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Aston Martin hikes yield on $1.1 billion junk bond sale to 10.5%

Published 30/10/2020, 14:10
Updated 30/10/2020, 22:00
© Reuters. FILE PHOTO: Aston Martin Lagonda cars parked outside the carmaker's factory in St Athan, Wales

By Abhinav Ramnarayan

LONDON (Reuters) - British luxury carmaker Aston Martin (L:AML) has had to increase the yield on offer on a $1.1 billion junk bond sale to 10.5% to get the deal over the line, making it one of the highest-yielding bond issues in Europe this year.

The loss-making company earlier this week announced the sterling and dollar bond sale as part of a wider financing package and set initial yield expectations at "high" 8%-9%.

But on Friday, the sterling tranche was cancelled and global coordinators JP Morgan (N:JPM) and Barclays (L:BARC) went out with new price guidance of around 10.5%, a lead manager said.

After the market closed, the five-year bond priced at exactly 10.5%, the lead manager said.

Several companies hit by the COVID-19 crisis, such as Jaguar LandRover and Rolls Royce (L:RR), have successfully raised money via junk bonds in the past few weeks.

But Aston Martin's deal coincided with a volatile time for markets ahead of the U.S. presidential election next week, with global equity markets under heavy pressure.

Althea Spinozzi, a fixed income strategist at SaxoBank, said the company had negative operating margins.

"Plus, with the Brexit hovering on top of its head, I can see why investors would not touch it unless adequately rewarded," she said.

The bond deal is to help to redeem existing senior secured debt, repay a government-guaranteed loan and put cash on the balance sheet for Aston Martin.

The carmaker floated two years ago but its shares have lost about two-thirds of their value this year.

The British company said earlier this week that Daimler 's (DE:DAIGn) Mercedes-Benz division is to increase its stake in Aston Martin to up to 20% by 2023, making it one of its largest shareholders.

© Reuters. FILE PHOTO: Aston Martin Lagonda cars parked outside the carmaker's factory in St Athan, Wales

Aston Martin did not immediately respond to a request for comment.

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