GameStop’s Other Trade Pays Off With Takeout of Junk Bonds
(Bloomberg) -- Investors in GameStop Corp.’s junk-rated bonds are finally cashing in on the video-game retailer’s wild ride in the stock market.
The company’s plan to go virtually debt free drove its 10% notes due in 2023 to an all-time high on Wednesday. The Grapevine, Texas-based firm will have to pay the so-called make-whole premium to retire the debt early, which is meant to compensate investors for any missed future interest payments.
The notes were up 3.4 cents to 108.5 cents on the dollar as of 12:18 p.m. in New York and were the biggest gainer in the U.S. high-yield bond market, according to Trace data. Meanwhile, the shares rallied as much as 23%, snapping a seven-day losing streak.
The decision to repay debt caps months of speculation among investors on whether GameStop would be able to capitalize on a stock rally fueled by an army of day traders who share tips on Reddit. The company announced earlier this month plans to sell as much as $1 billion worth of additional shares to accelerate its transformation.
GameStop said it will use cash on hand to redeem the 2023 bonds, on which it has $216.4 million outstanding. Last month, the company announced it had also redeemed the remaining $73.2 million that was outstanding on its 2021 notes.
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