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How Big Were Masco’s and First Data’s Bond Issuances Last Week?

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Mar. 23 2016, Updated 1:05 a.m. ET

Pricing trends

Improved market conditions brought high yield issuers back to the primary market, with the primary market seeing six deals last week. This was up from three deals in the previous week. Mutual Funds like the PIMCO High Yield Fund Class A (PHDAX) and the Fidelity High Income Fund (SPHIX) invest in junk bonds.

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Issuance by Masco Corporation

Masco Corporation (MAS) provides building supplies, construction materials, and contractor services for new home and industrial construction. It issued dollar-denominated junk bonds worth $900 million on March 10. The Ba2/BBB rated two-tranche issue consisted of the following:

  • $400 million in 3.5% senior notes due in 2021. The notes were issued at 99.7% of the aggregate principal amount at a yield to worst of 3.6%.
  • $500 million in 4.4% senior notes due in 2026. The notes were issued at 99.5% of the aggregate principal amount at a yield to worst of 4.4%.

Masco intends to use the proceeds of the loan for refinancing purposes.

Issuance by First Data Corporation

First Data Corporation (FDC) is a provider of commerce-enabling technology and solutions. It issued dollar-denominated junk bonds worth $900 million on March 9. The senior secured first-lien add-on notes were rated B1/BB and carried a coupon of 5.0%. The bonds will mature in 2024 and were issued at 99.5% of the aggregate principal amount at a yield to worst of 5.1%.

First Data intends to use the proceeds from the offering of the notes to repay a portion of its senior secured term loan facility due 2018 and to pay related fees and expenses.

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Issuance by Extended Stay America

Extended Stay America is the operator of an extended-stay hotel chain. It issued dollar-denominated junk bonds worth $800 million on March 11. The senior notes were rated B3/BB- and carried a coupon of 5.3%. The bonds will mature in 2025 and were issued at 98.5% of the aggregate principal amount at a yield to worst of 5.5%. The company intends to use the proceeds of the loan for refinancing purposes.

Issuance by Level 3 Communications

Level 3 Communications (LVLT) provides communication services to enterprise, government, and carrier customers. It issued dollar-denominated junk bonds worth $775 million on March 8. The senior notes were rated B1/B and carried a coupon of 5.3%. The bonds will mature in 2026 and were issued at 100% of the aggregate principal amount at a yield to worst of 5.3%. The company intends to use the proceeds of the loan for refinancing purposes.

In the next article in this series, we’ll look at high yield bond fund flows and yield movement of bond funds.

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