Apr 12, 2022
JPMorgan-Led Group Discussing 11% Yield on Struggling Junk-Bond Sale
(Bloomberg) -- A group of banks led by JPMorgan Chase & Co. is struggling to sell a $585 million junk bond to help fund the acquisition of building materials business Oldcastle BuildingEnvelope Inc. by buyout firm KPS Capital Partners, according to people with knowledge of the matter.
Pricing discussions on the unsecured notes have increased to a yield of up to 11%, said the people, who asked not to be identified because the transaction is private. That’s more than initial pricing discussions of mid-to-high 9% on the deal, and above the average yield of 9.81% on debt in the CCC tier.
The notes, rated Caa1 or seven notches below investment-grade, are part of a larger financing package which also includes a $400 million secured bond and a $1.285 billion loan.
Representatives for Oldcastle and JPMorgan, which is leading the bond sale, didn’t immediately respond to requests for comment. Representatives for KPS and Citigroup Inc., which is leading the loan sale, declined to comment.
Financings for leveraged buyouts were mostly clearing the market without a struggle just a few weeks ago, but that interest has cooled amid a broader sell-off in risk assets following Russia’s invasion of Ukraine and worsening inflation. Yields on junk bonds have soared amid expectations of Federal Reserve rate hikes, making the cost of borrowing more expensive.
CRH Plc, one of the world’s biggest building materials companies, announced the sale of its Oldcastle unit to KPS for $3.8 billion including debt at the end of February.
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