Waste Management Scores Cheap Debt Months After Burning Traders

(Bloomberg) -- A controversial bond-market maneuver by Waste Management Inc. appears to be paying off.

Just months after a shock debt redemption angered investors, the company was able to return to the bond market and score some of its cheapest borrowing costs ever, according to a person with knowledge of the matter.

Waste Management will use the $2.5 billion raised to repay a revolving credit facility entered into in July to fund its takeover of Advanced Disposal Services Inc., the person said. The firm originally sold $3 billion of bonds last year to finance the purchase, but when the deal was delayed, it took advantage of so-called special mandatory redemption language to call the debt, a move market watchers say was made to cut borrowing costs after rates plunged at the onset of the pandemic.

The maneuver trigged widespread losses for investors who’d purchased the notes well above their call price, including one notable holder -- the Federal Reserve. Thursday’s offering, which doesn’t include SMR provisions, will let Waste Management borrow for 30 years at a spread of 100 basis points over Treasuries. Last May, it paid 130 basis points.

Barclays Plc and Mizuho Financial Group Inc. are among managers on the bond sale, said the person, who asked not to be identified as the details are private.

©2020 Bloomberg L.P.