Yum Brands, the parent of KFC, Taco Bell and Pizza Hut restaurant chains, sold $600 million in bonds Monday, re-opening the U.S. market for junk-rated debt after its longest halt since the 2008 financial crisis.
Yum’s bond offering showed a glimmer of investor demand in one of the riskiest corners of the company credit market, which seized up for much of March after the coronavirus pandemic barged into an economically devastating pandemic.
While U.S. firms last week issued new investment-grade debt at a record clip, there had been no new issuance in the alleged high-yield marketplace for junk-rated debt bonds since March 4.
Yum ramped up its debt offering by 20%, after planning to attract $500 million. The deal was over ten times oversubscribed, based on an individual conversant in the matter.
However, Yum was pressured to accept a considerably higher borrowing cost than in its prior debt offers.
The corporate sold bonds maturing in 2025 at a 7.75% yield. By comparison, Yum attracted $800 million in September through 10-year debt with a yield of 4.75%. The higher the yield, the costlier the bond is for the corporation.
The debt proceeds will go toward “general corporate purposes,” Yum mentioned in an announcement.
The Federal Reserve stated last week it would backstop the investment-grade market; however, it has made no such promise for high-yield debt.