Corporations in Rate-Hike Panic, Sell Bonds like there’s No Tomorrow, Investors Blissfully Eager

Jon Banking, Blogosphere, Corporate, Economy, Fiscal Policies, Market Commentary

Telecom operator Frontier Communications came out of the ‘shadow calendar’ with a $6.6 billion three-part bond offering to fund its acquisition of Verizon’s wireline operations in Florida, Texas, and California. The roadshow was supposed to start on September 10, and pricing was supposed to take place on September 15 or 16, S&P Capital IQ’s LCD reported on Wednesday.
But yesterday, Frontier accelerated pricing of the bonds and moved it forward to today (September 11). Why the sudden panicky hurry?
On September 16-17 is the FOMC meeting. The fateful one. The Fed might decide to kick off the cycle of monetary tightening by raising interest rates from nearly nothing to practically nothing. It doesn’t sound like a big deal, but the cacophony about it has reached a deafening level. With this move, the Fed would kill the Wall Street illusion of ZIRP Infinity, just like it killed the illusion of QE Infinity. And for our over-indebted corporate heroes, such as Frontier Communications, it is a big deal.
Frontier’s bonds are expected to be rated at BB-/Ba3, so junk bonds. It’s not exactly cheap money. But according to LCD, there’s demand for the three-part deal, and this morning guidance on pricing has tightened:

This post was published at Wolf Street by Wolf Richter – September 11, 2015.