Spread Research in the NEWS



  • Recent articles

    Back to list
  • (BN) Tereos Bonds Drop to Record as Earnings Signal Refinancing Risks (August 2019)


    Tereos Bonds Drop to Record as Earnings Signal Refinancing Risks
    2019-08-09 12:21:27.996 GMT


    By Irene García Pérez and Luca Casiraghi
    (Bloomberg) -- Tereos bonds fell to a record amid concern that one of Europe’s biggest sugar producers will struggle to refinance its debt.
    The company’s 600 million euros ($672 million) of notes due in June 2023 fell for a 10th day, dropping about 3.5 cents on the euro to 72 cents on Friday, the lowest since they were issued in 2016, according to data compiled by Bloomberg. Bonds due in March 2020 fell one cent to 98 cents.
    Tereos reported a 60% drop in earnings for the three months through June and said its net debt-to-earnings ratio rose to 11.5 times from 4.3 times a year earlier, citing low sugar prices and declining sales volumes amid a global surplus. The French company said it expects an improvement starting from October after two years of declining earnings.

    Without a significant uptick in sugar prices, “there will be a risk on the refinancing of the 2023 bonds, while short-term debt should be covered by existing liquidity,” said Anthony Giret, a credit analyst at Spread Research in Lyon. “If at the end of 2020 the recovery is insufficient and the outlook for 2021 is again weak for sugar prices, there will be significant risk.”

    --With assistance from Megan Durisin.

    To contact the reporters on this story:
    Irene García Pérez in London at igarciaperez@bloomberg.net;
    Luca Casiraghi in London at lcasiraghi@bloomberg.net
    To contact the editors responsible for this story:
    Vivianne Rodrigues at vrodrigues3@bloomberg.net
    Abigail Moses

    Back to list

    (BN) Lecta Bonds Slump as Focus Turns to Funding for Paper Project (August 2019)


    Lecta Bonds Slump as Focus Turns to Funding for Paper Project
    2019-08-08 13:40:18.759 GMT


    By Irene García Pérez and Marianna Aragao
    (Bloomberg) -- Lecta SA’s bonds plunged as investors focused on funding for the company’s plan to transform its paper business.

    The company’s 375 million euro ($392 million) notes due in 2023 declined 8.9 cents to 48 cents on the euro, the lowest since issuance in 2016, according to data compiled by Bloomberg. The bonds were quoted at par in November.
    In an earnings call in June, the CVC-owned firm said it needed capital to transform its mill in France to produce specialty grade paper instead of coated woodfree, as well as to improve energy efficiency.
    “Lecta will need a bit of luck to transition out of coated woodfree”, Christopher Ryan, a credit research analyst at Bank of America Merrill Lynch wrote in a note on Thursday. “However, we think plans to convert capacity into specialty and transformational capex will prove too little, too late."
    “We expect bond prices to continue to decline as the company heads towards a restructuring, due to value destruction and administrative costs,” said Ryan.
    Ryan also expects cash burn at Lecta to continue through 2021 and that the company will need to restructure its business at the end of that year.

    If Lecta can’t get the funding for transforming its business, the liquidity at a group level will further deteriorate, Joan Sehim, credit analyst at Spread Research, said in a phone interview.

    French newspaper Sud Ouest reported last week local authorities have urged the French President Emmanuel Macron to fund the paper project although the European Commission wasn’t in favor of the government extending financial support. Representatives for Lecta did not reply to a request for comment.

    To contact the reporters on this story:
    Irene García Pérez in London at igarciaperez@bloomberg.net;
    Marianna Aragao in London at mduartedeara@bloomberg.net
    To contact the editors responsible for this story:
    Vivianne Rodrigues at vrodrigues3@bloomberg.net
    V. Ramakrishnan, Charles Daly


    Back to list

    (Refinitiv) From famine to M&A flood in European high-yield (July 2019)


    July 15 2019
    From famine to M&A flood in European high-yield
    The European high-yield market is seeing a flood of issuance this week, with €3.2bn-equivalent bonds on offer to back acquisitions.
    Loxam is looking to fund its acquisition of Ramirent and Trivium Packaging is funding its creation as a joint venture between Ardagh and peer Exal, while Domestic & General is wrapping up a roadshow for the buyout of a minority stake by the Abu Dhabi Investment Authority.
    This week’s deals will nearly double volumes backing M&A and LBOs for the year, as a mere €4bn-equivalent has been issued so far for these purposes, according to Spread Research.
    “This does not change the fact that 2019 will not be a huge year for M&A-related issues,” its head of credit research, Benjamin Sabahi told IFR.
    Despite this week’s uptick, a mere 14% of issuance this year has funded LBOs and M&A deals, according to data from Spread Research.
    This compares to 35% for the whole of 2018, when €23.3bn backed M&A and LBO financings, according to the credit research company.
    Sabahi said volumes are low this year compared to last as sectors such as gaming, debt collection and healthcare have consolidated, which means fewer transformative deals are launched, while most LBOs are financed in the loan market.

