GTT plummets on advisor announcement and earnings miss, CommScope slides and recovers, Party City softens on earnings – Mid-Day Commentary

GTT Communications bonds fell 10 points after the company missed earnings estimates for 2Q19 and announced that it hired an advisor to explore asset sales with the goal of reducing debt, according to three sources following the company.

GTT reported 2Q19 EBITDA of USD 112m, missing expectations of USD 125m, but up 49.5% year-over-year versus 2Q18. Revenue clocked in at USD 434m, down 3.6% sequentially, but up 32.7% from 2Q18.

“Not only did the company miss expectations, but revenue was also down sequentially, which is a material decline for a business that’s supposed to be stable,” one of the sources said. “On top of that, they hired an advisor, which goes against the roll-up strategy.”

Management expects the company to generate free cash flow of USD 175m–USD 200m in 2020, but investors are skeptical it will be able to achieve that, given the cash burn over the last few quarters. The company burned USD 4.1m this quarter and USD 16m in 1Q19.

GTT’s USD 575m 7.875% senior unsecured notes due 2024 fell to 64.25 to yield 18.677% from trades at 75 yesterday, rebounding slightly to 65.75 to yield 18.082%, according to MarketAxess.

The company’s stock fell 46% to USD 6.09 per share today for a market cap of USD 349m.

CommScope bonds whipsawed this morning after the telecom company reported weak earnings for 2Q19, according to two buyside sources.

The company reported pro forma EBITDA of USD 380.5m, down 20.1% YoY. Pro forma revenue declined 11.9% YoY due to lower sales to cable operator customers, pricing pressures and unfavorable impacts from foreign exchange rate changes.

However, investors regained confidence following the earnings call, one of the sources said. “After the call it seemed that the management team has a handle on what’s happening so for better results through the end of the year, they’re cutting capex spending, raising cost synergy guidance, streamlining sales and R&D staff and stretching off payables. Plus, they still expect to repay debt,” the source said.

Commscope’s 1bn 8.25% senior unsecured notes due 2027 traded as low as 90.22 to yield 10.132% today after the earnings report from trades at 93.25 to yield 9.519% on Monday (5 August). The bonds rebounded to trade at 93 to yield 9.517% after the call, according to MarketAxess.

The company’s stock traded today at USD 13.57 per share for a market cap of USD 2.627bn, up 5.19% from yesterday’s close.

Party City bonds ticked down after the party supply company reported lackluster earnings for 2Q19, according to a trader and sellsider.

Adjusted EBITDA for the quarter fell 16% YoY to USD 81m. Revenue ticked up 0.5% YoY to USD 563.9m, but missed consensus estimates by 1.42%, the sellsider said.

The company also reported earnings per share results of USD 0.22 per share, missing estimates of USD 0.38 per share.

“Overall, in the second quarter we continued to experience headwinds from direct and indirect impacts of the helium shortages and higher helium costs in many of our markets. Additionally, results were negatively impacted by the flow through of temporarily higher freight costs incurred in late 2018 and non-recurring inventory markdown costs associated with planned store closures,” Party City CEO James Harrison said.

The USD 500m 6.625% senior unsecured notes due 2026 last traded at 93.05 to yield 7.942%, down more than two points from 95.25 to yield 7.512% yesterday (7 August), according to MarketAxess.

The company’s stock fell 18% to USD 4.64 per share for a market cap of USD 426.656m.

Realogy’s debt rose today after the issuer reported a 2Q19 earnings beat, according to a trader.

The real estate services company generated USD 245m of operating EBITDA in 2Q19, higher than expectations of USD 242m, and down 11% from USD 276m in 2Q18, the trader said.

The USD 500m 4.875% senior unsecured notes due 2023 rose to trade this morning at 88.25 to yield 8.56%, up three points from 85.25 yielding 9.58% on 6 August, according to MarketAxess. The USD 550m 5.25% senior unsecured notes due 2021 traded today at 98.5 to yield 5.95%, up more than two points from 96.06 yielding 7.12% on 5 August.

The equity jumped 13% to trade this morning at USD 5.70 per share for a market cap of USD 685m.

Revlon’s bonds fell after the cosmetics company reported a drop in net sales for 2Q19, a sellsider said.

The company reported USD 570.2m of net sales for the quarter, down 6% from USD 606.8m in 2Q18. Meanwhile, adjusted EBITDA grew to USD 47m in 2Q19, up 28% from USD 36.7m in 2Q18.

Revlon attributed the earnings to a decline in the Portfolio and Fragrances segments, partially offset by growth in the Elizabeth Arden segment. The company also lowered overhead and transitioned to an internal media agency to cut costs.

The USD 500m 5.75% senior unsecured notes due 2021 fell today to 89.063 to yield 14.05%, down two points from 91 yielding 12.43% on 6 August, according to MarketAxess.

The equity fell 5% to trade this morning at USD 17.41 per share for a market cap of USD 923m.

Gogo’s bonds and equity jumped after the company reported EBITDA growth and lifted guidance.

The in-flight internet company reported USD 37.8m of adjusted EBITDA in 2Q19, double the USD 18.9m in 2Q18, driven by stronger service revenue growth and lower operating expenses.

Gogo also increased FY19 adjusted EBITDA guidance to USD 105m–USD 115m, from USD 90m–USD105m previously.

The USD 925m 9.875% senior secured notes due 2024 traded today at 104.53 to yield 8.4%, up two points from 102.375 yielding 9.1% yesterday (7 August), according to MarketAxess.

The equity rose 14% to trade this morning at USD 4.40 for a market cap of USD 377m.

2019 Debtwire

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