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High yield: the good and the bad

Two corporate high yield offerings last week had very different receptions, with IT Holding being forced to resize its deal but Editis seeing its bonds nearly 10 times oversubscribed.

The two deals demonstrated that market generalisations are dangerous as country and sector can be just as important as the type of offering.

IT Holding, which owns Italian fashion label Gianfranco Ferre, was forced to reduce its planned ?185 million ($237 million) offering to ?150 million and remove the call option as well as widening the yield by 100bp.

The deal appeared to fare so badly because of low demand for Italian deals post-Parmalat, the volatility of the fashion sector and the choice of Merrill Lynch as bookrunner ? Merrill faced tough questions following the lack of secondary market support given to its management of an issue by German cable company Tele Columbus in April. The other bookrunner was Banca IMI.

French publisher Editis, by contrast, received a fantastic reception for its ?150 million high yield bond, with over ?1.4 billion of investor demand. The enthusiasm enabled lead managers BNP Paribas, Credit Suisse First Boston and Lehman Brothers to reduce the yield guidance from 8.5%

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