International Financing Review April 4 2020 47BONDS HIGH-YIELDAll of them also came under ratings
pressure on Thursday.
Moody’s downgraded Tenet’s secured
DEBTûRATINGûTOû"ûFROMû"AûONûTHEûADDITIONALû
secured debt being layered in.
4RANS$IGMSû"ûANDû" ûCORPORATEûRATINGSû
WEREûBOTHûPUTûONûNEGATIVEûWATCHûBYû30ûANDû
Moody’s.
!NDû30ûPUTû2ESTAURANTû"RANDSû
International’s BB issuer and BB+ secured
bond ratings on negative outlook.
Aside from that, average spreads also
almost doubled in March.
But like their investment-grade
counterparts, high-yield issuers are growing
to the idea of paying up for liquidity when
the market is open to it.
2ESTAURANTû"RANDSû)NTERNATIONAL ûFORû
EXAMPLE ûPRICEDûITSû53MûlVE
YEARûNON
call notes at 5.75%, inside price talk of 6%
area, after selling eight-year debt at 3.875%
INû3EPTEMBERûLASTûYEAR
TransDigm upsized its 5.75 year non-call
TWOûSENIORûSECUREDûOFFERINGûTOû53BNû
FROMû53BN ûPRICINGûTHEûDEALûATûûnûHAVINGû
sold eight-year senior subordinated notes at
5.50% in November last year.
4ENET ûMEANWHILE ûPRICEDûITSûlVE
YEARû
NON
CALLûTWOûNOTESûnûUPSIZEDûFROMû53Mû
TOû53MûnûATû ûAFTERûSELLINGûlVE ûSIXû
and eight year debt at 4.625%, 4.875% and
ûLASTû!UGUST
3TILL ûWHILEû95-û"RANDSûWASûSEENûASû
offering a big concession to reopen the
market on Monday, Thursday’s deals were
conceded smaller concessions compared
with the borrowers’ existing curves, the
investor said.EUROPE/MIDDLE EAST/
AFRICAINVESTORS SCOUR PORTFOLIOS FOR
PRIMING DANGERSBondholders in certain stressed companies
are facing up to the danger of being placed
LOWERûDOWNûTHEûCAPITALûSTACKûIFûlRMSûLOOKûTOû
raise super senior debt to bolster their
balance sheets or risk the credit running out
of cash.
Investors have been asking credit
RESEARCHûlRMû#OVENANTû2EVIEWûWHETHERû
TWOû"LACKSTONE
OWNEDûCOMPANIES û3PANISHû
gaming company CIRSA and theme park
operator MERLIN, have the ability to incur
priming debt to shore up liquidity.
A Blackstone spokesperson declined to
comment.
“Pretty much any name in high-yield that
has some exposure to this crisis will be
looking at ways to free up additional
liquidity,” said a London-based high-yield
investor.“But most names wouldn’t do this easily
BECAUSEûTHEYûWOULDûLOSEûTHEûCONlDENCEûOFû
the bond market – or wouldn’t be able to do
it because their covenant limits are already
set lower than their current leverage.
Merlin has the ability to add over £2bn in
super senior debt under its covenants for its
ûBONDS ûSAIDû#OVENANTû2EVIEWûANALYSTSû
Merlin’s €370m 4.5% November 2027s were
seen bid at a cash price of 72 on Friday,
according to Tradeweb data. Those bonds
WEREûTRADINGûAROUNDûûINû&EBRUARY
And Cirsa’s debt covenants under its
senior secured notes and PIKs provide a
“generous amount of capacity” for
structurally senior debt, said analysts.
#IRSA ûRATEDû"ûBYû-OODYS ûWOULDûBEû
“silly” not to think about raising super
senior debt, said the investor.
Cirsa recently said that it had temporarily
suspended all operations other than online
betting and casino operations due to Covid-
ûWROTEûANALYSTSûATû#OVENANTû2EVIEWûINûAû
report published on Tuesday.
The company has also presented a
temporary staff reduction plan affecting
ûOFûITSûWORKERSûINû3PAIN ûANDûHASûFULLYû
drawn its revolving credit facility, wrote
analysts.Cirsa’s covenants allows around 5x
leverage, and its current debt levels are in
the 4x range, said the investor.
