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WDC Issued the Most Junk Bonds in the Week Ended April 1

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Pricing trends

The primary market maintained positive momentum after dovish comments from Federal Reserve chair Janet Yellen regarding an interest-rate hike. The high-yield market saw continuous growth in the primary market, with last week recording the highest year-to-date (or YTD) issuance volume in 2016. However, the deal flow in the primary market was down from eight deals to six.

Mutual Funds such as the PIMCO High Yield Fund Class A (PHDAX) and the Fidelity High Income Fund (SPHIX) invest in junk bonds. Meanwhile, ETFs such as the SPDR Barclays Capital High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) also invest in junk bonds.

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Issuance by Western Digital

Western Digital (WDC) develops and manufactures storage solutions that enable people to create and preserve data. It issued dollar-denominated junk bonds worth $5.2 million on March 30, 2016. The “Ba2” and “BB+” rated two-tranche issue consisted of:

  • $1.9 billion in 7.4% senior secured notes due in 2023. The notes were issued at 100% of the aggregate principal amount at a yield to worst of 7.4%.
  • $3.4 billion in 10.5% senior notes due in 2024. The notes were issued at 100% of the aggregate principal amount at a yield to worst of 10.5%.

Western Digital intends to use the proceeds from the offerings to finance its proposed merger with SanDisk (SNDK).

Issuance by T-Mobile US

T-Mobile US (TMUS) is a national provider of wireless voice, messaging, and data services. It issued dollar-denominated junk bonds worth $1.0 billion on March 29, 2016. The senior notes were rated “Ba3” and “BB” and carried a coupon of 6.0%.

The bonds will mature in 2024 and were issued at 100% of the aggregate principal amount at a yield to worst of 6.0%. T-Mobile intends to use the proceeds of the loan for general corporate purposes.

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Issuance by HD Supply

HD Supply (HDS) is an industrial distributor in North America. It issued dollar-denominated junk bonds worth $1.0 billion on March 28, 2016. The senior notes were rated “B3” and “B” and carried a coupon of 5.8%.

The bonds will mature in 2024 and were issued at 100% of the aggregate principal amount at a yield to worst of 5.8%. HD Supply intends to use the net proceeds from this offering for refinancing purposes.

Issuance by Zayo Group

Zayo Group, a subsidiary of Zayo Group Holdings (ZAYO), issued dollar-denominated junk bonds worth $550 million on March 31. The senior add-on notes were rated “Caa1” and “B-” and carried a coupon of 6.4%. The bonds will mature in 2025. They were issued at 97.8% of the aggregate principal amount at a yield to worst of 6.7%. The company intends to use the net proceeds from the notes offering for refinancing purposes.

In the next article, we’ll look at high-yield bond fund flows and the yield movements of bond funds.

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