With junk bond yields refusing to follow the general stock euphoria, and on Wednesday creeping up to a two week high of 4.68% according to the Bloomberg Barclays Corporate High Yield Index - still not too far from their record lows of 4.53% - it is probably not a surprise that companies are rushing to issue as much debt as they can before the issuance window closes.
Enter Crocs - as Bloomberg notes, the clog maker is selling a 10 year junk-bond to capitalize on still super-cheap rates and will use the proceeds to fund stock buybacks. The company, which has seen its popularity rise thanks to the likes of Justin Bieber and rapper Bad Bunny, is selling $350 million of notes that may price as soon as Thursday.
It won't be Crocs first foray into the "high" yield space: earlier this year, the Niwot, Colorado-based Crocs raised the same amount - $350 million - from its debut high-yield deal earlier this year, boosting the size of the offering amid strong demand. Since then, the bond which pays a 4.25% coupon, has rallied in price to about to 103.8 cents.
Capitalizing on a feverish yield-scramble, companies have been selling debt at a rampant pace this year capitalizing on cheap debt to fund everything from dividend payouts, acquisitions and leveraged buyouts, to replacing more expensive borrowings taken on earlier in the pandemic. Or, in the case of Crocs, to fund stock buybacks.
Morgan Stanley is managing the sale of the Crocs junk bond, which according to Bloomberg will be used for capital expenditures, working capital, the repayment of debt and acquisitions... but mostly stock buybacks.