Delta bonds soften on depressed 2Q revenues; Mohawk falls on SEC investigation; Bed, Bath and Beyond equity strengthens on improved same-store sales – Mid-Day Commentary

Earnings season kicked off Tuesday with major banks JPMorgan, Wells Fargo and Citigroup reporting along with Delta Air Lines.

All three banks reported stockpiling billions in their credit loss reserves during 2Q20, as the companies braced their balance sheets for the pandemic’s weakening effect on the financial health of their consumer and corporate clients. This undercut the banks’ profits during the quarter, even though trading-related revenue rose for JPMorgan and Citi.

Meanwhile, Delta’s capital structure softened today after the airline further underscored the lasting effects of the pandemic by reporting a 94% drop in passenger revenues during 2Q20 after cutting capacity by 85%. The average daily cash burn was USD 43m in June after the company grounded more than 700 aircraft to align with demand. 

Delta’s USD 600m 3.75% senior unsecured notes due 2029 traded today at 76.938 to yield 7.198% from trades at 78 to yield 7.012% yesterday (13 July), according to MarketAxess. The USD 500m 4.375% senior unsecured notes due 2028 traded today at 80.9 to yield 7.687%, down from trades at 82 to yield 7.471%.

The company’s stock dipped 3.3% on the day to USD 25.93 per share for a market cap of USD 16.541bn. 

Mohawk Industries’ debt and equity traded lower after the flooring-products maker disclosed in an SEC filing late Monday that it is being sued in federal court for securities-law violations and was the subject of an SEC investigation, according to a sellsider. 

The suit alleges that the company fabricated revenue figures by attempting delivery to customers that were closed and recognizing the items as sales. 

Mohawk’s USD 600m 3.85% senior unsecured notes due 2023 last traded at 101.707 to yield 3.074% from trades at 103.1 to yield 2.453% yesterday (13 July), according to MarketAxess. 

The company’s stock traded at USD 73.50 per share, down 4.04% from yesterday’s close and a market cap of USD 5.229bn. 

Bed Bath & Beyond stock jumped this morning after the retailer reported positive same-store sales for June as well as positive cash flow for the month. Management also notified investors that it could realize USD 350m-USD 450m in proceeds from potential asset sales. 

The report shot common shares of the retailer up 6.9% from yesterday’s close to reach USD 8.26 and a market cap of USD 1.04bn. 

Still, the issuer’s debt softened as investors consider the continued balance sheet risks facing the retailer, according to a sellsider. 

Its USD 900m 5.165% notes due 2044 traded at 50.75 for a 11.05% yield this morning from 51.688 on 10 July and lower than 52 on 9 July and 53 on 7 July.  

In the new issue space, Boise Cascade Company’s USD 400m 4.875% senior unsecured notes due 2030 traded up to 101.875 for a 4.591% yield after pricing at par yesterday

Funds from the financing will be used to repay debt as well as refinance its USD 350m 5.625% senior notes due 2024 as part of a tender offer. The 5.625% notes inched up to 103.33 this morning from 102.25 on 7 July.

Freeport-McMoRan’s newly priced USD 4.625% notes due 2030 ticked up this morning to trade at 100.5 for a 4.55% yield after pricing at par yesterday, according to a sellsider. These notes along with its other recently priced debt will support a tender offer for up to USD 800m of the mining company’s 3.55% senior unsecured notes due 2022, 3.875% notes due 2023, and 4.55% notes due 2024.

2020 Debtwire

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