    LEADING ACQUISITIONS

    French equipment rental company Loxam is marketing a €1.4bn dual-trancher, which includes €1.15bn of senior secured notes split between 5.5NC2 and 7NC3 tranches, alongside a €250m 8NC3 subordinated note.
    The equipment rental company is acquiring Ramirent, a Finnish peer operating in the Nordics and Eastern Europe, for €970m.
    The combined company is being pitched as a pan-European leader in its sector following the acquisition, with Ebitda increasing to €764m from €521m for Loxam standalone. This includes €12m of run-rate synergies.
    Net leverage will reach 4.9x following the financing, up from 4.3x. The senior notes are rated BB-, while the subordinated note is rated B, the same as Loxam’s outstanding.
    This is a speedy market return for Loxam, which was last in the market in April, for a refinancing trade that notably tightened the spread between its secured and subordinated bonds.
    An April 2026 bond issued then, just three months shorter than the 7NC3 secured notes, moved from 2.7% to 3% following the announcement of the deal this morning, while an April 2027, also slightly shorter than the 8NC3 subordinated notes, moved from 4.6% to 4.7%, according to Tradeweb.
    A banker on the deal said much of the acquisition news is already factored in, given that it was disclosed publicly.
    Deutsche Bank (B&D), BNP Paribas, Credit Agricole, Natixis and Societe Generale are joint bookruners.
    The other announcement on Monday came from Trivium Packaging, a new partnership between Ardagh’s metal food and speciality division and Exal, an aluminium container producer, are forming a new partnership. Like Loxam, Trivium is looking to be a leader in its sector.
    The financing includes a US$1.25bn-equivalent dual-tranche euro offering, including a 7NC1 FRN and a 7NC3 fixed-rate note, both senior secured. The company will also be raising unsecured debt in US dollars, through US$900m 7NC3 and US$600m 8NC3 notes.
    Ontario Teachers’ Pension Plan Board, which owns Exal, will control 57% of the new entity, while Ardagh will control 43%.
    Proceeds from the bonds will pay a US$2bn cash consideration to Ardagh and refinance Exal’s existing debt.
    Ardagh will use the cash consideration to repay several senior secured bonds.
    Net leverage at Trivium will be 5.9x following the financing and the achievement of US$19m of cost savings, which the company anticipates to achieve by 2023. Another US$40m of benefits are expected from the combination, according to an investor presentation.
    The capital structure will also include a US$250m asset-based revolver.
    “We view the spin-off transaction as a positive as it accomplishes the debt reduction needed at the operating company, as well as allows for an eventual refinancing at the top layers of the capital structure,” analysts at CreditSights said in a note.
    Citigroup (B&D) and BMO are joint bookrunners.

    LBOs TO COME

    Elsewhere, Domestic & General’s roadshow concluded roadshows for a £630m triple-trancher that backs Abu Dhabi Investment Authority’s purchase of a 30% stake, while sponsor CVC will continue as the company’s majority shareholder. [nL2N24B0UQ]
    Price talk is 6.25%-6.50% on a £230m senior secured 7NC3 note, 550bp-575bp on a £250m 7NC1 senior secured FRN and 8.75%-9.00% on a £150m 8NC3 senior note.
    Barclays (B&D) is sole physical bookrunner, with Bank of America Merrill Lynch and Credit Suisse as global coordinators.
    More LBO financings are expected later in the year, with Osram looking to fund its buyout by Bain and Carlyle through €1.325bn of bonds, most likely in the fourth quarter. The buyout of Kantar, the data analytics division of WPP, by Bain, will also feature high-yield bonds.

