IFR 03.21.2020

36 International Financing Review March 21 2020

ratings of SOUTHWEST AIRLINES to Baa1 from A3

ANDûPUTûALLûOFûITSûRATINGSûONûREVIEWûFORû

further downgrade. On Wednesday, Moody’s

also put WESTJET@Sû"AûISSUERûRATINGûONûREVIEWû

for downgrade.

2ATINGSûAGENCIESûALSOûTOOKûSEVERALûACTIONSû

on airlines in Latin America this week.

Moody’s assumption is that domestic

industry capacity in the US is cut by 50% in the

second quarter and 25% in the third quarter

RELATIVEûTOûTHEûRESPECTIVEûQUARTERSûINû

4HEû53ûGOVERNMENTûHASûPROPOSEDûAû

US$50bn lending facility to support the

industry, which fell short of what lobbyists

had hoped for.

Industry body Airlines for America, which

represents American Airlines, United

Airlines, Delta Air Lines, Southwest Airlines

and others, said on Monday the sector

needed US$25bn of grants, US$25bn of loans

ANDûSIGNIlCANTûTAXûRELIEFûOFûATûLEASTû53BNû

TOûSURVIVE

In the meantime, some airlines such as

!MERICANûANDû*ET"LUEûHAVEûLINEDûUPûSHORT

TERMûLOANSûFROMûINVESTMENTûBANKSûTOûSHOREû

up liquidity.

DEL MONTE DOWNGRADED

AFTER CANNING BOND

DEL MONTE FOODS‘ decision to postpone a

US$575m bond has left the company with

looming debt maturities as uncertainty

GROWSûOVERûITSûABILITYûTOûACCESSûMARKETS

S&P cut the food producer’s corporate

rating on Monday to CCC from CCC+ with a

NEGATIVEûOUTLOOKûAFTERûMARKETûVOLATILITYû

FORCEDûTHEûCOMPANYûTOûPULLûAûSEVEN

YEARû

non-call three senior secured bond, which

WASûTOûBEûUSEDûFORûRElNANCINGû

Moody’s also hit Del Monte with a one-

notch downgrade on Wednesday to Caa2

from Caa1.

S&P said that maturities are starting to

LOOMûWITHûITSû53MûlRST

LIENûTERMûLOANû

becoming current, or due within in year, on

February 18.

-OODYSûESTIMATESûTHEûlRMSûDEBT

TO

Ebitda ratio at 12.2 times and said it carries

HIGHûRElNANCINGûRISKûDESPITEûAûPLANûTOû

PURSUEûAûRElNANCINGûATûAûLATERûDATEû

Its US$442.5m asset-based lending facility

ALSOûBECAMEûCURRENTûINû.OVEMBERûWHILEû

US$187m of other debt maturities falling due

between August and October need to be

addressed in the near term, according to S&P.

h7EûBELIEVEûTHATûITûWILLûTAKEûLONGERûTHANû

PREVIOUSLYûEXPECTEDûTOûCOMPLETEûAû

RElNANCINGûWITHûREASONABLEûTERMSûGIVENû

the company’s current standing in the

credit markets and uncertain market

conditions,” said S&P.

The planned bond was announced on

March 4 and had been expected to price on

March 10.

)TûWASûAIMEDûATûRElNANCINGûTHEû

company’s capital structure, alongside a

53MûCASHûINVESTMENTûFROMû$ELû-ONTEû

0ACIlCûANDûTHEûEQUITYûSALEûOFû$ELû-ONTEû

0ACIlCû4,û(OLDINGS

3INCEûITûWASûANNOUNCEDûAVERAGEûHIGH

YIELDûSPREADSûHAVEûWIDENEDûTOûBPûOVERû

4REASURIESûFROMûBPûWHILEûAVERAGEû4RIPLEû

#ûSPREADSûHAVEûMOVEDûTOûBPûFROMû

BP

The company has been under pressure

FROMûHIGHûlNANCIALûLEVERAGEûDECLININGû

CANNEDûFRUITûANDûVEGETABLEûSALESûASûWELLûASû

being in the midst of a major operational

RESTRUCTURINGû-OODYSûSAIDûONû-ARCHû

“Del Monte was a hard deal to do when

the market was good, so it’s no surprise,”

SAIDûONEûHIGH

YIELDûINVESTOR

JP Morgan was lead-left on the proposed

bond, with Wells Fargo, Bank of Montreal and

Capital One as bookrunners. JP Morgan

declined to comment on the deal.

RR DONNELLEY CLOSES PRIVATE

DEBT REFI

The high-yield primary market may be

closed for new business, but that did not

STOPûMARKETINGûANDûPRINTûSERVICESûCOMPANYû

RR DONNELLEYûANNOUNCINGûAûPRIVATELYû

negotiated debt exchange on Monday

against a turbulent market backdrop.

The company said it had addressed a

hSIGNIlCANTûPORTIONvûOFûITSûûANDûû

debt maturities.

