Sears plans debt as September junk sales surge
Sears Holdings Corp., the largest U.S. department-store company, is marketing debt as the number of high-yield issuers in September jumps to a five-month high.
The retailer plans to sell $500 million of notes due in 2018, it said in a Sept. 28 statement distributed by PR Newswire. Hoffman Estates-based Sears may use proceeds to repay a senior secured revolving loan, for working capital requirements of its retail businesses and for general corporate purposes, according to the statement.
Speculative-grade companies have issued debt 61 times in September, the most since 79 in April. Sales of high-yield, high-risk corporate bonds surged this month as companies took advantage of investor demand and lower capital costs to refinance debt, said Christopher Towle, who oversees $20 billion in high-yield and convertible securities at Lord Abbett & Co. in Jersey City, New Jersey.
"The pool of issuers being accepted in the marketplace is broader," Towle said in a telephone interview. "Companies are taking advantage of lower costs of capital to refinance out their so-called maturity walls in 2011 and 2012 that don't really exist anymore."
Yields on junk-rated corporate bonds fell 4 basis points yesterday to 8.05 percent, according to the Bank of America Merrill Lynch U.S. High Yield Master II Index. Spreads on the debt narrowed 7 basis points to 629 basis points, the index data show.
"There's a shortage of yield out there, and the high-yield market is the beneficiary of that," Towle said. "Given monetary conditions, refinancing needs and the low cost of capital, high-yield issuance is where it should be."
High-yield, high-risk debt is rated below Baa3 by Moody's Investors Service and BBB- by Standard & Poor's. A basis point is 0.01 percentage point.
Sears's notes were rated BB+ by Standard & Poor's, one step below investment grade.
Investment-grade corporate bond spreads were unchanged at 184 basis points for the sixth straight day, according to the Bank of America Merrill Lynch U.S. Corporate Master Index. Absolute yields on the debt rose 3 basis points to 3.68 percent.
Hongkong Land Holdings Ltd. sold $600 million of 15-year senior unsecured U.S. dollar debt, and Hyundai Motor Co. sold $500 million of 5 ˆ½ -year notes denominated in U.S. dollars to lead $4.76 billion of investment-grade offerings yesterday.
Omega Healthcare Investors Inc. sold $225 million of debt after increasing the size of the transaction to bring high-yield debt sales this month to $32.5 billion, the most since companies issued $34.2 billion in April, Bloomberg data show.
Companies sold $149.9 billion of debt in the U.S. corporate bond market for the busiest September on record, and the most sales since March 2009, when borrowers issued $143.9 billion of debt, according to data compiled by Bloomberg.
Issuance this week is $20.4 billion of investment-grade debt and $1.79 billion of junk bonds, Bloomberg data show.
The following is a description of at least $11.9 billion of pending sales of dollar-denominated bonds in the U.S.