FAST FIVE: Bonds With "Worst-Ever Covenants" Are 3x Oversubscribed

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This flood into fixed income continues despite repeated warnings about the dangers of the corporate debt bubble from such investing icons as DoubleLine's Jeff Gundlach and Marathon's Bruce Richards, not to mention the IMF and BIS, who have been focusing on the growing risk of mass downgrades in the $3 trillion BBB-space, which could translate into a tsunami of fallen angels during the next recession.

As Bloomberg reported, the $10 billion total package was 3x oversubscribed as underwriters revealed they had $30 billion in orders already linked up, including $9 billion for a loan deal that allowed the syndicate to raise the offering size to $4.2 billion from the $3.2 billion initial talk at a lower spread (revised to L+350 from L+400-425 originally).

Amusingly, the concessions don't broadly improve the credit accord, and some investors upgraded the analyst categorization from “the worst ever, to one of the worst ever” with analysts at high-yield research firm Lucror said the documents remain weak for bondholders.

The original issue discount was also narrowed to 99.5 cents from 98.5 cents initially.

It wasn't just the loans with the terrible covenants that got a preferential revision: yields on the bonds were also reduced, with the $1 billion portion of secured notes offered at 6.25% from an initial range of 7% to 7.25%.

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