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Frontier Communications Was the Highest Issuer of Junk Bonds

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Pricing trends

Junk bond issuers came back to the primary market in the week ended September 11, 2015, after two weeks of no issuance. ETFs like the SPDR Barclays 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

Voice, data, and video services provider Frontier Communications (FTR) issued junk bonds worth $6.6 billion last week. This was the fifth largest issue ever. The Ba3/BB- rated three-tranche issue consisted of:

  • $1.0 billion in 8.875% senior notes due on September 15, 2020. The notes were issued at 100% of the aggregate principal amount at a yield to worst of 8.875%.
  • $2.0 billion in 10.50% senior notes due on September 15, 2022. The notes were issued at 100% of the aggregate principal amount at a yield to worst of 10.50%.
  • $3.6 billion in 11.00% senior notes due on September 15, 2025. The notes were issued at 100% of the aggregate principal amount at a yield to worst of 11.00%.

Frontier Communications raised these bonds to acquire wireline properties from Verizon Communications (VZ) in California, Florida, and Texas.

Issuance by Mallinckrodt International

Mallinckrodt International Finance, a wholly owned subsidiary of specialty pharma company Mallinckrodt Public Limited Company (MNK), issued senior notes worth $750 million last week. The bonds were rated B1/BB-, and carried a coupon of 5.625%. The senior notes, which will mature on October 15, 2023, were issued at 100% of their par value with a yield to worst of 5.625%. Mallinckrodt will use proceeds of the sale to acquire TGG Medical Solutions.

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Issuance by Targa Resources Partners

Midstream energy company Targa Resources Partners LP (NGLS) issued senior notes worth $600 million last week. The bonds were rated Ba2/BB+, and carried a coupon of 6.75%. The junk bonds, which will mature on March 15, 2024, were issued at 100% of the par value with a yield to worst of 6.75%. Targa Resources Partners will use these funds for refinancing older debt.

Issuance by HealthSouth

HealthSouth Corporation (HLS) operates rehabilitation hospitals in the US. It issued senior notes worth $350 million last week. The bonds were rated B1/B+, and carried a coupon of 5.75%. The junk bonds, which will mature on September 15, 2025, were issued at 100% of their par value with a yield to worst of 5.75%. HealthSouth raised these funds to finance the acquisition of Reliant Hospital Partners.

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