Social-media site Twitter Inc. has collected a lot of likes on its debut $600 million junk-bond deal in the past two days.
Yields on the nearly eight-year parcel of bullet bonds, due in 2027, have narrowed to an indicative level of 4% yield from an 4.5% area, according to one debt investor monitoring the transaction. When prospective yields fall on a bond offering, even before it’s priced, that signals robust demand from investors.
And in this case, investors have shown a keen interest in backing Twitter’s popular platform, even though its new debt offering includes surprising few details on what the funding will be used for.
S&P Ratings, which gave the bonds BB+ ratings, only said the bonds would be used for general corporate purposes.
But the credit-rating agency added that Twitter’s “ample financial flexibility” via an $5.8 billion cash balance and modest debt burden were strengths of the company.
The debt investor said the lack of detail was unusual for a high-yield, or “junk” bond issuer. And on Twitter’s bond call this week with potential investors, he said top leadership indicated they didn’t want to be constrained in terms of spelling out their leverage or credit-rating targets.
“As a bond investor, you don’t want to hear that,” he said,
In October, Twitter
reported third-quarter earnings of $824 million, up from $758 million a year prior, but fell short of the $874 million that analysts surveyed by FactSet had been expecting, while blaming advertizing bugs for the miss.