Sweet Junk Bond Offering

According to Bloomberg, Nortel is expected to offer the highest yields in 15 years to convince enough investors to purchase $2 billion of junk bonds this month. The yield on Nortel's 6.875% due in 2023 has risen about 100 basis points to 8.3% since May. "A lot of deals aren't doing well out of the blocks," said Timothy Cronin, a fixed-income analyst at John Hancock Advisers in Boston, told Bloomberg. "There's fear over the strength of the economy and whether the consumer is going to hang around." Nortel is expected to sell its bonds due in 2011, 2013 and 2016 next week. Nortel is selling the bonds to repay money drawn from a $1.3 billion, one-year credit line, replenish cash used for $150 million of bonds that matured this month and fund a $580 million payment related to a shareholder lawsuit.

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