Bombardier dips on Alstom disclosure; Frontier rises on narrowing net loss; Simon equity jumps on Amazon consideration – Mid-Day Commentary

Bombardier’s bonds traded down after Alstom – which had previously agreed to purchase Bombardier Transportation for EUR 5.8bn-EUR 6.2bn – hinted that it was re-thinking aspects of the deal, which it originally struck in February.

Alstom said that it intends to go ahead with the deal, but that it has noted negative financial and operational performance developments at the rail unit. The buyer said it “will take into account the consequences of these operating and financial developments in forthcoming discussions with Bombardier Inc, and will update the market as required.”

Alstom’s takeover of Bombardier Transportation is expected to close in the first half of 2021. Bombardier intends to use proceeds to boost its liquidity position and could also funnel some of the cash to address its high leverage. Bombardier has nearly USD 1.5bn of debt due in 2021, according to company documents.

Bombardier’s USD 500m 5.75% senior unsecured notes due 2022 traded today at 91 to yield 12.128% from trades at 93.75 to yield 10.084% on 7 August, according to MarketAxess. The USD 2bn 7.875% senior unsecured notes due 2027 traded at 76.75 to yield 13.218%, compared to trades at 78.5 to yield 12.746%.

Frontier Communications‘ debt strengthened after the bankrupt telecom provider reported that its 2Q20 net loss narrowed substantially versus the same period last year.

For the quarter, the issuer booked USD 181m in net loss, compared to a USD 5.32bn net loss in 2Q19.

The company filed for bankruptcy on 14 April with a USD 460m DIP and a restructuring support agreement backed by holders of more than 75% of its roughly USD 11bn unsecured obligations.

Frontier is treating the first and second liens as unimpaired and ineligible to vote on the plan, which drew objections from secured creditors.

The USD 1.6bn 8.16% secured notes due 2026 traded up to 99.5 yielding 8.16% from 98.75 on 7 August, according to MarketAxess. Its stock fell 8.9% from Friday’s market close to trade at 9.7 cents with a USD 10.18m market cap.

Simon Property Group’s shares leaped this morning while its bonds firmed following a story this weekend in the Wall Street Journal describing talks between the mall REIT and online retail giant Amazon to re-purpose bankrupt retail locations into fulfillment centers.

The two companies are exploring the idea of converting stores formerly occupied by JCPenney and Sears into Amazon distribution centers.

While the concept could help repurpose currently vacant space, rent per square foot of a retail tenant is much higher than the rent commanded by a more industrial tenant base, said a sellside analyst.

Simon shares rose 7% since Friday’s close, to USD 66.44 and a USD 20.55bn market cap. Its USD 1bn 2% unsecured notes due 2024 firmed to 103.6 to yield 1% this morning, compared to 103.5 on 7 August, according to MarketAxess.

JCPenney shares also initially rose 28% this morning to USD 0.395 cents per share before settling at 0.331 cents per share, up 7.12% from Friday’s close and a market cap of USD 106.4m.

MGM Resorts International’s debt and equity traded up after IAC/InterActive Corp announced a significant investment in the hospitality and entertainment company this morning. The media and technology-focused IAC has accumulated 12% interest in MGM.

MGM’s USD 750m 6.75% unsecured notes due 2025 ticked up to 107.25 yielding 4.241% this morning from 106 on 6 August, according to MarketAxess. It’s stock shot up 13% this morning from the previous close to trade at USD 21.50 with a USD 10.6bn market cap.

Gogo’s shares gained after the in-flight internet provider disclosed that it is looking to sell its commercial aviation business on the heels of beating 2Q20 revenue estimates.

With the COVID-19 pandemic impairing travel, the company said that it has retained investment bankers and is in a process to sell the unit.

For the quarter, the company posted USD 96.64m in revenue, beating consensus estimates by 7%.

Gogo’s equity topped out at USD 3.80 per share this morning, up 16.8% from Friday’s close, before settling at USD 3.32 per share, up 2.31% from Friday’s close and a market cap of USD 279m.

In new issues, Standard Industries’ USD 1.1bn 3.375% senior unsecured notes due 2031 traded up to 101.13 yielding 3.212% after pricing at par on Friday (7 August).

Proceeds from the financing, along with cash, will be used to refinance its USD 1.1bn 6% unsecured notes due 2025, which last traded at 103.75 on 7 August.

2020 Debtwire

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