UK markets closed
  • NIKKEI 225

    +638.22 (+2.50%)

    +102.00 (+0.39%)

    +1.79 (+4.16%)

    -32.30 (-1.76%)
  • DOW

    +454.97 (+1.54%)

    +405.29 (+2.93%)
  • CMC Crypto 200

    +8.78 (+2.37%)
  • ^IXIC

    +156.15 (+1.31%)
  • ^FTAS

    +51.07 (+1.43%)

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

Abhinav Ramnarayan
·2-min read
FILE PHOTO: Aston Martin Lagonda cars parked outside the carmaker's factory in St Athan, Wales
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 <AML.L> 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 <JPM.N> and Barclays <BARC.L> 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 <RR.L>, 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 <DAIGn.DE> Mercedes-Benz division is to increase its stake in Aston Martin to up to 20% by 2023, making it one of its largest shareholders.

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

(Reporting by Abhinav Ramnarayan; Editing by Rachel Armstrong and Jane Merriman)