Vaccine expectations prop the market; KIK bounces on asset sale; AMC slides as TSA talks continue – Mid-Day Commentary

The market took a positive turn for the first day of the third quarter as Pfizer’s coronavirus vaccine showed progress and provided encouragement for travel-related names, according to a buysider and sellsider.

Preliminary test results of an experimental coronavirus vaccine from Pfizer and BioNtech showed the drug is safe for use and facilitates production of antibodies against the virus. The results fueled expectations for a vaccine for the virus sooner rather than later.

As far as indices go, the June Purchasing Manager’s Index reading released this morning was up 52.6%, an increase of 9.5 percentage points from May, according to the Institute for Supply Management (ISM). That’s stronger than the consensus estimate of 49.7%, said a credit strategist. 

While largely good news for an economic recovery in the US, that number likely doesn’t incorporate sentiment from the back half of June when infection rates for coronavirus began to increase in areas that were largely spared during the first wave of the pandemic in the Spring, said the first and a second credit strategist.

“We’ll have to see the second wave’s impact is on the economy moving forward,” said the second strategist.

The IG Corporate bond ETF softened 15bps this morning to 134 from 134.15 at open, said the second credit strategist. That’s higher than 123.5 at the start of 2Q20. Meanwhile, the high yield corporate bond ETF was up slightly to 81.67 from 81.41 at open. That’s only a few percentage points higher than the 2Q20 start of 77, said the strategist. 

The CDX was perhaps the most optimistic indicator, tightening 23bps to 500, from 523.5. The least optimistic was the Dow Jones Industrial Index, which has bounced around 25,800 after an open at 25,979. Tomorrow morning will usher in what is expected to be a strong June, non-farm payroll numbers, said the first credit strategist.

“The consensus estimate is for non-farm payrolls to be up by a little over 3m,” said the first credit strategist. “

Travel-related names such as United Airlines and American Airlines strengthened on the renewed expectations of a coronavirus vaccine soon.

United’s USD 3.8bn 6.5% senior secured notes due 2027 traded today at 101.125 to yield 6.285% from trades at 100.25 to yield 6.493% yesterday, according to MarketAxess. The company’s stock traded today at USD 35.65 per share, up 3% from yesterday’s close and a market cap of USD 10.363bn.

American’s USD 2.5bn 11.75% senior secured notes due 2025 traded today at 95.25 to yield 13.063% from trades at 94.079 to yield 13.399%, according to MarketAxess. The company’s stock traded today at USD 13.33 per share, up 2% from yesterday’s close and a market cap of USD 6.773bn.

KIK Custom Products’ loan moved up this morning after the consumer products manufacturer entered into an agreement today to sell its personal care business to Voyant Beauty, according to a sellsider.

KIK was working with William Blair to find a buyer for its personal care division, as reported last February.

The USD 919.375m Libor+ 400bps first lien term loan due 2023 was last quoted today in the 97.375/98.375 context from trades at 95/96.088 context yesterday (30 June), according to Markit.

AMC Entertainment’s loan ticked down this morning in light of reports that advisors to the subordinated noteholders are working on finalizing the terms of a proposed TSA, according to a sellsider and buysider

The advisors, Milbank and Guggenheim, held discussions with company advisors and two large holders to discuss how to execute the TSA by the end of the week, as Debtwire reported. Meanwhile, some lenders are proposing a counter to further enhance the company’s liquidity, but that offer is predicated on convertible holder Silver Lake swapping into 1.5 lien paper as opposed to first lien paper.

The company also disclosed that it has extended its early tender deadline, withdrawal deadline and expiration time for holders of the subordinated notes to exchange into 12% cash/PIK second lien notes due 2026. The new deadline is 7 July.

AMC’s USD 2bn Libor+ 300bps first lien term loan due 2026 was last quoted today in the 69.125/72.375 context, compared to quotes in the 72.313/74.723 context yesterday, according to Markit.

In the new issue space, PowerTeam Services’ USD 587m 9.033% notes due 2025 traded up this morning after the borrower priced a USD 150m add-on at 100.25 for a 8.962% yield-to-worst yesterday.

The notes changed hands at 101.875 for a 8.527% yield, up from the offering price but down from 103.25 on 26 June, according to MarketAxess.

Proceeds from the financing will be used for general corporate purposes, which may include future acquisitions. The borrower raised the initial 2025 notes in May to repay a bridge loan associated with its purchase of MVerge.

Meanwhile, Enviva Partners’ notes traded up yesterday evening after the company priced its additional USD 150m 6.5% notes due 2026 at 103.75 implying a 5.7% yield to maturity on 29 June. The offering is expected to close on 15 July.

Its USD 750m 6.5% senior unsecured notes due 2026 traded at 104.27 yesterday yielding 5.106%, up from the offering price but down from 105.27 on 26 June, according to MarketAxess.

2020 Debtwire

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