American Airlines newly issued notes fall as COVID cases increase; Hertz bonds trade off further after CDS auction; Rite Aid jumps on exchange offer – Mid-Day Commentary

The high yield market opened weaker this morning as investors digested this week’s spikes in coronavirus cases across the country and a higher-than-expected jobless claims number, according to a buysider and sellsider. 

Wednesday marked the worst day of new coronavirus infections in the US, with Florida, Texas, Oklahoma and South Carolina reporting their highest single day-totals. In response, New York, New Jersey and Connecticut called for a 14-day quarantine for visitors traveling from states experiencing spikes.

Adding to the downward sentiment, the latest jobless claims report showed weekly unemployment claims worse than expected, with first-time claims for the insurance at 1.48 million last week, compared to the expectation of 1.32 million.

While investors welcomed new deals from airliners American Airlines and United Airlines earlier this week, the increase in cases and jobless claims has turned investors more bearish on the recovery prospects of the travel sectors, the sources said. 

Priced yesterday, American’s USD 2.5bn 11.75% senior secured notes due 2025 fell three points today to 96 to yield 12.848%, according to MarketAxess – after issuing at 99

United’s USD 2bn term loan due 2027 and USD 3bn secured bonds due 2027 in the market have yet to price, but its USD 148m 4.75% senior unsecured notes due 2022 ticked down to 98.25 to yield 5.482% from trades at 98.75 to yield 5.223% yesterday, according to MarketAxess. 

Hertz unsecured bond prices began to fall in line with the recent CDS settlement auction. After fluctuating over the past week, the bankrupt car rental company’s USD 800m 5.5% unsecured bond due 2024 traded this morning at 29, down from 40 on 16 June, while its USD 500m 6.25% unsecured bond due 2022 also fell to 29.5 from 43 over the same period.

“The bonds are aligning themselves with the auction results,” said one bondholder.

The price for protection mirrored the recent fall in the bond prices ahead of the auction, with five-year CDS on the name widening 15 points to 73 points up front over the week prior to the auction. The Hertz CDS auction settled yesterday at 26.375, resulting in a roughly 74 cent pay-out to buyers of protection, said the bondholder.

Rite Aid’s debt and equity jumped this morning as the retailer launched an exchange offer for up to USD 750m of its outstanding 6.125% notes due 2023 for newly issued 8% senior secured notes due 2026 and cash. 

Those participating by the 9 July early deadline will get USD 800m of new notes and USD 194m in cash for every USD 1,000 notes. Those tendering after that deadline but prior to 23 July expiration date will receive USD 760m of new notes and USD 184m in cash for USD 1,000 notes. 

The targeted USD 1.15bn 6.125% senior unsecured notes due 2023 traded up three points today to 98 for a 6.936% yield from 95 yesterday while its stock jumped 20.5% from previous day’s close to USD 15.52 for a market cap of roughly USD 872.1m.

CEC Entertainment’s notes dropped this morning after the family entertainment company filed for Chapter 11, according to a sellsider familiar. 

The company closed venues and suspended operations in response to the COVID-19 pandemic, which led to the hiring of advisors for the company, bondholders and an ad hoc group of lenders, as previously reported.  

The USD 215m 8% senior unsecured notes due 2022 last traded today at 3.5, down from trades at 14.5 on Tuesday (23 June), according to MarketAxess. 

In new issuance, Meredith Corp’s unsecured notes traded down slightly this morning as the issuer launched a new USD 300m senior secured notes offering due 2025. 

The offering is part of a proposed USD 710m in new financing that the issuer plans to use to redeem all its outstanding Series A preferred stock. The media conglomerate intends to raise the remainder of new debt in the form of incremental term loans.

Its USD 1.2bn senior unsecured 6.875% notes due 2026 fell a point to 88 for a 9.704% yield compared to 89 yesterday, according to MarketAxess. Its common shares traded at USD 14.23 this morning up 0.4% from yesterday’s close for a USD 645.9m market cap. 

2020 Debtwire

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