However, it has a limited time to access
new liquidity – before April 29, when it is
due to report earnings, he said.
“Cirsa will have to raise money before its
third-quarter numbers come out, which are
likely to be very weak and therefore
leverage will spike,” he said.
A request for comment was not
immediately returned by the company.
The practice of raising super senior debt,
which then has payment priority over other
debt in a company’s capital structure, is
known as “priming”.
Pizza Express recently put a super senior
facility in place, layering bondholders.
And in the primary bond markets, both
CASINO and, last week CARNIVAL, have recently
layered existing bondholders with new,
high-priority, secured debt.
“If these company end up liquidating, it
puts the new debt-holders at the same level
as the credit’s banks – at the top of the pile,”
said a debt analyst.
Investors will have to scour bond
documents in order to work out a
company’s capacity to prime, he said.ALL US$ DENOMINATED HIGH-YIELD BONDS
BOOKRUNNERS: 1/1/2020–31/3/2020
Managing No of Total Share
bank or group issues US$(m) (%)Including US domestics, Euro, foreign, globals. Excluding equity-related debt.
Source: Refinitiv SDC code: B51 JP Morgan 56 7,476.08 8.8
2 BofA Securities 50 7,409.48 8.7
3 Barclays 45 6,525.29 7.7
4 Citigroup 46 5,569.87 6.6
5 Credit Suisse 39 4,952.15 5.8
6 Goldman Sachs 40 4,760.43 5.6
7 Morgan Stanley 27 4,657.61 5.5
8 Deutsche Bank 40 4,326.31 5.1
9 Wells Fargo 31 3,906.95 4.6
10 RBC 28 3,807.52 4.5
Total 129 84,853.68ALL NON-DOLLAR DENOMINATED HIGH-YIELD BONDS
1/1/2020–31/3/2020
Managing No of Total Share
bank or group issues €(m) (%)Excluding equity-related debt.
Source: Refinitiv SDC code: B61 JP Morgan 17 1,973.42 9.6
2 Deutsche Bank 12 1,683.84 8.2
3 Citigroup 13 1,335.14 6.5
4 BNP Paribas 13 1,222.00 6.0
5 Barclays 11 1,154.94 5.6
6 ING 10 1,110.34 5.4
7 HSBC 13 1,019.70 5.0
8 Credit Agricole 7 994.41 4.9
9 Credit Suisse 7 978.24 4.8
10 UniCredit 9 904.62 4.4
Total 38 20,464.64ALL EUROPEAN HIGH-YIELD ISSUERS
1/1/2020–31/3/2020
Managing No of Total Share
bank or group issues US$(m) (%)Excluding equity-related debt.
Source: Refinitiv SDC code: B06c1 JP Morgan 19 2,461.13 9.6
2 Deutsche Bank 11 2,129.37 8.3
3 Citigroup 14 1,964.32 7.7
4 BNP Paribas 13 1,626.43 6.4
5 ING 9 1,326.58 5.2
6 Credit Suisse 7 1,277.19 5.0
7 Barclays 9 1,274.13 5.0
8 Credit Agricole 6 1,203.41 4.7
9 SG 7 1,125.88 4.4
10 HSBC 12 1,124.68 4.4
Total 39 25,528.65ALL ASIAN HIGH-YIELD ISSUERS
1/1/2020–31/3/2020
Managing No of Total Share
bank or group issues US$(m) (%)Excluding equity-related debt.
Source: Refinitiv SDC code: B06d1 Credit Suisse 18 2,362.97 11.2
2 UBS 12 1,672.49 7.9
3 BofA Securities 5 1,531.66 7.2
4 Tianfeng Securities 4 1,320.00 6.2
5 Goldman Sachs 10 1,235.42 5.8
6 Citic 17 974.90 4.6
7 Haitong Secs 25 947.56 4.5
8 Barclays 13 790.45 3.7
9 Standard Chartered 7 677.20 3.2
10 Deutsche Bank 13 666.69 3.2
Total 47 21,135.576 IFR Bonds 2327 p 25 - 65 .indd 47 03 / 04 / 2020 20 : 29 : 00