Return of the Junk-Bond Dividend Deal Shows It's Risk On Again
(Bloomberg) -- Need more proof that investor appetite for risk-taking is returning in the U.S. junk-bond market? Take a look at the debt being offering by Ascend Learning, the educational software maker acquired two years ago by Blackstone Group and the Canada Pension Plan Investment Board in a leveraged buyout.
The $300 million high-yield offering is the first since July that will be used to fund a dividend to a company’s owners, a purpose that’s typically seen by investors as riskier than other types of deals. It was the first such deal to launch since Bruin E&P Partners sold $600 million of notes in July to, among other things, fund a payout to its equity sponsors, data compiled by Bloomberg show.
It’s just the latest sign that investors have returned to the market with a vengeance after fleeing for safer asset classes at the end of 2018. Here’s how the market’s been shaping up:
- Investors have been pouring cash into funds that buy high-yield debt, with data provider Lipper reporting an inflow of $3.86 billion last week, the biggest since July 2016
- U.S. junk bonds have had the best start to the year since 2009 and have been the best asset class in fixed income with year-to-date returns of 4.83 percent
- The biggest gains have come in the riskiest part of the market, with triple-C rated notes returning 5.53 percent
- The rally allowed CCC+ rated Clear Channel Outdoor to sell $2.235 billion of notes last week with a coupon of 9.25 percent, at the lower end of initial price talk
- Clear Channel and CommScope Holding Co. led about $7 billion of offerings last week in the third straight week of solid issuance, bringing 2019’s total to about $27 billion
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