What’s Up With iPayment Bonds?

Last Thursday, one High Yield bond that caught my attention was iPayment’s (IPMT) 10.25% Coupon, Maturing May 5, 2018 (CUSIP 46262EAE5). In particular, the price action on IPMT was extreme. The bond was priced at $85.45 at the end of closing on Wednesday. By the end of trading on Thursday, the bonds cratered by 7.6% on the day and closed at $78.99 for a Yield to Worst of 16.21%. Since that low print, the bonds have rallied back to where it started at $85.45 for a Yield to Worst of 14.18%.

Below is a graph from Bloomberg of the price action of the bond:


Interestingly, there was no news on the company that day to the best of my knowledge that could possibly trigger the fall in price. The company reported results from the Third Quarter in early November. Shortly afterwards, JP Morgan reiterated their ‘Overweight’ recommendation on their website on November 13. So, the question is what prompted the drop in price last Thursday?

In any event, the owner of the bonds who purchased it at the low gained 8.2% in several days. At the very least and assuming the company performs on its debt, the owner will earn 16.21% per year until maturity on the B3/CCC+ rated bond by Moody’s and S&P.

iPayment, Inc. which was formed in 1992 as a privately owned company, is a provider of credit and debit card-based payment processing services to approximately 140,000 small merchants across the United States. iPayment’s payment processing services enable merchants to process both traditional card-present, or “swipe,” transactions, as well as card-not-present transactions, including transactions over the internet or by mail, fax or telephone.

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