Herbalife sells junk bonds for stock buybacks
Herbalife Nutrition Ltd. managed to persuade investors to lend it $600 million so it could buy back shares, an unusual move at a time when companies are borrowing billions of dollars to shore up liquidity during the coronavirus crisis.
The Los Angeles maker of weight loss shakes and supplements that counts Carl Icahn as its largest shareholder sold the unsecured debt Wednesday at a yield of 7.875%, down slightly from early unofficial pricing discussions of 8%, according to people familiar with the matter.
Proceeds will be used for general corporate purposes, which could include the purchase of stock or capital investment, said the people, who asked not to be named discussing a private transaction.
Herbalife products are distributed by a network of direct sellers rather than through stores, and the company has garnered controversy for its multilevel marketing structure that encourages sellers to recruit others to hawk the products. But the business has fared well during the pandemic.
Net sales increased 7.7% on a year-over-year basis in the first quarter, which ended March 31, and the company expects only a small decline in preliminary April volumes as a result of the virus, according to an earnings release this month.
“The demand for our products and for our services has gone up around the world,” Chief Executive John Agwunobi said on a recent earnings call.
A representative for Herbalife didn’t respond to a request for comment.
Herbalife shares climbed 1.8% on Wednesday to $44.03.