GPS Gap Inc

By Sam Goldfarb 

A rush to raise cash in the high-yield bond market picked up momentum Thursday, with US Foods Holding Corp., Gap Inc. and MGM Resorts International among the latest companies to announce new bond sales.

At least seven businesses rated below investment-grade by a major ratings firm began marketing new bonds Thursday -- looking to add to a growing tally of businesses that have taken advantage of investors' improved demand for riskier debt.

Before the new sales were announced, this week's projected high-yield bond issuance was already expected to exceed $6 billion, according to LCD, a unit of S&P Global Market Intelligence. That comes after companies issued $15.8 billion last week -- the eighth-largest weekly total on record, according to LCD.

The coronavirus pandemic is behind many of the bond sales, as companies facing a sharp decline in revenue try to avoid running out of cash.

Gap is expected to issue around $2 billion of new secured bonds for general corporate purposes and repay existing debt. The apparel chain -- which like most retailers has closed its North American stores -- warned Thursday that it had already burned through half its cash savings, even after drawing down its entire credit line and skipping April rent payments.

MGM Resorts, which has also closed properties, said Thursday it would issue $500 million of unsecured bonds to bolster its liquidity.

Investors' appetite for high-yield bonds is significantly greater than it was a month ago. The average extra yield, or spread, investors demand to hold speculative-grade bonds over U.S. Treasurys was 7.61 percentage points Wednesday, according to Bloomberg Barclays data. That was down from 11.0 percentage points on March 23, though still up from around 3.5 percentage points in mid-February.

In recent trading, the yield on the benchmark 10-year U.S. Treasury note was 0.600%, according to Tradeweb, compared with 0.618% Wednesday. Yields fall when bond prices rise.

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

(END) Dow Jones Newswires

April 23, 2020 14:55 ET (18:55 GMT)

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