Yankee Candle calls off $1.4bn fundraising

Thu Jun 13, 2013 3:05pm EDT

NEW YORK, June 13 (IFR) - Yankee Candle called off plans Thursday to raise $1.4 billion in fresh capital, withdrawing a bond issue and term loan amid tough and volatile conditions in the US financing markets.

The Massachusetts-based candle-maker withdrew its $450 million five-year senior unsecured bond and pulled a $950 million concurrent term loan, sources told IFR.

It was the second setback in as many months for Yankee, a leader in the scented candle business which had been on the block for sale by its private equity owner Madison Dearborn.

But the buyout firm nixed the sale in May after failing to secure the offer it had wanted for Yankee, which posted a $90.4 million gross profit in the first quarter of 2013.

It was also the second time this week that a high-yield deal has been pulled from the market, which has been wracked by worry about the spike in Treasury rates as well as fears that the Federal Reserve could soon wind down its economic stimulus plan.

Independent energy company Warren Resources on Monday postponed an USD200m eight-year non-call four senior notes offering via BMO sole bookrunner, citing market conditions.

Since the end of May, the bond markets have been selling off on worries about rising rates, which has kept many would-be issuers of new debt on the sidelines.

Surprisingly to some, Yankee decided to test the waters anyway - and to do so with a dividend deal, aimed at using much of the new money to reward the owners.

Dividend deals are often among the most aggressive deals in the high-yield bond market, and Yankee's proposed bond was viewed as a test of current investor appetite for risk.

"Yankee getting pulled was not so much an issue with the market - it was just that it shouldn't have launched in the first place," said one banker who asked not to be named.

"Investors are still there but are being very thoughtful. They want things to look cheap, but when they do, they are certainly willing to go all in."

MARKET FREEZE

Barclays and Bank of America Merrill Lynch were joint bookrunners on the Yankee Candle bond deal, which was launched on Wednesday.

It was structured as five-year notes, callable immediately at 101.5 through the end of year two, at par + 1/2 coupon through year three, at par + 1/4 coupon through year four, and at par through year five.

S&P has assigned a CCC+ rating to the Yankee offering, with Moody's putting them at Caa1 - both ratings well into the junk-bond end of the credit spectrum.

New issues of junk and investment-grade bonds alike have been reined in over the past few days, as Treasury yields have touched their highest levels in 14 months.

That has marked an abrupt U-turn for the bond markets, which had been white-hot for months, allowing companies to sell debt at historically low coupon (interest) rates.

But as rates have risen, investors have become decidedly more cautious.

"There are some other aggressive deals like Yankee that were on the launch pad," the banker said. "But these have not launched, thankfully."

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