May 11, 2018 / 4:52 PM / 9 days ago

Factbox: Five U.S. junk bond deals that faced investor pushback

NEW YORK (Reuters) - Investors in the junk bond market have started to push back against some issuers trying to bring deals to market with insufficient yields and weak investor protections.

Following are details on recent deals that were forced to offer better terms to get sold.

WEWORK COMPANIES INC

RATING: MOODY’S Caa1, FITCH BB-

ISSUE DATE: APRIL 30, 2018

WeWork, the office-sharing unicorn said to have a $20 billion valuation, sold $702 million of bonds in a deal it upsized by $202 million.

The company leases rather than owns most of its real estate, leaving investors concerned about its limited assets in the event of a downturn, and the company had to pay up to get them aboard. It offered a coupon of 7.875 percent, a full point above what was originally anticipated.

Since the deal, WeWork’s bond 96208LAA9=RRPS has fallen sharply, last trading at 94.125 cents to the dollar to yield 9.029 percent.

AMERICAN GREETINGS CORP

RATING: MOODY’S Caa1, S&P CCC+

ISSUE DATE: APRIL 9, 2018

Greeting-card maker American Greetings cut its deal size twice, ultimately selling $282.5 million at 87 cents on the dollar, down from its initial target of $325 million. While the coupon remained 8.75 percent, the repricing resulted in a yield-to-maturity of nearly 11.5 percent.

The company had to tighten covenants as well, reducing the pro forma leverage ratio needed to make restricted investments. It also removed a provision that would have allowed the company broad discretion in the use of asset sale proceeds.

On the secondary market, trading in American Greetings’ bond 026375AR6=RRPS has been choppy, swinging above and below its opening price of 91.25 cents on the dollar. It last traded at 91.25 cents to yield 10.56 percent.

MCDERMOTT INTERNATIONAL

RATING: MOODY’S B2, S&P B-

    ISSUE DATE: APRIL 18, 2018

    To sell its $1.3 billion bond, oil construction firm McDermott International (MDR.N) offered a discount of 94.75 cents on the dollar with a coupon of 10.625 percent, delivering a yield-to-maturity of 11.865 percent for initial buyers.

    It also added a new protection designed to prevent the transfer of valuable intellectual property to unrestricted subsidiaries. The company had intended to raise $1.5 billion as part of its acquisition of Chicago Bridge and Iron, but cut a planned eight-year tranche from the deal.

    Since the deal, McDermott’s bond 58003XAA0=RRPS has traded above the opening price of 96.75 cents, last at 102.875 to yield 9.87 percent.

    PISCES MIDCO

    RATING: MOODY’S Caa1, S&P CCC+

    ISSUE DATE: APRIL 12 2018

    Pisces Midco issued $645 million senior notes paying 8 percent to fund private-equity firm Clayton, Dubilier & Rice’s buyout of home remodeling firms Ply Gem Industries and Atrium Windows & Doors.

    The company was forced to tighten covenants, reducing the pro forma leverage ratio needed to unlock capped dividends and removed a proposed weakening of protection of asset sale proceeds.

    Pisces Midco’s bond US180720219=RRPS has slipped below par on the secondary market, last at 99.375 cents to yield 8.11 percent.

    TITAN ACQUISITION

    RATING: MOODY’S Caa2, S&P CCC+

    ISSUE DATE: MARCH 28 2018

    Titan Acquisition, created to finance the purchase of supplier of injection molding equipment Husky Injection Molding Systems by Platinum Equity, issued $650 million of debt, after down-sizing the deal by $100 million. The coupon is 7.75 percent.

    The company had to tighten covenants, reducing the size of a number of carve-outs and removing the weakened protection of asset sale proceeds.

    Since the deal, Titan Acquisition’s bond 88827AAA1=RRPS has fallen below par, last quoted at 99.125 cents to yield 7.897 percent.

    Reporting by Kate Duguid; Editing by Dan Burns and Meredith Mazzilli

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