KFC owner Yum Brands breaks junk debt market’s fast

imageStock Markets9 hours ago (Mar 30, 2020 06:20PM ET)

(C) Reuters. A vehicle waits at the drive-thru window of Kentucky Fried Chicken after a state mandated carry-out only policy went into effect in order to slow the spread of the novel coronavirus (COVID-19) in Louisville

By Joshua Franklin

(Reuters) – Yum Brands Inc (N:YUM), owner of Pizza Hut, KFC and Taco Bell restaurant chains, sold $600 million in bonds on Monday, reopening the U.S. market for junk-rated debt issues after its longest lull since the 2008 financial crisis.

Yum’s bond offering represented a glimmer of investor demand in one the riskiest corners of the corporate credit market, which seized up for much of March after the coronavirus outbreak morphed into an economically devastating pandemic.

While U.S. companies last week issued new investment-grade debt at a record clip, there had been no new issuance in the so-called high-yield market for junk-rated debt issuers since March 4.

Yum boosted its debt offering by 20%, after planning to raise $500 million. However, Yum was forced to accept a considerably higher borrowing cost than in its prior debt deals.

The company sold bonds maturing in 2025 at a 7.75% yield. By comparison, Yum raised $800 million in September through 10-year debt with a yield of 4.75%. The higher the yield, the more expensive the bond is for the company.

The debt proceeds will go towards “general corporate purposes,” Yum said in a statement.

The Federal Reserve said last week it will backstop the investment-grade market but has made no such pledge for high-yield debt.

Yum, which has over 48,000 Pizza Hut, Taco Bell and KFC restaurants across the globe, said last week it expects the coronavirus pandemic to impact its second-quarter same-store sales more significantly than in the first quarter, as the fast-spreading virus hits customer traffic at its stores globally.

Yum was among several restaurant companies that this month the White House for aid to help weather the coronavirus crisis.

Earlier on Monday, Moody’s amended Yum’s ratings outlook to “negative” from “stable.”

“The negative outlook reflects the risk that there may be a sustained weakening in Yum’s credit metrics as they are increasing debt levels at a time when the company is facing significant uncertainty surrounding the potential length and severity of restaurant closures and the ultimate impact that these closures will have on Yum’s revenues, earnings and liquidity,” Moody’s Senior Credit Officer Bill Fahy said in a statement.

Yum shares, which are down 29.8% in 2020, closed up 3.1% at $70.67, giving it a market value of $21 billion.

KFC owner Yum Brands breaks junk debt market’s fast

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Leave a Reply

Your email address will not be published. Required fields are marked *