Pyxus bonds crash as EBITDA falls 56% ahead of looming bond maturities

Pyxus International’s near-term secured bonds plummeted this morning after the tobacco company reported a sharp fall in quarterly revenue and EBITDA and withdrew previously stated guidance for its 2020 fiscal year, which ends in March.

The company, formerly known as Alliance One, has two bond maturities in 2021. It could potentially delever by growing sales of CBD products or by selling parts of the division that contains that business, according to five sources familiar with the matter.

The company’s USD 630m 9.875% second lien notes due 2021 fell 15 points this morning (11 February) to 49, per MarketAxess. Its USD 272m 8.5% first lien notes due 2021 traded at 96 to yield 12.24%, down from par on 24 January.

The company’s stock, which trades on the NYSE under the ticker PYX, fell as low as USD 4.86 per share this morning. It has since retraced to USD 5.30 per share, down 26.5% on the day, equating to a market cap of USD 47m.

For the quarter ended 31 December, Pyxus generated USD 24.2m of adjusted EBITDA, down 56% from the year prior. Revenue was USD 363.3m, down 31% from 3Q19. The earnings take leverage to 10.8x, based on USD 1.45bn of total debt and USD 137.5m of LTM adjusted EBITDA.

The company attributed the drop in earnings to lower sales volumes and prices, related to shipment and processing delays across Africa, North America and Asia. Management also noted that the company was monitoring the effects of the coronavirus in shipments from North America to Asia.

Citing these uncertainties—as well as “additional steps” needed to restart tobacco leaf exports to China in the wake of the US-China trade agreement—Pyxus withdrew its previous earnings guidance for the 2020 fiscal year. It had forecast USD 150m-USD 170m of EBITDA and USD 1.75bn-USD 1.85bn of revenue.

However, the company noted the fourth quarter has historically been its strongest period for revenue and that it anticipated a repeat of that trend this year. Sources familiar with the company, meanwhile, pointed to its new CBD business as a potential source of growth.

“Their saving grace would be if they could partner with a Rite Aid, CVS, Procter & Gamble, somewhere like that to sell their CBD products,” said one.

Pyxus is also considering a partial monetization of its “Other Products and Services” segment, which includes the CBD business, according to public filings. Sources noted that proceeds could be used to pay down debt but questioned whether they would be substantial enough for meaningful deleveraging.

Messages left for Pyxus were not returned.

2020 Debtwire

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