Bloomberg / New York
Mitsubishi UFJ Financial Group Inc took the unusual step of tapping a competitor to help offload $300mn of debt it was stuck holding after stumbling through its inaugural effort in the US junk bond market.
MUFG enlisted Cantor Fitzgerald LP to help sell bonds from the oil and gas exploration firm CNX Resources Corp, according to people familiar with the matter. MUFG sold the bonds to Cantor for 90 cents on the dollar. Cantor then turned around and sold that debt to investors at 90.25 cents, earning about $750,000 from the trade, the people said, asking not to be identified discussing a private matter. Friday’s deal may translate into a loss of at least $20mn for MUFG, the people said, although hedging may have mitigated some of that. Total losses for the bond underwriter may be higher, according to the people. The bank tried to sell around $500mn of bonds in March.
MUFG’s tapping of Cantor is unusual since a bank that puts together a high-yield bond offering for a company typically uses corresponding staff and other capabilities to organise the subsequent sale of that debt to investors. MUFG struggled to move the CNX bonds in March after getting a cool reception from investors wary at the time of riskier debt, and had to sell the securities below the price they agreed to buy them at.
The market was also tenuous for borrowers following a spike in volatility that stymied sales in late 2018. CNX has seen its share price tumble this year as the high-yield market has rallied, with the Bloomberg Barclays US. Corporate High Yield Total Return Index up 8% through Thursday.
A representative for MUFG declined to comment. A representative for Cantor Fitzgerald declined to comment.
CNX was MUFG’s first deal as the lead and sole bookrunner in the US junk bond market, part of its efforts to boost their debt finance capabilities, according to Bloomberg data going back to at least 2005. MUFG beat out Credit Suisse Group AG to underwrite the sale by guaranteeing CNX a better price for the bonds after they had sought other offers. The Japanese bank sold a portion of the offering at the time at a discount of about 97 cents on the dollar.
LEAVE A COMMENT Your email address will not be published. Required fields are marked*
QFC new strategy is focusing on markets with growth potentials
Lukoil wants Opec+ kept forever; it’s got some convincing to do
US is targeting sub-Saharan Africa for first free-trade pact
Large Exxon shareholder starts divesting over climate change
Katitas sees big business opportunity in Japan’s 8mn empty homes
Asean leaders seek to bolster position in face of trade war
Dollar poised to slide into a ‘modest’ bear market, says Amundi
Trump blacklists more China tech companies days before Xi summit
Dish seeks a favour from FCC for T-Mobile-Sprint deal role