Briggs & Stratton falls on grace period expiration; California Resources ticks up on Chapter 11 filing — Mid-Day Commentary

Market reaction came in mixed Thursday morning as investors digested the weekly jobless claims and monthly retail sales numbers.

New jobless claims clocked in at 1.3m for the week ended 11 July, compared to an expected 1.25m. Continuing claims now total 17.338m, compared to expectations of 17.5m.

For context, jobless claims have dropped for a fifteenth straight week, compared to 6.867m new claims in late March. 

Retail sales, on the other hand, rose 7.5% in June, compared to economist expectations of 5%. The rise compares to a 18.2% jump in May, which was the greatest gain recorded since the beginning of the series in 1992. 

In credit-specific movements, Briggs & Stratton bonds are quoted lower today after the company disclosed yesterday that its grace period for its 6.875% senior notes due 2020 ended with no agreement reached with the ad hoc group – further raising the prospects of a freefall bankruptcy filing, according to a trader and sellsider.

The USD 200m 6.875% senior unsecured notes due 2020 are quoted in the 15 area today, down from trades in size at 33 on 8 July, according to MarketAxess.

The company skipped its interest payment on 15 June after hiring Weil Gotshal as restructuring counsel. The ad hoc group organized with Imperial Capital and Gibson Dunn and went restricted after the coupon miss. 

California Resources notes ticked up late last night after the company filed for Chapter 11, according to a trader. 

The company opted not to make a coupon payment on 15 May for its 6% senior unsecured notes due 2024, entering into a grace period and then forbearance agreements. The company subsequently made the payment on 12 June, as disclosed in SEC filings. 

The plan contains USD 1bn in DIP financing, a USD 450m rights offering backstopped by term lenders, and a USD 200m second lien exit facility. Ares is expected to exchange its joint venture interests for equity and new notes.

California Resources’ USD 144m 6% senior unsecured notes due 2024 moved up to trades at 4.008 yesterday from trades at 1.25 on 10 July, according to MarketAxess. The USD 1.8bn 8% second lien notes due 2022 nudged up to 4.008 yesterday from trades in the 3-3.18 range on 14 July, according to MarketAxess. 

American Airlines’s secured debt yo-yoed this morning on reports yesterday that roughly 25,000 of its employees could be furloughed this fall, followed by the company announcing a strategic partnership with JetBlue today. 

The goal of the JetBlue partnership is to provide more routes from the Northeast and alter the airline landscape to allow American and JetBlue to compete with United Airlines and Delta Air Lines.

As far as furloughs go, any airline that has taken advantage of the government payroll support program cannot cut jobs or employee pay until 30 September as stipulated under the terms of the program. 

The borrower encouraged its employees to take early retirement or extended leaves with the aim of reducing the number of people on payroll. 

American’s USD 2.5bn 11.75% senior secured notes due 2025 changed hands at 91.5 for a 14.174% yield this morning after climbing up to 92.5 for a 13.871% yield yesterday. Its USD 1bn 6.5% unsecured notes due 2025 fell to 91.5 for an 8.645% yield this morning from 94.634 yesterday.

The company’s stock fell 5.6% to trade at USD 12.60 per share with a USD 6.4bn market cap. 

Norwegian Cruise Lines’s debt ticked up as the issuer announced its debt and equity offering this morning.  

The cruise operator announced a private offering of USD 675m senior secured notes due 2026 along with a plan to sell USD 250m of its exchangeable senior notes due 2025. It also launched an underwritten public offering of USD 250m of its ordinary shares today.

NCL’s USD 565m 3.625% senior unsecured notes due 2024 traded at 65 for a 14.698% yield this morning up from 63.9 on 15 July, according to MarketAxess. 

Meanwhile, the company’s stock dove 11.1% from yesterday’s close to USD 16.40 per share with a USD 4.2bn market cap.

In new issues, Ryerson’s newly priced USD 500m 8.5% senior secured notes due 2028 climbed up to trade at 103.375 for a 7.677% yield this morning, according to MarketAxess. The notes were priced at par yesterday with proceeds from the financing, along with cash, being used to pay down debt. 

2020 Debtwire

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