Sinclair Set to Complete Largest Junk Bond Sale Since 2016
July 18 2019 - 2:33PM
Dow Jones News
By Sam Goldfarb
A subsidiary of Sinclair Broadcast Group Inc. is poised to
complete the largest U.S. junk-bond sale in more than three years,
drawing substantial demand from investors to support its purchase
of regional sports networks from Walt Disney Co.
The subsidiary, Diamond Sports Group LLC, is expected as early
as Thursday to sell a combined $4.9 billion of speculative-grade
bonds -- including both secured and unsecured notes -- the most
since Altice France SA issued $5.2 billion in April 2016, according
to LCD, a unit of S&P Global Market Intelligence.
Diamond Sports is also issuing a $3.3 billion loan to fund the
acquisition. And a different subsidiary, which houses Sinclair's
existing local television stations, plans to sell a $1.3 billion
loan to both fund the acquisition from Disney and refinance bonds
due in 2021.
Proposed interest rates on all of the new bonds and loans were
lowered from initial guidance set by a JPMorgan Chase & Co.-led
underwriting group, a sign of strong interest from investors.
Though some investors noted the risks from customers abandoning
cable TV, they also pointed to the value in sports networks, which
are typically among the most expensive channels for distributors
and customers.
Sinclair, the nation's biggest owner of local television
stations, said in May that it would buy 21 regional sports networks
from Disney in a deal valued at $10.6 billion.
After the acquisition, Diamond Sports' debt is expected to total
more than five-times its earnings before interest, taxes,
depreciation and amortization. But it should still generate roughly
$830 million of annual free cash flow, according to the research
firm CreditSights.
Sinclair's debt sale has benefited from favorable market
conditions.
With the Federal Reserve expected to cut interest rates later
this month, investors generally have a positive outlook on the U.S.
economy -- providing a boost to speculative-grade bonds and riskier
assets more broadly.
The loan market has been something of a weak spot. That is in
large part because loans become less appealing in a flat or
declining interest-rate environment due to their coupons that rise
and fall with benchmark rates.
Still, Sinclair's loans are rated at the high end of the
speculative-grade spectrum, making them attractive to investors who
have been searching for such debt.
In recent trading, the yield on the benchmark 10-year U.S.
Treasury note was 2.061%, according to Tradeweb, compared 2.059%
Wednesday. Yields rise when bond prices fall.
The WSJ Dollar Index, which measures the U.S. currency against a
basket of 16 others, was recently down 0.1% at 90.01.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
July 18, 2019 14:18 ET (18:18 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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