(^40) International Financing Review March 7 2020
due to the coronavirus curtailing appetite
for risk, with CMA CGM, VALLOUREC and CODERE
among the credits highlighted by investors
and analysts.
The trio all need to push out near-term
maturities this year and next and have seen
their bonds tank in secondary.
Investors told IFR it’s too early to talk
about a spike of defaults among companies
because of the coronavirus.
But after a record start to the year for
European junk bonds with the market
seemingly open to all-comers, and a rush of
RElNANCINGS ûBORROWERSûWITHûDEBTûNEEDSû
must be “kicking themselves”, said one
investor.
“Most investors will act rationally around
this event but still - what we’re seeing is
somewhat unprecedented,” said Martin Horne,
HEADûOFûGLOBALûPUBLICûlXEDûINCOMEûATû"ARINGS
h7EûHAVEûNOTû;EVER=ûHADûSUPPLYûCHAINû
disruption in quite this fashion.”
Still, he said that companies may only
lNDûTHEMSELVESûSHUTûOUTûOFûTHEûMARKETûhIFû
the business was perceived to be structurally
weak or in trouble before this event”.
Spanish gaming company Codere has
€500m of euro debt coming due in
November 2021. Over the past two weeks
those bonds have dropped by more than 10
points, according to Tradeweb.
Codere was already perceived as a risky
CREDIT ûHAVINGûISSUEDûTWOûPROlTûWARNINGSûINû
2019, and on February 28 reported weak
fourth-quarter results with Ebitda dropping
18.3% year-over-year.
Its 6.75% November 2021s were bid
around 81 on Friday. The bond had been
trading at 97.50 in January.
In Italy, the company saw revenue
collapse by 14% in the last two weeks of
&EBRUARYûCOMPAREDûTOûTHEûlRSTûTWOûWEEKSûOFû
the month, thanks to coronavirus fears.
“We believe coming quarters will
continue to be challenging, making the
ûBONDSûRElNANCINGûHIGHLYûUNCERTAIN vû
wrote Spread Research analysts.
Lucror Analysts agreed, writing: “The
Covid-19 situation, if not contained in
Europe, could further pose a risk to the
outlook and the company’s ability to
RElNANCEûTHEûBONDSv
!FTERûDROPPINGûOVERûlVEûPOINTSûTHEûWEEKû
prior, CMA CGM’s bonds were up slightly
last week as the investment-grade primary
market opened up to new issues again.
However, the French shipping company’s
UNCERTAINûPATHûTOûRElNANCINGûISûHIGHLIGHTEDû
by the fact its various bonds are still trading
well below par.
CMA CGM’s 6.5% July 2022s were bid at 74
on Tuesday, down from a high in January of
97.75.
Its 5.25% Jan 2025s were bid at 64, down
from a January high of 88.
The company has two big maturities
coming up: a €725m 7.75% January 2021 and
a €650m 6.5% July 2022. It held a number of
meetings with investors earlier this year
until anxieties over coronavirus took hold.
Elsewhere, French steel pipe maker
Vallourec’s bonds were down last week on
worries that the coronavirus outbreak will
put an upcoming rights issue at risk.
h4HEûLOGICALûREASONû;FORûTHEûDROP=ûISûTHATû
investors have increased doubts over the
rights issue,” said one bondholder.
Vallourec announced after full-year
earnings on February 19 that it would target
€800m in a fully underwritten rights issue to
strengthen its balance sheet.
“We believe that a heady drop in
Vallourec’s share could make the capital
INCREASEûDIFlCULTûTOûEXECUTE vûWROTEû3PREADû
Research analysts last Monday.
The company’s share price has dropped
over 40% since the beginning of the year.
VALLOUREC BONDS DROP SHARPLY ON
RIGHTS ISSUE DOUBTS
Bonds issued by French steel pipe maker
VALLOUREC have lost more than 10 points on
worries that the coronavirus outbreak will
put the company’s upcoming rights issue at
risk.
Its 6.375% October 2023s have fallen 10
points to 92.50 since February 20, while its
2.25% September 2024s have dropped to 73
from 89.70.
h4HEûLOGICALûREASONû;FORûTHEûDROP=ûISûTHATû
investors have increased doubts over the
rights issue,” said one bondholder.
Vallourec announced after full-year
earnings on February 19 that it would target
€800m in a fully underwritten rights issue
to strengthen its balance sheet.
Vallourec bonds had rallied by up to 17
points after the announcement, but have
reversed much of those gains.
The deal is pegged to launch in the second
quarter, and would represent about 80% of
Vallourec’s market cap of €1bn.
“We believe that a heady drop in
Vallourec’s share could make the capital
INCREASEûDIFlCULTûTOûEXECUTE vûWROTEû3PREADû
Research analysts on Monday.
The company’s share price has dropped
more than 40% since the beginning of the
year.
Vallourec has also agreed a €800m
revolving credit facility, which is
conditional on the completion of the rights
issue.
Analysts called the capital increase a
“game-changer for the credit”.
Vallourec had previously been seen as a
potentially distressed credit story,
mentioned by investors in the same breath
as CMA CGM, the French shipping company.
The company has a hill of maturities to
climb: €600m of bank facilities due in
February 2021, and then €1.7bn of bonds
maturing 2022, 2023 and 2024, according to
2ElNITIVûDATA
Vallourec’s bonds tanked last February on
reports that two lenders were trying to pull
out of its revolving credit facility at a price
in the 70s.
But unlike CMA CGM, Vallourec has more
recently been seen as a good earnings
recovery story, with improvements in
%BITDAûANDûCASHmOWûGENERATIONû
Another reason for the drop in Vallourec’s
bonds could be that investors are cashing
out now they have seen a substantial
improvement in the credit, said the
investor.
“Investors have spent a lot of money on
the story and now we’re all reducing,” said
the investor. “Why be greedy and hang out
for that last point or two from a rights
issue.”
A second investor pointed out that the
rights issue had already been underwritten.
The company, once an investment-grade
issuer, is now rated B– (positive) by S&P.
BNP Paribas, Morgan Stanley, Natixis and
Societe Generale are global coordinators on the
rights issue, and bookrunners along with
Commerzbank, people close to the deal said.
Shareholder Bpifrance will subscribe to its
14.6% pro rata share while shareholder
Nippon Steel Corporation, which also owns
14.6%, will subscribe for an amount to give it
a stake of about 10% in Vallourec post-
money.
STRUCTURED FINANCE
EMEA MBS
PROTECTED ORDERS EASE PRICING FOR
BTL PAIR
Asset-backed syndicate desks managed to
push through deals last week that had
already been announced, but worry over the
coronavirus meant there was just one
addition to the pipeline despite prior
expectations of a busy March.
There are at least 10 repeat securitisations
from UK originators, mainly specialist
LENDERS ûlLEDûATû#OMPANIESû(OUSEûTHATûAREû
yet to be announced.
“You can get a deal done – but it’s not
PRETTY vûSAIDûONEû!"3ûSYNDICATEûOFlCIAL
Away from CLOs the only new
announcement was a Triple A only French
RMBS which, if it does come to market, is
likely to be supported by the ECB’s ABS
6 IFR Bonds 2323 p 25 - 53 .indd 40 06 / 03 / 2020 19 : 18 : 08
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