McLaren Bonds Draw Billions in Investor Demand
(Bloomberg) -- Demand for McLaren’s latest bond sale reached at least $4 billion as investors bet the firm will use a bolstered balance sheet and strong brand image to turn itself around.
Funds bid around seven times the amount of bonds being sold by the supercar maker, according to people familiar with the matter. The strong demand for the new debt enabled McLaren Finance PLC to improve the pricing terms to 7.5%, from original indications of 8%.
The company is poised to raise $620 million to repair its finances after suffering losses from the pandemic, as it seeks to compete with peers such as Ferrari NV. The sale comes just a week after McLaren raised $760 million of preferential shares and equity warrants from investors including Ares Management Corp. and Saudi Arabia’s sovereign wealth fund.
The high value of McLaren’s brand, technological edge, history of successfully introducing new models and strong shareholder support were seen as positives, analysts from Lucror Analytics said in a note to clients on Thursday. Yet they still expect the company’s free cash flow to remain negative for the foreseeable future.
The firm will be refinancing its debt with more expensive interest rates, replacing the 5.75% dollar bonds raised when it held a higher rating of B/B2 in 2017. The new rate, at current price guidance, is also about 1.5% more than the average for a CCC rated dollar-denominated credit, Bloomberg data shows. The deal is led by Goldman Sachs Group Inc. and HSBC Holdings Plc, along with National Bank of Bahrain.
The trade is the latest example of how the hunt for yield among investors has intensified in global credit markets, even for companies and sectors that have been bruised by the pandemic, and as investors fret about a spike of new infections.
“Higher beta is definitely in demand,” said George Curtis, a London-based credit analyst at TwentyFour Asset Management. “It’s a pretty good environment for credit, default rates are incredibly low and companies are flush with cash, while expecting a big rebound in earnings.”
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