Cineplex Inc. sold its $250 million sale of unrated bonds at a lower yield than previously offered after seeing strong demand from investors seeking to play the economic recovery trade.

Canada’s largest chain of movie theaters priced the second-lien secured senior notes due 2026 to yield 7.5 per cent, according to people familiar with the matter. That compares with an earlier guidance between 7.5 per cent and 7.75 per cent and preliminary discussions with investors Thursday for 8 per cent to 8.25 per cent, said the people, who asked not to be named before the deal is completed.

The transaction comes as investors worldwide are positioning for a post-pandemic reopening as countries execute COVID-19 vaccination campaigns. Investors piled into the deal even though Canada has an additional layer of uncertainty because its vaccination effort is lagging most key Western economies, according to data compiled by Bloomberg.

“From a market functioning perspective, the Cineplex transaction shows even businesses directly affected by COVID restrictions can access capital,” said Alex Schwiersch, a portfolio manager at Algonquin Capital. “These bonds provide the liquidity to help bridge the gap between now and recovery and with regard to the recovery, people have been forecasting the death of cinema since the first black and white televisions showed up in the 1950s living room.”

Cineplex bookrunners garnered orders for around five times the deal’s size and 51 buyers took part in the transaction, said the people. The arrangers had gathered around $1 billion in preliminary indications of interest as of Thursday.

Earlier this month, Cineplex said it was planning to raise a minimum $200 million by selling bonds by the end of March to meet conditions for a covenant waiver agreed to with its existing lenders, according to a Feb. 8 statement.

The yield investors demand to hold high-risk bonds was at 3.36 per cent Thursday up from 3.27 per cent Wednesday and 3.21 per cent a day earlier, the lowest on record, according to the ICE BofA Canada High Yield Index data going back to early 2001.

Even as Cineplex has continued to burn cash in recent months amid more lockdowns, the stock rose Friday by as much as 12 per cent to $13.56, the highest since June 12. Its convertible bonds first issued at par in July have rallied to trade at around 135 Canadian cents on the dollar, according to data compiled by Bloomberg Friday.

“If things go back to normal this year, they have ample liquidity,” said Dhruv Mallick, head of high-yield fixed income at Leith Wheeler Investment Counsel Ltd. “The bear case is if vaccines don’t roll out and people aren’t back to the theaters and its 2022.”

Bank of Montreal and Scotiabank managed the bond sale. A representative for Cineplex didn’t immediately respond to a request for comment on Friday.

--With assistance from Allan Lopez, Aoyon Ashraf and Kristine Owram.