Twitter Inc. sold $1 billion in junk bonds in the United States on Wednesday, in part to fund a share buyback, reviving a new-issue market that had been dormant for nearly two weeks.
The sale of the unsecured debt, which is due in 2030, was spearheaded by JPMorgan Chase & Co. According to a source familiar with the situation, the bonds were priced at a 5% yield after earlier pricing conversations in the 5% area. In addition to share repurchases, Twitter stated in a statement that funds will be utilised for general corporate objectives, which might include capital expenditures, investments, and working capital.
The San Francisco-based business raised $700 million in its high-yield debut in 2019, after receiving more than $6 billion in orders. According to Trace data, the deal was sold at a yield of just 3.875 percent, one of the lowest ever seen in the trash market, and is now trading at around 4.2 percent.
Since the firm announced a $4 billion stock purchase in connection with its quarterly earnings announcement on Feb. 10, Twitter shares have fallen more than 10%, while the tech-heavy Nasdaq 100 Index has been down roughly 5%. The stock has dropped around 23% this year and ended at $32.76 on Wednesday.
Parag Agrawal, Twitter’s newly installed CEO, has pledged to increase accountability, make faster decisions, and improve product execution. By the end of 2023, the company established aggressive growth goals, including growing annual revenue to $7.5 billion and reaching 315 million daily users.
Hiatus Comes to an End
The U.S. junk-bond new issue market has reopened as a result of Twitter’s recent offering, as well as a sale disclosed Tuesday by protein drink company BellRing Brands. According to statistics provided by Bloomberg, the most recent sale to price was on Feb. 10, when Norwegian Cruise Line Holdings Ltd. raised $1.6 billion.
Twitter’s debt sale and share buyback, according to Moody’s Investors Service, is a “credit negative.” “However, the company’s credit rating will not be affected immediately, according to a statement released on Wednesday. The deal “increases gross leverage above Moody’s downgrading criteria of 3.5x,” according to the credit rating agency “although, the firm has a sizable cash reserve.
According to Twitter’s announcement, the debt would be used in part to support possible acquisitions, but the firm isn’t actively involved in any deals at this moment.
“Twitter examines prospective strategic deals and acquisitions of businesses, technologies, or products from time to time.” “as stated in the statement “At this time, however, Twitter has no agreements in place regarding any such substantial strategic deals or acquisitions.””