British Retail Icon M&S Readies First Junk Bond in Upbeat Market

Marks & Spencer Plc is back in the debt market for the first time since July 2019, but this time as a high-yield issuer.

The downgraded British retailer has mandated banks to arrange a series of investor calls from Tuesday, ahead of issuing a sterling-denominated, senior unsecured bond with 5.5 years maturity, according to a person familiar with the matter who isn’t authorized to speak publicly and asked not to be named.

This will be the company’s first bond sale as a sub-investment grade issuer. Standard & Poor’s and Moody’s cut the retailer’s credit rating to one level below investment grade in March. Fitch followed in April, as the pandemic added pressure to its clothing and home divisions, only partially offset by robust online and food sales.

The deal comes alongside an offer from the company to buy back its 300 million pounds ($397.1 million) of notes due in December 2021 for 106.25 pence on the pound, according to a statement on Tuesday. The bonds are quoted at 105.8 pence, according to data compiled by Bloomberg.

NatWest Markets Plc is acting as global coordinator for the deals, as well as joint lead manager together with BNP Paribas SA, MUFG Securities EMEA Plc and SMBC Nikko Capital Markets Ltd, the company said in the statement.

Buoying market

M&S is joining a flurry of U.K. high-yield borrowers selling debt this week, capitalizing on the upbeat tone of the credit markets following the U.S. election and positive results of the Covid-19 vaccine developed by Pfizer Inc. and BioNTech SE.

Building materials firm Travis Perkins Plc and utility company Thames Water Kemble Finance Plc announced sterling-denominated deals on Monday. Both were announced before the vaccine-related news, and they haven’t priced yet.

Also on Monday, British gym operator PureGym Group Ltd announced it’s selling an euro-denominated bond. Initial price talk on the bond was for a 5.5% coupon and a discount to face value in the high 80% area, but the revised price talk on Tuesday looked slightly better for the company with the discount to face value in the 92-94 area, Bloomberg reported earlier.

“Issuers should tap the market because demand is very impressive as we’ve seen from recent transactions from both euro and sterling accounts,” Benjamin Sabahi, head of credit research at Spread Research in Lyon, France, said by phone.

©2020 Bloomberg L.P.

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