PureGym’s return to debt markets signals that junk-rated UK companies are able to raise funds to refinance — albeit at a price.
(Bloomberg) — PureGym’s return to debt markets signals that junk-rated UK companies are able to raise funds to refinance — albeit at a price.
The British budget gym chain priced two bonds on Wednesday, both with yields above 8%. While that’s an expensive rate for any company, the fact that PureGym was able to pull off the sale is a sign that market conditions are improving.
The deal is the first for a high-yield UK firm in around two months, since supermarket Iceland, and follows the Bank of England’s decision to put interest rates on hold for the first time in almost two years amid signs of slowing inflation. The gym company’s deal came just before the French waste-treatment group Suez SA brought the longest-dated sterling corporate bond for six months.
PureGym sold a £475 million ($576 million) five-year note that yields 10% and a €380 million ($400 million) bond yielding 8.25%. That compares with coupons of 6.375% on its sterling note and 5.5% on its euro one, both maturing in February 2025.
Credit analysts at SpreadResearch have pointed to recent data showing UK inflation easing as a positive for a handful of high-yield UK consumer companies, such as gym chain David Lloyd, theme park operator Merlin Entertainments, pub chain Stonegate and debt collector Lowell.
“This refinancing gives us a distinct competitive advantage compared to more resource constrained competitors,” PureGym chief executive Humphrey Cobbold said in a statement.
The company said it has also agreed an increased senior credit facility of £175.5 million — from £145 million previously — from a syndicate of banks including Barclays, RBC, Deutsche Bank, ING and JP Morgan.
An index of sterling junk-rated companies, which comprises mostly British names, has an average yield of 10.57%, the lowest in six weeks.
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