Boeing and airlines soften on slowed air travel recovery; Community Health trades up on EBITDA jump; Tupperware equity rises on earnings boost – Mid-Day Commentary
The overall market took a dive this morning as investors track the onslaught of new coronavirus cases in the US and Europe ahead of the uncertainty around next week’s presidential election.
European countries including France and Germany are considering their own form of closures, while US hospitalizations related to COVID-19 have risen by at least 10% over the past week across 32 US states and Washington, DC. Daily US coronavirus cases have increased by an average of 71,832 over the past week, according to data compiled by Johns Hopkins University.
The Dow Jones Industrial Average fell 695.34 points or 2.53% from yesterday’s close to reach 26,767.85 points while the CDX North American High Yield index was down one point this morning, according to a sellsider.
Recent issues from MultiPlan and Cars.com softened amidst the bearish tone in the broader market. MultiPlan’s USD 1.3bn 5.75% senior unsecured notes due 2028 traded today at 98 to yield 6.069%, after being issued on Monday (26 October) at par, according to MarketAxess.
Cars.com’s USD 400m 6.375% senior unsecured notes due 2028 traded today at 99 to yield 6.537%, after pricing yesterday (27 October) at par, according to MarketAxess.
Boeing and related airlines’ debt traded off this morning after the company announced that it plans to cut thousands of additional jobs through 2021 as it adjusts to the long-term drop in air travel demand, despite reporting a narrower-than-expected quarterly loss.
The company plans to bring its workforce down to 130,000 by the end of 2021 from 160,000 at the beginning of 2020. Boeing already announced headcount reductions due to attrition and layoffs earlier this year, and the latest round of cuts will impact about 7,000 more jobs.
CEO Dave Calhoun also said today that he expects US air travel recovery to be slower than expected.
As far as the quarter goes, the company reported USD 14.1bn in revenue, compared to an expected USD 13.84bn.
Boeing’s USD 3.5bn 5.93% senior unsecured notes due 2060 traded today at 124.932 to yield 4.557%, compared to trades at 125.924 to yield 4.511% yesterday, according to MarketAxess. The company’s equity traded down to USD 151.85 per share and a market cap of USD 85.633bn, down 2.18% from yesterday’s close.
American Airlines’ USD 2.5bn 11.75% senior secured notes due 2025 traded today at 94.75 to yield 13.268%, down from trades at 96 to yield 12.892% yesterday, according to MarketAxess. The USD 1bn 6.5% senior unsecured notes due 2025 traded today at 83.12 to yield 11.238%, down from trades at 87.694 to yield 9.844%.
American’s stock traded today at USD 11.05 per share and a market cap of USD 5.62bn, down 1.6% from yesterday’s close.
United Airlines’ USD 3bn 5.875% EETC notes due 2027 traded today at 99.875 to yield 5.897%, down from trades at 100.75 to yield 5.785% yesterday, according to MarketAxess.
United’s equity traded today at USD 33.07 per share and a market cap of USD 9.623bn, down 3.22% from yesterday’s close.
Community Health Systems’ debt and equity traded up after the hospital operator beat estimates to report an 11% increase in adjusted EBITDA to USD 431m for 3Q20 compared to USD 388m for the same period last year. Net operating revenues decreased 3.7% to USD 3.13bn for 3Q20 compared to USD 3.25bn for 3Q19.
The issuer also bought back roughly USD 261m of debt during the quarter, resulting in around USD 115m in pre-tax gain from early extinguishment of debt.
Community’s USD 1bn 8.625% senior secured notes due 2024 ticked up to trade at 103 yielding 7.124% this morning from 102.28 yesterday, according to MarketAxess.
Its shares shot up 25% from previous close to trade at USD 5.49 this morning with a USD 701.4m in market cap.
Tupperware Brands’ equity rocketed this morning after the issuer booked a 14% increase in net sales for 3Q20 to USD 477.2m compared to USD 418.1m year-over-year.
Its net income rose 341% to USD 34.4m, or USD 0.65 per share, from USD 7.8m, or USD 0.16 per share YoY driven by sales growth as well as realization of its turnaround plan cost savings.
The borrower bought back roughly USD 121m of its 4.75% senior notes due 2021 during the quarter, leaving USD 380m outstanding.
The food product storage company expects to address the debt through exploring alternatives including refinancing, exchange offers of debt for debt, cash or equity, or other transactions. Earlier this year, the issuer tapped Alvarez & Marsal and Moelis as its advisors.
The USD 380m 4.75% senior notes traded yesterday (27 October) at 96.75 for a 10.571% yield, up slightly from 95.7 on 26 October, according to MarketAxess. Tupperware’s equity shot up 40.3% this morning from previous close to trade at USD 29.9 and a USD 1.4bn market cap.
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