Mattel Plunges After Pulling Bond Sale Over Whistleblower Letter

(Bloomberg) -- Mattel Inc. fell the most in almost 6 months on Friday after the company said it would pull a bond sale as it looks into “an anonymous whistleblower letter.”

The toymaker became aware of the letter on Aug. 6, according to a filing late yesterday. Mattel said it is terminating the sale of senior notes due in 2027 “to provide the company with an opportunity to investigate the matters set forth in the letter.”

The sale had been scheduled to close on Thursday. Mattel said it plans to refinance bonds that are due in October 2020 before maturity. It didn’t offer any further details about the letter. Spokeswoman Dena Cook said the company had no comment to add beyond what’s in the filing.

While Mattel didn’t offer many detail of the claims, Jefferies analyst Stephanie Wissink said they are likely “material enough to prevent” the bond deal rather than just delay it.

“We can only espouse from the timing of the filing that a legal test was conducted and determination made that the matters contained in the letter were meaningful enough to affect an investor’s ability to assess merit & risk,” Wissink said.

The shares fell as much as 12% to $11.78 in New York, the biggest intraday drop since February. The stock had gained 34% this year through Thursday’s close, boosted last month as the company signaled it’s making progress in revamping operations and reported quarterly revenue that outpaced estimates.

Mattel’s bonds were among the biggest decliners in the market Friday morning. Its 6.75% bonds due in 2025 dropped 4.625 cents on the dollar to 100.25 cents, the most since they were issued, according to Trace. Its notes due in 2020 declined more than 2 points to trade around par.

Junk-rated Mattel has about $3 billion of debt on its books. About $250 million of that comes due next year. The toymaker had planned to refinance its 2020 obligation with the pulled bond, which had been sold to investors on Aug. 1.

To contact the reporters on this story: Jonathan Roeder in Chicago at jroeder@bloomberg.net;Claire Boston in New York at cboston6@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Lisa Wolfson, Craig Giammona

©2019 Bloomberg L.P.