4HEûDEALûWASûUNDERSTOODûTOûHAVEûBEENû

negotiated with the company’s largest

BONDHOLDERûPRIVATEûEQUITYûlRMû#HATHAMû

Asset Management, according to a report by

+$0û)NVESTMENTû!DVISORS

4HEûPRIVATEûEQUITYûlRMûALSOûOWNSûûOFû

outstanding RR Donnelley stock, according

TOû2ElNITIVû%IKONûDATAûANDûHASûBEENû

INVOLVEDûINûANûESCALATINGûDISPUTEûWITHûTHEû

COMPANYûOVERûITSûCAPITALûSTRUCTUREûANDûNEAR

term debt maturities.

'IVENûTHEûSTRUCTURALûHEADWINDSûINûTHEû

commercial print industry, ratings agencies

were keeping a close watch on the

COMPANYSûLEVERAGEûWHICHûWASûATûXûASûOFû

!UGUSTûûACCORDINGûTOûANû30ûREPORTû

ABOVEûTHEûXûTHRESHOLDûFORûITSû"ûRATING

RR Donnelley reduced outstanding debt

BYû53MûINûûTOûAûTOTALûOUTSTANDINGû

amount of US$1.82bn at the end of the year.

Despite that, Chatham wrote to RR

Donnelley on February 12 to articulate its

CONCERNSûABOUTûTHEûCOMPANYSûlNANCIALû

position.

h)NVESTORSû;WHETHERûEQUITYûORûDEBT=ûAREû

understandably skittish about the

COMPANYSûlNANCIALûSTABILITYvûTHEûFUNDû

WROTEûh%VENûMOREûUPSETTINGûISûTHEûLACKûOFûAû

publicly announced plan to deal with these

looming near-term maturities.”

The dispute between the two parties

escalated after RR Donnelley reported

FOURTH

QUARTERûANDûFULL

YEARûûRESULTSûONû

February 25.

These showed a 7.7% year-on-year decline

INûNETûREVENUESûANDûAûLOSSûPERûSHAREû

attributable to common stockholders of

53ûINûTHEûFOURTHûQUARTERûOFûû

compared with a loss per share of US$0.32 in

the fourth quarter of 2018.

RR Donnelley also reported problems with

its supply chain and labour shortages in

#HINAûRELATEDûTOûTHEûCORONAVIRUSûOUTBREAKû

WHICHûITûESTIMATEDûWOULDûHAVEûAû53MûHITû

TOûREVENUEûINûTHEûlRSTûQUARTERûOFû

Later in the month, Chatham expressed

concerns about what it saw as RR

Donnelley’s “poison pill” defence against

ACTIVISTûINVESTORSûWHOûHOLDûMOREûTHANûû

of the company’s stock, and it threatened

litigation against the company.

DEBT SWAP

Under the announced transactions, RR

$ONNELLYûWILLûREPURCHASEû53MûOFûû

SûANDû53MûOFûûSûATûAûPRICEû

OFûûUSINGûAûSENIORûSECUREDûASSET

BASEDû

lending facility.

!NDûINûRETURNûFORû53MûOFûNEWûû

SENIORûUNSECUREDûûNOTESûTHEûCOMPANYû

will exchange US$277m of existing debt

HELDûBYû#HATHAMûACROSSûITSûûSû

ûSûANDûûSûDEBENTURES

!SûOFû$ECEMBERûûûTOTALûOUTSTANDINGû

debt was US$1.82bn, down US$273m from

û!VAILABILITYûUNDERûTHEûCREDITûFACILITYû

WASû53MûATû$ECEMBERûûûUPû

53MûFROMû

4HEûlRMûHASû53MûOFûBONDSûANDû

debentures maturing across 2020 and 2021,

which it said it would repay with its credit

facility.

“We are particularly pleased that we were

ABLEûTOûCONSUMMATEûTHEûRElNANCINGûDESPITEû

HEIGHTENEDûVOLATILITYûINûTHEûCAPITALûMARKETSû

ANDûWISHûTOûTHANKûOURûlNANCINGûPARTNERûFORû

working with us on these transactions,” said

4ERRYû0ETERSONûEXECUTIVEûVICE

PRESIDENTûANDû

CHIEFûlNANCIALûOFlCERûOFû22$

FRONTIER SKIPS COUPON PAYMENT

AHEAD OF BONDHOLDER TALKS

Telecoms company FRONTIER COMMUNICATIONS

skipped US$322m of coupon payments on

SEVERALûOFûITSûUNSECUREDûBONDSûONû-ONDAYû

ENTERINGûAû

DAYûGRACEûPERIODûTOûCONTINUEû

talks with unsecured noteholders for a

potential debt restructuring.

JP Morgan analysts said the missed

coupons included the 8.875% notes due

2020, 10.50% notes due 2022, 11% notes due

ûANDûTHEûûNOTESûDUEû

The company had around US$17.5bn of

debt outstanding as of September 30.

6 IFR Bonds 2325 p 23 - 45 .indd 36 20 / 03 / 2020 19 : 59 : 41