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Ally Financial Issues $1.4 Billion in Junk Bonds Last Week

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Pricing trends

The number of high-yield bond issuances kept the primary market very busy in the week ended May 15. Investors had a strong appetite for junk bond issues, even the long-dated ten-year issues. ETFs like the SPDR Barclays Capital High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond Fund (HYG) invest in junk bonds.

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Deal highlights of the week

Ally Financial (ALLY) provides financial products and services to auto dealers and their customers. It issued junk bonds worth $1.4 billion last week. The BB+ rated two-tranche issue consisted of the following:

  • $1.0 billion in 3.60% senior notes due on May 19, 2018 – The notes were issued at 99.44% of the aggregate principal amount at a yield to worst of 3.800%.
  • $400 million in 4.625% senior notes due on May 19, 2022 – The notes were issued at 98.39% of the aggregate principal amount at a yield to worst of 4.900%.

Ally Financial will use the money raised to pay off older debt.

Issuances by Burger King–Tim Hortons and Spectrum Brands

The Burger King–Tim Hortons merger, which operates under Restaurant Brands International (QSR), issued B1/B+ rated bonds worth $1.25 billion last week. The senior secured first-lien notes carried a coupon of 4.625%. The notes will mature on January 15, 2022. They were issued at 100% of the aggregate principal amount at a yield to worst of 4.625%. The restaurant chain combination will use the proceeds to refinance older debt.

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Consumer products company Spectrum Brands Holdings (SPB) issued bonds worth $1.0 billion. The single-tranche B2/B rated issue of senior notes carried a coupon of 5.75%. The notes will mature on July 15, 2025. The notes were issued at 100% of the par value at a yield to worst of 5.75%. Spectrum Brands will use the proceeds from the sale to finance its $1.4 billion acquisition of Armored AutoGroup Parent.

Issuances by CNO Financial and Energizer Holdings

Insurance products company CNO Financial Group (CNO), which provides services through companies like Bankers Life and Casualty Company, raised Ba1/BB+ rated bonds worth $800 million in the following two tranches:

  • $400 million in 4.50% senior notes due on May 30, 2020 – The notes were issued at 100% of the par value at a yield to worst of 4.50%.
  • $400 million in 5.25% senior notes due on May 30, 2025 – The notes were issued at 100% of the par value at a yield to worst of 5.25%.

CNO will use the money raised to pay off older debt.

Energizer Holdings Inc. (ENR), a battery, lighting, and personal care product maker, issued Ba3/BB rated junk bonds worth $600 million. The single-tranche issue of senior notes carried a coupon of 5.5%. The notes will mature on June 15, 2025. They were issued at 100% of their par value at a yield to worst of 5.5%. Energizer will provide these proceeds in a tax-free spin-off to newly formed Edgewell Personal Care.

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