Friday, January 23, 2009

Yield-Hungry Investors Feast on Junk Offerings

By KATE HAYWOOD Speculative-grade, or junk-rated, companies raised more than $1 billion in the bond market, taking advantage of renewed investor interest in riskier securities to refinance old debt and fund operations. Wireless infrastructure provider Crown Castle International Corp., sold $900 million of bonds maturing in 2015, the largest deal of the day and up from the originally planned $600 million. Yet, the company offered a deep discount on the new debt, 90.4 cents on the dollar, so it only pocketed $795.6 million. Meanwhile, Petrohawk Energy Corp. brought home $547.7 million by selling its 5½-year bonds at a discount, and gas-transmission and distribution company Tennessee Gas Pipeline Co., a unit of El Paso Corp., sold $250 million of seven-year bonds to net $237 million. "It doesn't say that the market has turned around, but to see three companies coming to market simultaneously after months of very little issuance is striking," said Martin Fridson, chief executive of investment firm Fridson Advisors in New York. The yields on the deals ranged from 9% on the Tennessee Gas bonds, rated double-B by Standard & Poor's, to 12.75% on Petrohawk's debt, rated single-B. The yields are less than what the companies would have paid late last year, but the cost of borrowing is still at historic highs. Average junk-bond yields are around 18%. This is down from highs of more than 20% last year. The offerings Thursday followed Nielsen BV's $330 million junk-bond sale Wednesday, the first instance of a highly speculative, triple-C-rated company tapping the U.S. bond market since September. Investors caution, however, that well-known companies with strong credit profiles will find it easier to sell debt while lesser-known firms that are vulnerable to the weak economy still will face difficulties.

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