Toy maker Mattel on Thursday terminated a high-yield bond issue it priced last week ahead of closing the deal, after being made aware of an anonymous whistleblower letter.
“On August 6, 2019, Mattel, Inc. … was made aware of an anonymous whistleblower letter,” the filing said.
“To provide the Company with an opportunity to investigate the matters set forth in the letter, the offering of the Company’s 6.00% Senior Notes due 2027 that was scheduled to close on August 8, 2019 has been terminated.”
Cancelling a deal in between pricing and settlement on the other hand has only happened three times before, according to CreditSights - with Legends Gaming and OSI Restaurants in 2007 and Servicemaster in 2012.
In the secondary on Friday, Mattel’s 6.75% 2025s bonds were down up to four points on Thursday to trade as low as 100.00, according to MarketAxess.
The new US$250m eight-year non-call three senior unsecured notes were priced with a 6% yield last Thursday and had been scheduled to settle yesterday.
The firm was looking to refinance its 4.35% senior notes due 2020. It still intends to refinance those bonds ahead of maturity, according to the filing.
Analysts at CreditSights said the additional cost of coming back to the market with a new deal would not be meaningful, given its small size. But investing in the firm’s bonds while the contents of the letter remain unknown “seems inadvisable”, they said.
Pulling a deal after pricing is extremely rare and suggests the company and banks were wary of any potential legal risks that could arise if the deal went ahead.
“The banks are all about printing paper, but if this does lead to a loss for investors they could be accused of not performing due diligence,” said an investor. “This is a (risk management) move on the bank’s side and for the company it’s the same thing.”
Two other high yield bonds from Sirius Minerals and US Farathane were pulled this week, but they were victims of worsening market conditions and could not find the right price from investors.
Lead left Bank of America Merrill Lynch could not be reached for comment. Mattel did not immediately respond to a request for comment.