Numericable Completes Biggest Ever Sale of a Single Junk Bond

French telecoms giant Numericable-SFR has sold $5.19 billion in debt on in the largest ever sale of a single junk bond.

The debt sale showed investor appetite remains strong for selected deals in the U.S. junk bond market, which sold off sharply in late 2015 and earlier this year.

The sale in 10-year debt, which priced on Wednesday, was increased from $2.25 billion amid strong investor demand. It is the largest ever single-tranche debt sale in the junk bond market, according to data provider Dealogic. There have been larger issues, but deals sliced into various tranches.

"Throughout all this volatility, it is reinforcing the message that the market is open for the right kind of credit," said Mitch Reznick, co-head of credit at Hermè s Investment Management, who bought some of the bonds.

Mr. Reznick said the company's shift away from acquisitions-led growth towards focusing on stabilizing the business and investment should be more beneficial for bondholders.

Numericable did not immediately comment.

The deal comes after a volatile period for U.S. junk bonds. The average gap in yield between U.S. high-yield bonds and U.S. Treasurys has narrowed to around 6.5 percentage points on Wednesday, according to Barclays. That comes amid a global rally in riskier assets and compares to a recent high of 8.4 percentage points in mid-February.

The U.S. junk bond market sold off in late 2015, when a sharp decline in commodity prices hit the resource companies that have been big issuers of this debt. Investors were also spooked by the closure of a credit fund overseen by Third Avenue Management LLC.

Since then, conditions have improved for high-yield investors. The oil price has rebounded and the Federal Reserve has signaled it is in no hurry to raise interest rates, making higher yield investments more attractive.

Investors poured $3.3 billion into high-yield bond funds in the first three months of 2016, according to strategists at Bank of America Corp. They pulled $684 billion out of these funds in the final quarter of 2015.

Jeff Mueller, a portfolio manager at Eaton Vance, said higher-rated junk bond deals should continue to see demand from investors.

"But the question is how quickly does that translate to the lower quality end of the market, and I think we still need to see further stability at these levels before that is the case," said Mr. Mueller, who also bought some of the Numericable bonds.

Numericable is rated B+ by Standard & Poor's Ratings Services, and B1 by Moody's Investors Service.

Numericable has already smashed records in this market. It issued $10.88 billion-worth of debt in April 2014, the largest junk bond sale ever. That debt was sold to help parent company Altice SA fund its acquisition of Vivendi's SA's telecom business, SFR.

In another sign of strong investor demand, banks were able to slightly lower the interest rate paid on these May 2026 bonds from around 7.5% to 7.375%, according to a person familiar with the matter.

The bonds can be called after five years.

J.P. Morgan Chase & Co, BNP Paribas SA, Deutsche Bank AG, Barclays PLC, Bank of America Corp, Cré dit Agricole SA, Goldman Sachs Group Inc and Morgan Stanley were underwriting the deal.

(END) Dow Jones Newswires

April 07, 2016 09:35 ET (13:35 GMT)

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