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Speculative-grade companies seized the opportunity to repay debt and fund their operations Thursday, raising more than $1 billion in the U.S. junk bond market.

The biggest deal was from wireless infrastructure provider Crown Castle International Corp. (CCI), which sold $900 million of notes for proceeds of $795.6 million. This was larger than the initial target of $600 million, and makes it the largest sale of bonds from a Single B rated company since July 1, 2008, when Intelsat Jackson Holdings raised $986.51 million, according to data provider Dealogic.

Petrohawk Energy Corp. (HK) meanwhile sold $600 million in bonds - more than the originally planned $300 million - for proceeds of $547.67 million. Also, gas transmission and distribution company Tennessee Gas banked $237 million of proceeds from its $250 million bond sale in what are known as "drive-by" offerings.

A drive-by offering means there is enough demand for a deal without borrowers having to do a long investor roadshow. Drive-bys used to be fairly common in the junk bond market, but they have been few and far between since the credit crisis began. The drive-bys are yet further indication that conditions in the credit markets are easing for some lower-rated companies and follow Nielsen Co. BV's $330 million junk-bond sale Wednesday.

"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.

This is excellent news for companies that need to raise cash and have been locked out of the market for months. Investors caution, however, not to get too excited, saying that well-known companies with strong credit profiles will continue to find it easier to sell debt but lesser-known firms that are vulnerable to the weak economy will still face difficulties.

"[Crown Castle, Petrohawk and Tennessee Gas] are well-known, good-quality companies that would normally have access to the market," said Kenneth Monaghan, head of high-yield credit and portfolio manager at Rogge Global Partners in New York.

Investors have turned their attention back to corporate bonds over the last few weeks, as yields on risk-free assets, such as Treasurys, are so low that buyers get very little return.

"High yield is catching part of this, where people are looking for limited downside with very high yields," said Gary Sullivan, head of high-yield bond portfolio management at DB Advisors, the institutional asset management arm of Deutsche Bank, on a call with journalists last week.

This renewed interest has allowed speculative grade borrowers to sell just over $3 billion of bonds already in January, making it the busiest month for high-yield issuance since July 2008 when companies raised more than $3.8 billion in the market, according to data provider Dealogic.

A revival of the junk bond market, which is a vital source of financing for some of the world's major companies, is becoming more and more important as the default rate increases and the number of borrowers being downgraded to sub-investment grade rises. Speculative-grade borrowers made up the majority of U.S. corporate debtors for the first time in 2007, according to Standard & Poor's.

Crown Castle and Petrohawk saw good demand for their deals, with the former pricing at a discount at 90.416 cents on the dollar to give a 9% coupon and an 11.25% yield. The yield on Petrohawk's 5 1/2-year 10.5% bonds, which priced at 91.279 cents on the dollar, came at 12.75%. Tennessee Gas, a unit of El Paso Corp. (EP), meanwhile sold seven-year senior notes at a discount at 94.88 cents on the dollar to yield 9% for a coupon of 8%.

The yields are less than what the companies could have ended up paying had they tapped the market last year. But the cost of borrowing is still at record highs.

U.S. junk bonds have returned 4.71% year-to-date after having fallen over 30% since the start of last year, according to Merrill Lynch Master II High Yield Index. Risk premiums, or spreads over risk-free Treasurys for high-yield bonds, meanwhile stood at 16.71 percentage points Wednesday, according to Merrill. That's nearly twice what they were at the start of 2008 but well below the peak of 21.82 percentage points in mid-December.

Average yields are around 18%. This is down from highs of more than 20% last year, but it's still more than double the yields junk bond issuers have traditionally been used to.

Successful deals from Crown Castle, Petrohawk and Tennessee Gas don't necessarily mean that other speculative-grade borrowers of fallen angels, or companies that have had their credit ratings cut to junk from investment-grade, will find it as easy to raise cash in the bond market, according to Robert Bishop, portfolio manager for SCM Advisors in San Francisco.

"It'll be a long time before people will be buying Triple C rated paper," Bishop said.

"The companies that will grab people's attention will continue to be high quality."

-By Kate Haywood, Dow Jones Newswires; 201-938-2348; kate.haywood@dowjones.com

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