SVC debt trades up on hotel management transfer; FTS bonds gain on restructuring deal; Frontier bonds strengthen after plan confirmation – Mid-Day Commentary

Service Properties Trust (SVC) debt ticked up this morning after the company announced a plan to transfer the management of its 103 hotels to Sonesta International Hotels Corp, from InterContinental Hotels Group (IHG), after IHG’s failure to pay rent for July and August. 

IHG had until 24 August to pay SVC USD 26.4m for minimum returns, rents along with accrued interest for the two months to avoid termination of its agreement with the real estate investment trust. 

SVC did not receive any payment from IHG by that deadline, so it will terminate its management agreement with IHG effective 30 November. On the same date SVC will transfer the branding and management of these hotels to Sonesta. 

SVC’s USD 350m 4.5% senior unsecured notes due 2025 changed hands at 95 for a 5.764% yield this morning, up from 92.75 to yield 6.358% yesterday (24 August), according to MarketAxess.  

FTS International’s debt traded up yesterday after the fracking company announced it entered into a restructuring support agreement with around 75% of the holders of its 6.25% senior secured notes due 2022 and around 64% of its secured debt claims. The issuer plans to file for Chapter 11 in the next few weeks. 

Under the agreement, holders of its secured notes along with term loan lenders will exchange their claims for USD 30.6m in cash consideration and 90.1% of the company’s reorganized equity. Existing equity holders will receive the remaining 9.9% of the equity. 

The company is working with Kirkland & Ellis and Lazard while an ad hoc group of secured noteholders is working with Davis Polk and Ducera.  

Its USD 370m 6.25% senior secured notes due 2022 traded at 32.375 yesterday up from the most recent prior trade of size, at 29 on 3 August, according to MarketAxess. Its USD 67.4m Libor+ 475bps term loan due 2021 is quoted in the 61.6/67.2 context today, in line with its levels for this month, but down from 69/72.5 context on 7 July, according to Markit.

Its common shares are trading at USD 3.90 this morning with a USD 21.5m market cap, down 20.4% from its Friday close at USD 4.90, prior to the RSA announcement, but up from a USD 3.15 closing price yesterday. 

Frontier Communications bonds have edged up over the last few days after the telecommunications giant’s fifth amended restructuring plan was confirmed by the US Bankruptcy Court for Southern District of New York late Friday (21 August).  

According to the plan, the company will reduce its total outstanding debt by more than USD 10bn. The plan had faced objections from two ad hoc groups of senior unsecured noteholders over a settlement between the company and secured creditors.  

On Friday, Frontier also received approval to enter into term loan and bond engagement letters with Goldman Sachs for a DIP-to-exit facility. The company filed for Chapter 11 in April. 

Frontier’s USD 172m 8.5% senior unsecured notes due 2099 traded today at 40.5 from trades at 38.875 on 20 August. Its USD 3.6bn 11% senior unsecured notes due 2025 traded up to 42.25 yesterday from trades at 40 on 18 August, according to MarketAxess.  

The USD 1.6bn 8.5% secured notes due 2026 traded today at 101.57, up from 100.75 on Friday and par the day before.  

NN Inc loans rose yesterday (24 August) after the company announced a USD 825m sale of its life sciences unit, proceeds of which will repay most of the company’s debtload, as reported.  

The precision parts manufacturer announced yesterday that American Securities would purchase its life sciences business. American Securities will then combine the segment with MW Industries.  

The USD 270m Libor+ 325bps incremental TLB due 2021 and USD 527m L+ 375bps TLB due 2022 jumped to 98/99.5 yesterday, compared to 93/95 context on 21 August, according to Markit. The loans have held at the elevated levels today.  

2020 Debtwire

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