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Junk Bond Issuance Was Dominated by First Data Corporation

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Pricing trends

Junk bond issuance plummeted month-over-month in October, primarily driven by volatility in financial markets and potential issuers remaining on the sidelines ahead of the monetary policy announcement by the Federal Reserve on October 28. The largest weekly issuance was seen after the statement was released. ETFs such as 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 month

E-commerce and payment solutions provider First Data Corporation (FDC) issued junk bonds worth $3.4 billion on October 29. This was the largest issue of October. The senior notes were rated Caa1/B and carried a coupon of 7.0%. The bonds will mature on December 1, 2023. FDC intended to use the proceeds to refinance older debt.

Issuance by L Brands

Specialty women apparel retailer L Brands (LB) issued junk bonds worth $1.0 billion on October 27. The senior notes were rated Ba1/BB+ and carried a coupon of 6.9%. The bonds will mature on November 1, 2035.

L Brands intends to use the net proceeds for general corporate purposes, including capital expenditures, dividends, and share repurchases.

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Issuance by AerCap Holdings

AerCap Ireland Capital Limited and AerCap Global Aviation Trust are wholly owned subsidiaries of Netherlands-based aircraft leasing company AerCap Holdings (AER). They issued junk bonds worth $1.0 billion on October 16. The senior notes were rated Ba2/BB+ and carried a coupon of 4.6%. The bonds will mature on October 30, 2020. The company will use the proceeds for general corporate purposes.

Issuance by Level 3 Financing

Level 3 Financing is a wholly owned subsidiary of Level 3 Communications (LVLT), which provides integrated communication services. It issued junk bonds worth $900 million on October 29. The senior notes were rated B1/B and carried a coupon of 5.4%. The bonds will mature on January 15, 2024. The net proceeds from the offering of the notes will be used to refinance older debt.

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Issuance by Lennar Corporation

Homebuilder Lennar Corporation (LEN) issued junk bonds worth $400 million on October 29. The senior notes were rated Ba2/BB and carried a coupon of 4.9%. The bonds will mature on December 15, 2023. The company will use the proceeds for general corporate purposes.

Issuance by The Scotts Miracle-Gro Company

The Scotts Miracle-Gro Company (SMG) manufactures and sells consumer garden care products. It issued dollar-denominated junk bonds worth $400 million on October 7. The bonds were rated B1/B+ and carried a coupon of 6.0%. The bonds will mature on October 15, 2023. The company intended to use the proceeds to repay existing bank debt.

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