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%.
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
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