Why Was Junk Bond Issuance Mild Last Week?

(Continued from Prior Part)

Pricing trends

Issuance in the high-yield primary market is losing traction. Investors fear that sluggish global growth might increase defaults in junk bonds. Junk bond issuance fell last week—compared to the previous week. The deal flow was down from seven deals priced in the previous week to five in the last week.

Funds like the T. Rowe Price High Yield Fund – Advisor Class (PAHIX) and the iShares iBoxx $ High Yield Corporate Bond Fund (HYG) invest in junk bonds.

Hanesbrands’ issuance

Hanesbrands (HBI) markets innerwear and active wear apparel in the Americas, Europe, and Asia. It issued Ba2/BB rated dollar-denominated junk bonds worth $1.8 billion on May 3. The two-tranche issue consisted of:

• $900 million in 4.6% senior notes due on May 15, 2024. The notes were issued at 100% of the aggregate principal amount at a yield to worst of 4.6%.

• $900 million in 4.9% senior notes due on May 15, 2026. The notes were issued at 100% of the aggregate principal amount at a yield to worst of 4.9%.

The company intends to use the proceeds of the loan for refinancing purposes.

U.S. Steel’s issuance

U.S. Steel (X) is an integrated steel producer. It issued junk bonds worth $980 million on May 3. The senior secured notes were rated B/BB- and carried a coupon of 8.4%. The bonds will mature on July 1, 2021. They were issued at 100% of the aggregate principal amount at a yield to worst of 8.4%. The company intends to use the proceeds of the loan for refinancing purposes.

PTC’s issuance

PTC (PTC) provides technology platforms and solutions that transform how companies create, operate, and service the “things” in the Internet of Things. It issued junk bonds worth $500 million on May 4. The senior notes were rated Ba3/BB- and carried a coupon of 6.0%. The bonds will mature on May 15, 2024. They were issued at 100% of the aggregate principal amount at a yield to worst of 6.0%. The company intends to use the proceeds of the loan for refinancing purposes.

Mobile Mini’s issuance

Mobile Mini (MINI) designs and manufactures portable steel storage containers, portable offices, telecommunication shelters, and a variety of delivery systems. It issued junk bonds worth $250 million on May 4. The senior notes were rated B2/BB- and carried a coupon of 5.9%. The bonds will mature on July 1, 2024. They were issued at 100% of the aggregate principal amount at a yield to worst of 5.9%. The company intends to use the proceeds of the loan for refinancing purposes.

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