Valeant's jumbo bond to quench thirst for large liquid issues

Tue Feb 24, 2015 9:47am EST
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By Mariana Santibanez

NEW YORK, Feb 24 (IFR) - High-yield investors clamoring for chunky-sized trades with ratings closer to investment grade will get another stab at picking up paper when pharma giant Valeant launches a US$9.6bn bond to finance its acquisition of Salix Pharmaceuticals.

The expected bond from the issuer, rated just three notches below investment grade at Ba3 by Moody's and BB- by S&P, would be the second largest high-yield bond on record, and the biggest ever from a pharmaceutical company, according to IFR data.

Part of a broader US$15bn debt package, the bond will refinance an unsecured bridge loan and comes as large, liquid deals are popular with investors cautious about liquidity and flush with cash after billions of inflows into the asset class.

"A year ago, the market was not asking enough for liquidity," said one high-yield investor. "But that's changed. If we're being asked to buy a US$250m deal versus a US$500m we want to be compensated for it."

Market conditions for a deal of this size are opportune.

Despite an uncertain start to the year, high-yield primary market volumes as of February 23 were up 30.91% at US$45.36bn versus US$34.654bn a year earlier, according to IFR data.

And the US$10.012bn that has poured into high-yield funds between January 28 to February 18, according to Lipper, has bolstered demand for some sizeable acquisition financings this year for the likes of Altice, GTECH, Dollar Tree and Petsmart.   Continued...