SBGI Sinclair Inc

By Sam Goldfarb 

A subsidiary of Sinclair Broadcast Group Inc. completed 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, sold 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 also issued a $3.3 billion loan to fund the acquisition. Another subsidiary, which houses Sinclair's existing local television stations, sold a $1.3 billion loan to 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. The roughly $3.1 billion of secured notes due in 2026, for example, priced at par with a 5.375% coupon, down from initial guidance in the low 6% area, according to investors.

Although 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, assuming no changes in its earnings.

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 largely 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.

The yield on the benchmark 10-year U.S. Treasury note settled at 2.040%, compared with 2.059% Wednesday. Yields, which fall when bond prices rise, slid after Federal Reserve Bank of New York President John Williams said the current environment requires the Fed to move quickly to lower interest rates, and keep rates lower for longer, when confronted with economic weakness.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was recently down 0.5% at 89.68.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

(END) Dow Jones Newswires

July 18, 2019 16:54 ET (20:54 GMT)

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