A $10 Billion Junk-Debt Sale Crosses Finish Line

By Sam Goldfarb 

Banks on Monday completed the largest sale of speculative-grade debt so far this year, allocating to investors more than $10 billion of bonds and loans to help fund the private-equity buyout of Johnson Controls International PLC's automotive-battery business.

Power Solutions, the world's largest maker of automotive batteries, sold roughly $3.7 billion worth of secured and unsecured bonds, denominated in both dollars and euros, along with around $6.5 billion in loans, also split between euro and U.S. dollar tranches, several investors said.

Meeting strong demand from investors, banks last week were able to cut the expected yields on all pieces of the debt package, underscoring the resurgence of the speculative-grade market in recent months following a sharp downturn at the end of last year.

Among the multiple debt offerings, Power Solutions on Monday issued $1 billion of secured bonds due 2026 at par with a 6.25% coupon and $1.95 billion of unsecured notes due 2027 at par with an 8.5% coupon.

Investors had expected the sale to be finished Friday, but were told it had been pushed to Monday because banks were still putting the finishing touches on the transaction at the end of the workday in London.

Unusually for such an in-demand deal, prospective buyers were able to modestly strengthen the package of investor protections accompanying the debt. Yet the result, some investors said, still gives the company's owners ample room to pay themselves dividends and remove collateral from the business, in keeping with a broad trend toward weaker protections.

JPMorgan Chase & Co. was the lead underwriter for the secured dollar bonds and loans, while Barclays PLC led marketing of the euro debt and Credit Suisse Group AG was the lead underwriter of the unsecured dollar bonds.

Johnson Controls, an industrial and technology conglomerate with headquarters in Cork, Ireland, announced in November it was selling Power Solutions to a Brookfield Business Partners LP group for $13.2 billion in cash. The deal is expected to close by June 30.

Write to Sam Goldfarb at [e-mail]

(END) Dow Jones Newswires

March 18, 2019 15:06 ET (19:06 GMT)

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