By Abhinav Ramnarayan
LONDON (Reuters) - British luxury car maker Aston Martin (L:AML) is testing investor appetite for risky assets days before the U.S. election with a 840-million-pound ($1.1 billion) junk bond sale, one of the largest deals of its kind in Europe this year.
The company is looking to sell dollar and sterling bonds to help redeem existing senior secured debt, repay a government-guaranteed loan and put cash on the balance sheet, according to an investor announcement seen by Reuters.
The sale started today and the book will be closed on Friday, when Aston Martin will announce the final price.
The bond issue is the main tool behind a refinancing package that includes a 125-million-pound equity raise, a separate $335 million private placement of notes and an agreement that will see Mercedes-Benz (DE:DAIGn) lift its stake in Aston Martin to up to 20% by 2023.
"Yes, there is a risk involved (for investors) when there's a big part of the business plan that still needs executing," said a source familiar with the transaction. "But it's senior secured debt with a strong brand, production facilities and a billion-pound market cap behind it."
Also on offer is a substantial yield at a time when unprecedented monetary stimulus is pushing rates to record lows.
Both tranches are being marketed at the "high 8%s-9%", wording that usually suggests an offer yield of around 8.75%-9%.
"It's unusual to see a listed business with a billion pounds of market cap offering yields at this level," said Steven Hunter, chief executive of high-yield analytics company 9fin.
"What's also unusual is that it's a company with a negative EBITDA, so it's going to be expensive," he added, referring to earnings before interest, taxes, depreciation and amortization.
Aston Martin is rated Caa1 by Moody's rating agency.
Investors have recently shown a willingness to take on risky assets in the bond market of late, with Jaguar Land Rover, Rolls-Royce (LON:RR) and British debt collector Lowell all accessing funds this month.
JP Morgan and Barclays (LON:BARC) are global coordinators on Aston Martin's bond sale.