Good Faith: Caught in the Crossfire

By Matt McCleery

When Good Faith Holdings Limited realized that price talks for its $280 million offering of high yield bonds were drifting around 10.50%, it must have been particularly frustrated. After all, when the company began thinking about issuing high yield bonds, it looked as though if it could achieve a double B rating , it would price in the 8% neighborhood. During the winter and into the spring a string of thin deals backed up the market and in May Enterprises came to market with a double B and priced at 9%, becoming the first four-B deal to price more than 300 basis points over. In June double B rated Cenargo was priced to yield 10% and became “last done” before Good Faith would come to market. In the meantime, DLJ, Good Faith’s joint lead underwriter with Goldman Sachs, failed to get Fredricksen’s aggressive ULCC Sea Transport done and was simultaneously trying to control the damage from another of its under performing junk bond deals, Premier Cruise Lines, which plummeted in both price and ratings after it was brought to market.

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