Low-rated companies are taking advantage of recent breakthroughs in the Covid-19 vaccine as investors look to effective jab prospects to boost the financial outlook for riskier borrowers. I’m renting in a market.
Companies under the rating ladder and those whose profits have declined due to pandemics are in a good mood to push debt trading across the line while providing juicy returns to investors with a growing desire for risk. I am using.
The success of such a deal reflects expectations for a recovery from the vaccine next year. Historical central bank behavior and low interest rates offered by high-rated borrowers also encourage investors to look for returns in the more risky corners of the market.
Boparan, Britain’s largest producer of chicken, run by the so-called “King of Chickens” Ranjit Singh Boparan, issued high yield bonds this week. Prior to financing, chicken suppliers to retailers, including Aldi and Tesco, had a triple C credit rating in the lowest range of junk. Last month, it launched a turnaround program that included selling assets, including Fox’s Biscuits, for £ 246m, squeezed by high levels of borrowing.
Just hours after Boparan’s £ 475m bond issuance began on Monday, U.S. biotechnology company Moderna delighted the market by announcing that the coronavirus vaccine was nearly 95% effective. did.
This boosted demand for junk bonds issued by the UK exercise chain PureGym, following the announcement of highly effective vaccines announced by Pfizer and BioNTech last week. The bank has been in debt since January, and vaccine news has given PureGym bankers the boost they need to dodge sudden losses.
“The bond market is arguably very hot now, and the Pfizer and Moderna vaccine headings are very aggressive, at least on credit risk,” said James Durance, European High Yield Portfolio Manager at Fidelity International. A low-rated issuer to state and market.
For Boparan, the breakthrough in double vaccines has helped as well. During the summer, the company was looking to refinance its bonds due in 2021, but investors demanded excessively high borrowing costs, putting the plan on the ice.
Prior to the announcement of the vaccine, Dominique Ashcroft, co-head of Emea Leveraged Finance at Goldman Sachs, said that transactions with companies, including Boparan, were “more difficult or achieved to reach previous price levels.” You couldn’t … .. .. This week they are at a better level than they were two weeks ago. “
Of Boparan’s £ 475m worth of five-year debt, £ 50m was purchased by Mr. Boparan and his wife, according to a pricing document viewed by the Financial Times, with an interest rate of about 7.6% to investors. Gave.
Boparan declined to comment on this week’s deal or the possibility of refinancing during the summer.
US companies at the bottom of the rating scale also benefit from post-vaccination euphoria. Yields on the US index for triple-C-rated bonds fell 0.72 percentage points on the day Pfizer announced, dropping to 10 percent, the largest daily decline since May, as investors plunged into debt.
Cruiseline operator Carnival is a pandemic-hit company that regularly uses the bond market this year. This week it is back with the first unsecured transaction. Bonds are a riskier offer as they are not backed by ships or other collateral.
“The news of the vaccine was a US game changer,” said Ben Burton, head of the US Leveraged Finance Syndicate at Barclays, adding that risk appetite has increased “dramatically.”
In the loan market, the inspiring brand, which owns the restaurant chain Buffalo Wild Wings and Arby’s, raised $ 2.6 billion this week to buy the Dunkin brand coffee chain. Bankers have postponed the closing date of the transaction two days in advance, lowering the company’s borrowing costs by 3.25 percentage points below a benchmark rate called Libor, as a sign of demand for the transaction.
Saran Disappointment, co-head of the Bank of America’s global capital markets, said the bond market sold its shares due to lower borrowing costs and strong investor demand for bond purchases or loan executions. He said it was an attractive alternative to raising money.
Vaccine news also sparked a surge in transactions from riskier emerging market borrowers as investors bet that the sector would be one of the biggest winners from a faster economic recovery.
This week, Uzbekistan raised $ 750 million worth of $ 750 million and Uzbek som from only its second bond issue, following its market debut last year.
“Before the second wave of Covid, the market was open to EM borrowers, collect“Sergey Goncharov, Fund Manager at Vontobel Asset Management, said.
The development of the vaccine has made investors “more comfortable buying these high-risk names,” he added. “Portfolio managers have accumulated so much cash and are looking for a place to make it work.”
Vaccines want a clear path for high-risk groups to open up capital markets
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