • $700 million in 4.875% senior notes due on April 15, 2020 – The notes were issued at 100.00 at a yield to worst of 4.875%.
  • $700 million in 5.500% senior notes due on April 15, 2025 – The notes were issued at 100.00 at a yield to worst of 5.500%.

The company intends to use the proceeds of the sale to finance its acquisition of Compound Holdings II, Inc. and pay expenses of the acquisition of Ikaria, Inc.

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