(^48) International Financing Review March 7 2020
Aircraft paper with heavy exposure to
Chinese airlines widened by 50bp last week
and has not yet shown any signs of
recovering in the wake of the Fed’s
intermeeting rate cut, traders said.
“While aircraft ABS has consistently
been highest yielding in the ABS
market, recent concerns and volatility
AROUNDû#/6)$
û;CORONAVIRUS=ûONLYû
underscore the potential risks, plus the
esoteric and cyclical nature, of the
sector,” JP Morgan analysts said in a
research note.
Amid market turbulence two weeks ago, a
US$629.82m aircraft lease offering, KDAC
2020-1, was postponed. It is unclear when it
will return, according to several market
sources familiar with the deal.
Investors have also been monitoring other
businesses that would be hurt from the
coronavirus breakout that has killed more
than 3,100, mostly in China.
Income Research’s Remley cited hotels,
retailers, restaurants and even car rental
companies that may suffer if consumers pull
back their spending and travel behaviours
due to fears about the virus.
“Business travel is under pressure,”
Remley said. “Rental car ABS could be the
next sector we should be concerned about.”
US CLO
CLOs TO WARN INVESTORS CORONAVIRUS
COULD IMPACT PERFORMANCE
Collateralised loan obligation managers are
preparing to warn investors that the fast-
spreading coronavirus could impact the
performance of the loans they own as
production slowdowns weigh on earnings.
)NVESTMENTûlRMSûHAVEûDISCUSSEDûADDINGû
the virus, which has swiftly spread around
the globe, as a risk factor in US CLO
documents, according to sources familiar
with the conversations.
Language under consideration warns that
a widespread health crisis could impact the
ability of the fund to pay its investors.
The language would indicate that
because the long-term impact of the
virus is unknown, it is causing
SIGNIlCANTûUNCERTAINTYûINûBOTHûDOMESTICû
ANDûGLOBALûlNANCIALûMARKETS ûAûSOURCEû
said.
The virus “could have a material adverse
effect on certain obligors of collateral
obligations, including disruptions to
obligors’ supply chains, closures of their
facilities or decreases in demand for their
products and services”, a potential clause
states, according to a source.
Any additional widespread health crisis in
the future could have a similar adverse
effect and negatively impact the fund’s
ability to make payments to its CLO
tranches, the clause explains.
“CLO managers are monitoring their
exposure” to the virus, according to Jason
Merrill, an investment specialist at Penn
Mutual Asset Management. “When you look
at deal documents, I wouldn’t be surprised if
there is not a direct reference to the
coronavirus or at least a mention to a
SSAR
US DOLLARS
Mar 4 2020 World Bank US$3.5bn Mar 11 2025 0.75 99.429 MS+10 / T+15.65 0.867
Mar 5 2020 EBRD US$550m Mar 13 2023 Sofr+26 100 Sofr+26 -
Mar 5 2020 KBN US$1.25bn Mar 12 2025 0.875 99.922 MS+15/T+21.5 0.891
EUROS
Mar 3 2020 Hessen €500m Mar 10 2025 0 102.234 MS-5 / B+34.6 -0.441
Mar 3 2020 Lower Saxony €500m Mar 9 2035 0.05 99.761 MS+3 0.066
Mar 4 2020 Hamburg €250m Sep 3 2049 0.2 97.016 MS+17 / B+46.1 0.306
Mar 5 2020 Brandenburg €450m incr
(€750m)
Aug 8 2036 0.75 110.315 MS+7 / B+61.4 -
STERLING
Mar 5 2020 UK MBA £350m Mar 12 2025 Sonia+80 100 Sonia+80 -
SWISS FRANCS
Mar 3 2020 ZKB SFr40m incr
(SFr230m)
Mar 12 2030 0 103.335 MS+19 / Eidg+51 -0.328
NON CORE
Feb 28 2020 City of Gothenburg NKr1bn Mar 3 2025 3mN+7 100 3mN+7 -
Feb 28 2020 City of Gothenburg NKr500m Mar 3 2026 3mN+11 100 3mN+11 -
Mar 3 2020 Akademiska Hus SKr500m Mar 13 2023 0.19 100 0 0.19
CORPORATES
US DOLLARS
Mar 3 2020 American Electric Power Co US$400m Mar 1 2030 3.25 99.829 T+165 3.259
Mar 3 2020 American Electric Power Co US$400m Mar 1 2030 2.3 99.956 T+130 2.305
Mar 3 2020 Canadian Pacific Railway US$500m Mar 5 2030 2.05 99.802 T+105 2.072
Mar 3 2020 Entergy Louisiana US$350m Mar 15 2051 2.9 99.755 T+130 2.912
Mar 3 2020 Mcdonald’s US$750m Sep 1 2049 3.625 108.227 T+160 3.188
Mar 3 2020 Mcdonald’s US$750m Mar 1 2030 2.125 99.946 T+115 2.131
Mar 3 2020 Mcdonald’s US$500m Sep 1 2025 1.45 99.816 T+75 1.485
Mar 3 2020 Sherwin-Williams US$500m May 15 2060 3.3 99.823 T+170 3.309
Mar 3 2020 Sherwin-Williams US$500m May 15 2030 2.3 99.979 T+130 2.302
Mar 3 2020 Texas Instruments US$750m Mar 12 2025 1.375 99.851 T+60 1.406
Mar 4 2020 Berkshire Hathaway Finance US$500m Mar 12 2030 1.85 99.9 T+87.5 1.861
GLOBAL BOND SUMMARY DETAILS: WEEK ENDING 6/3/2020
Pricing date Issuer Amount Maturity Coupon (%) Reoffer Spread (bp) Yield (%)
6 IFR Bonds 2323 p 25 - 53 .indd 48 06 / 03 / 2020 19 : 18 : 09
ann
(Ann)
#1