After a two-week drought, debt investors showed they’re willing to start lending to junk-rated borrowers again. But they’re still apprehensive when it comes to energy companies.
That’s what happened this week when off-shore driller Transocean Ltd. came to the bond market with plans to raise $1.5 billion. The company ended up trimming the deal to $1.25 billion and had to boost yields to entice investors.
Transocean was the first junk-rated company to sell bonds since just before June 23, when the U.K. voted to leave the European Union and issuance of speculative-grade debt in both the U.S. and Europe ground to a halt. And while a rebound in oil prices this year has boosted the value of bonds sold by riskier energy companies, parts of that industry still haven’t recovered, according to Jake Leiby an analyst at debt research firm CreditSights.