AMC and leisure bonds reverse course, trade down amid renewed fears of COVID-19 second wave – Mid-Day Commentary

High yield bonds and equity declined this morning after Federal Reserve Chairman Jerome Powell disclosed Wednesday the Fed’s decision to hold rates steady until 2022 amid reports that COVID-19 cases are rising in many states, according to two buysiders and sellsider.

Fed officials projected a slow economic recovery from the effects of the pandemic. They indicated that they expect an unemployment rate of 9.3% at the end of 2020, along with elevated unemployment for years, coming in at 5.5% at the end of 2022, according to media reports.  

The US hit two million confirmed coronavirus cases on Wednesday, with spikes in hospitalizations around the country in Texas, Arizona, Arkansas, Florida and California, fueling fears of a second spike in cases of the virus.

The Dow Jones Industrial Average fell more than 1,300 points, or 4.95%, so far today from yesterday’s close.

As such, many of the same travel and leisure names that rode the market rally over the last week are now plummeting, the sources said.

Most visible was AMC Entertainment, whose sub bonds shot up yesterday by as much as 10 points on the theater operator’s optimistic reopening comments – but gave back some of those gains this morning.

AMC’s USD 595m 5.875% senior subordinated notes due 2026 fell five points to 38 for a 26.441% yield compared to yesterday’s high of 43 while its USD 600m 5.75% subs due 2025 dropped to 36.5 from 42, according to MarketAxess.

The issuer’s USD 475m 6.125% sub notes due 2027 fell to 36.438 this morning after gaining six points yesterday to reach 41.

Its stock fell to USD 5.07 this afternoon for a USD 528.5m market cap, down 19.3% from yesterday’s close.

Royal Caribbean Cruises’ USD 500m 3.7% senior unsecured notes due 2028 traded down today to 72.5 to yield 8.64% from trades at 77.25 to yield 7.638% on 9 June, according to MarketAxess. The company’s stock traded today at USD 58.95 per share for a USD 12.34bn market cap, down 7.3% from yesterday’s close.

Boeing’s USD 5.5bn 5.805% senior unsecured notes due 2050 traded down to 115.578 to yield 4.809% today from trades at 117.289 to yield 4.712% before the announcement, according to MarketAxess. The company’s stock fell to USD 187.34 per share for a market cap of USD 106.21bn, down 7.9% from yesterday’s close.

Ford’s USD 750m 3.815% senior unsecured notes due 2027 shed nearly three points to trade today at 89.75 to yield 5.524% from trades at 92 to yield 5.128% on Tuesday (9 June), according to MarketAxess. Its USD 1bn 9.625% senior unsecured notes due 2030 traded today at 116 to yield 7.279% from trades at 118.75 to yield 6.921%. The company’s stock fell to USD 6.35 per share for a market cap of USD 25.264bn, down 6.75% from yesterday’s close.

In addition, high yield new issues have come under pressure this week. Ten bonds have priced week-do-date through Wednesday, according to Debtwire data, and all of them softened today although some remain above their issue prices.

For example, Delta Air Lines’ USD 1.25bn 7.375% senior unsecured notes due 2026, issued at par yesterday, traded today at 98.5 to yield 7.707%, according to MarketAxess. The company’s stock traded today at USD 28.80 per share for a market cap of USD 18.395bn, down 8.98% from yesterday’s close.

International Game Technology’s USD 750m 5.25% senior unsecured notes due 2029 traded today at 98.25 to yield 5.508% from trades at par yesterday, after pricing at par on 8 June, according to MarketAxess. The company’s stock last traded at USD 8.94 per share for a market cap of USD 1.829bn, down 9.74% from yesterday’s close.

CenturyLink subsidiary Level 3 Financing’s USD 1.2bn 4.25% senior unsecured notes due 2028 softened to 99.625 to yield 4.305% today, compared to a par issuance price, according to MarketAxess. CenturyLink’s stock traded down today to USD 9.91 per share for a market cap of USD 10.90bn, down 7.42% from yesterday’s close.

Realogy‘s USD 550m 7.625% second lien notes due 2025 traded today at 100.25 to yield 7.551%, after popping to the 102-102.25 range upon pricing, according to MarketAxess. The notes were issued on Tuesday at par. The company’s stock traded at USD 6.65 per share for a market cap of USD 767.21m, down 15.18% from yesterday’s close. 

In earnings news, Tailored Brands’ term loan softened this morning after the issuer provided preliminary financials for 1Q20 ended 2 May and requested a 45-day extension to file its Form 10-Q for the quarter due to disruption caused by the pandemic. The retailer reported a 60.4% year-over-year in net sales for the quarter to USD 286.7m and drew down an additional USD 310m under its credit facility.

Its USD 900m Libor+ 325bps (1% floor) TL due 2025 softened to 22.4/26.4 context today compared to 23/26.8 yesterday, according to Markit.

Lenders to the company have retained Houlihan Lokey and Gibson Dunn in anticipation of balance sheet restructuring talks, while the company is working with PJT and Alix Partners.

Equinox’s existing term loan softened by about two points over the last few days, as the company raised a USD 150m L+900bps (1% floor) TLB due March 2024 in a club deal led by BofA.

Its USD 1.01bn L+300bps TLB due March 2024 traded down to 80.375/82.875 this morning from 82.55/84.2 yesterday, according to Markit.

Grubhub’s bonds gained more than three points this morning after the borrower reached a deal to be acquired by  European food delivery company Just Eat Takeaway for USD 7.3bn yesterday.  

The issuer’s USD 500m 5.5% senior notes due 2027 climbed to 103 this morning for a 4.822% yield after trading at 99.875 yesterday. Meanwhile its stock is trading at USD 62.17 this morning for a market cap of roughly USD 5.7bn, up 5.4% from market close. 

The all stock-deal values Grubhub at USD 75.15 per share, marking a 27% premium to its closing price of USD 59.05 on Tuesday (9 June).

2020 Debtwire

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