Mattel Sought Delay, Not Scrapping, of Debt Deal

(Bloomberg) -- In a sign that Mattel Inc. isn’t too worried about the whistleblower letter that upended last week’s $250 million bond offering, the toymaker initially asked bankers to delay the sale for just a couple of days, according to people who have communicated with company officials.

The closing was scrapped when at least one of the banks involved balked at a postponement because the bonds had already been priced, said the people, who asked not to be identified because the communications were private. An additional person familiar with the deal said the banks learned of the letter after the pricing. Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. were among the institutions involved.

Mattel is playing down the situation as a case of being overly cautious, the people said. The toymaker was made aware of the letter Aug. 6, just two days before the scheduled closing. Citing the need for more time to investigate the allegations, which haven’t been made public, the company disclosed on Aug. 8 that the deal had been canceled.

In the public filing, the company didn’t say how it learned of what it called an “anonymous whistleblower letter” or whether a regulator was involved. That’s because the notification came from a third party that’s outside of government, the people said of Mattel’s account.

A spokeswoman for the El Segundo, California-based company declined to comment, as did representatives for Bank of America, Citigroup and Wells Fargo.

Nascent Turnaround?

The debt offering was canceled just about two weeks after the company’s first quarterly revenue gain since 2017 gave investors hope that its long turnaround might be taking hold. The company has said it intends to still refinance $250 million in bonds maturing in October 2020.

Mattel’s stock has plummeted about 16% since the disclosure. On Tuesday, Mattel was among the consumer companies whose shares were buoyed by President Donald Trump‘s decision to delay some tariffs on goods from China, rising 2.5% to $11.27 at 1 p.m. in New York.

The 2020 bonds, which the new issue was intended to refinance, are trading just above par, according to Trace pricing.

“That level is definitely not sounding the alarm,” said Scott Kimball, a portfolio manager at BMO Global Asset Management, who owns Mattel bonds maturing in 2021. “They have some time and decent enough liquidity options to press pause on the refinancing as they investigate this anonymous letter.”

©2019 Bloomberg L.P.

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