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CommScope Issues Largest Volume of Junk Bonds

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Pricing trends

Both the quantum and the number of junk bond issuers picked up in the week ended May 29. Most issuers were rated Ba2/BB. Energy-related issuers were the most prolific, accounting for ~34% of total issuance.

The SPDR Barclays Capital High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) invest in junk bonds.

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Deal highlight of the week

CommScope (COMM) provides connectivity solutions for business and residential networks. It issued junk bonds worth $2 billion last week. The two-tranche issue consisted of:

  • $500 million in 4.375% Ba2/BB rated senior secured notes due on June 15, 2020
    • the notes were issued at 100% of the aggregate principal amount at a yield to worst of 4.375%
  • $1.5 billion in 6% B2/B rated senior notes due on June 15, 2025
    • the notes were issued at 100% of the aggregate principal amount at a yield to worst of 6%

CommScope will use the proceeds from the sale to acquire TE Connectivity (TEL) telecom, enterprise, and wireless businesses.

Issuances by Altice and ArcelorMittal

Altice provides cable television services via its subsidiaries. It issued junk bonds worth $1.7 billion via the following three tranches:

  • $1.1 billion in 5.375% B1/BB- rated senior secured first-lien notes due on July 15, 2023
    • the notes were issued at 100% of the aggregate principal amount at a yield to worst of 5.375%
  • $300 million in 7.75% Caa1/B- rated senior notes due on July 15, 2025
    • the notes were issued at 100% of the aggregate principal amount at a yield to worst of 7.75%
  • $300 million in 7.75% Caa2/CCC+ rated senior notes due on July 15, 2025
    • the notes were issued at 100% of the aggregate principal amount at a yield to worst of 7.75%

Altice will use the proceeds from the sale to finance a part of its $9.1 billion acquisition of Suddenlink Communications, the seventh-largest US cable operator. For a while, Altice was also in the race to acquire Time Warner Cable (TWX).

ArcelorMittal (MT) is an integrated steel and mining company. It issued Ba1/BB rated junk bonds worth $1 billion in two tranches:

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  • $500 million in 5.125% senior notes due on June 1, 2020
    • the notes were issued at 100% of the aggregate principal amount at a yield to worst of 5.125%
  • $500 million in 6.125% senior notes due on June 1, 2025
    • the notes were issued at 100% of the aggregate principal amount at a yield to worst of 6.125%

ArcelorMittal will use the proceeds of the sale to refinance older debt.

Issuances by SandRidge Energy and MarkWest Energy

SandRidge Energy (SD) is an oil and gas exploration and production company. It issued B1/B rated senior secured second-lien notes worth $1.25 billion last week. The single-tranche issue had its coupon set at 8.75%. The notes, which will mature on June 1, 2020, were issued at 100% of their par value with a yield to worst of 8.75%. SandRidge will use the proceeds from the sale to refinance older debt.

MarkWest Energy Partners (MWE) gathers, processes and transports natural gas. It issued Ba3/BB rated junk bonds worth $1.2 billion. The single-tranche issue of senior notes carried a coupon of 4.875%. The notes will mature on June 1, 2025. The notes were issued at 99.03% of their par value, at a yield to worst of 5%. MarkWest will use these proceeds to refinance older debt.

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