Investors in LVMH's Tiffany bonds left second-guessing on redemption payout

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Investors in LVMH's Tiffany bonds left second-guessing on redemption payout
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The holders of 9 billion euros (8.36 billion pounds) worth of bonds issued by LVMH to fund its now imperilled acquisition of Tiffany & Co have been left second-guessing as to when they might get their money back.

FILE PHOTO: A Tiffany & Co. store is pictured in the Manhattan borough of New York City, New York, U.S., September 10, 2020. REUTERS/Carlo Allegri

Most of the LVMH deal bonds initially rose on news the deal was off as holders bet they would be swiftly repaid at “par” or slightly higher along with accrued interest, having been previously trading below that level. But as corporate bonds were hit hard by the COVID-19 crisis and the outlook for luxury goods clouded in a recessionary environment, the LVMH bonds traded down as low as 90 cents on the euro. That is typically seen as a significant fall in value and means the yield on the bonds doubled in some cases from where they were priced.

“A number of the bonds are a pretty good value proposition if the acquisition falls through, as there are calls at par or slightly above,” said Gordon Shannon, a portfolio manager at Twenty Four Asset Management.

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