    Back to list

    (BN)BASF Profit Warning Pulls Down High-Yield Bonds of Rival Firms (July 2019)


    BASF Profit Warning Pulls Down High-Yield Bonds of Rival Firms
    2019-07-09 10:16:17.535 GMT
    By Laura Benitez and Marianna Aragao
    (Bloomberg) -- High-yield bonds from chemical companies in Europe fell across the board on Tuesday after the world’s biggest chemical maker BASF SE slashed its profit forecast for 2019.
    Ineos Group Holding SA’s bonds due in November 2025 slumped as much as 1.7 cents on the euro, the most since Dec. 10, to 98.2 cents, according to CBBT prices. Nouryon Holding BV’s notes due in October 2026 dropped as much as 1.3 cents, while Chemours Co.’s bonds due in May 2026 fell 1.5 cents to 97.3 cents on the euro.
    Ineos’s credit-default swaps widened 23 basis points to 222 basis points, the most since March 20.
    BASF said on Monday that its earnings before interest, taxes and special items could be 30% lower versus 2018 levels this year. The profit warning was attributed to the impact of the U.S.-China trade war, the downturn in the automotive industry and lower global industrial production growth.
    The diminished outlook at BASF underscores the challenges for the chemical sector as a whole, and highlights the potential for negative surprises for second-quarter earnings and second- half outlooks, according to investors.
    There’s “a reality check coming from likely weak second quarter numbers in commodity chemicals businesses,” with risks stemming from slowing demand in the automotive and agricultural markets, said Benjamin Sabahi, head of research at Spread Research.
    These concerns were brewing even before BASF’s warning sent a "negative signal to the whole industry.”
    Brokers said the bonds from chemical companies were being marked down on the news but there was little selling activity so far from real money investors.

    Back to list

    (BN) Teva Credit Investors Ramp Up Short Bets as Legal Costs Weigh (July 2019)


    Teva Credit Investors Ramp Up Short Bets as Legal Costs Weigh
    2019-07-03 08:30:56.980 GMT

    By Katie Linsell
    (Bloomberg) -- Credit investors are ramping up short positions on Israeli drugmaker Teva Pharmaceutical Industries Ltd. as mounting legal costs and flagging sales pressure its balance sheet.
    Shorts on Teva’s bonds have more than doubled since the start of April to $479 million, the largest volume in more than a year, based on data from IHS Markit Ltd.
    The price of insuring exposure to Teva debt jumped to the highest on record last week at 560 basis points, according to ICE Data Services.
    Investors are also increasing negative bets on Teva’s stock, which is trading near the lowest in 19 years.
    Teva is facing multiple threats, including the potential for millions of dollars in payouts related to opioid lawsuits and a legal claim that it helped mastermind a conspiracy among drugmakers to raise the price of medicines.
    The world’s largest producer of generic drugs -- reproductions of existing medicines after patents expire -- has also seen a dip in operating performance. Falling sales of its multiple sclerosis drug Copaxone mean less cash to service a $27 billion debt pile dating from its acquisition of Allergan Plc’s generics business in 2016.
    Teva’s free cash flow fell 81% over the past year to $360 million in the first quarter, while net debt has risen to 5.45 times earnings compared with 4.53 times a year earlier, according to company filings.
    With about $8 billion of bonds coming due in the next three years, the weakening financial position alongside the potential litigation costs could make refinancing expensive.
    “Management has missed its chance to properly address its short-term debt challenges,” Benjamin Sabahi, a credit analyst at Spread Research in Lyon, France, wrote in a recent note to clients. “Going to the market now would be very costly.”
    The company will probably need to raise cash through “huge asset disposals” or a rights issue, according to Sabahi, who has a sell rating on the company’s bonds.
    Teva plans to repay 2019, 2020 and some of its bonds maturing from 2021 with cash, a spokesman said in an emailed response to questions.
    A “portion” of the debt coming due from 2021 will be refinanced by the middle of next year.
    “The best return to our shareholders – and to all our stakeholders – will be achieved by continuing our consistent and proactive deleveraging path, stabilizing and growing the business and vigorously defending the company from the litigation it’s facing,” the spokesman said.
    Teva agreed to pay $85 million in May to settle an Oklahoma lawsuit which claimed that illegal marketing of its opioid painkillers contributed to a public health crisis in the state.
    At least 42 states and more than 1,600 municipalities have sued drug companies and Teva faces further opioid litigation in Ohio in October.
    Teva is also accused of helping mastermind price-fixing by generic-drug makers, according to an antitrust lawsuit filed in May that stems from a five-year investigation.
    Barclays Plc analysts said this case may take years to settle and estimated a fine of about $960 million.
    “The issue is that lawsuits can take a while and there is no clarity about the potential outcome or the magnitude of the fines,” said Steffen Ullmann, a credit analyst at Oddo Bhf Asset Management in Dusseldorf, Germany, which holds some Teva bonds.
    “The uncertainty has a negative impact.” S&P Global Ratings said in May that if the liabilities for litigation, including the price fixing case, run to about $1 billion it would consider reducing Teva’s rating from BB, two levels below investment grade.
    Teva’s Chief Executive Officer Kare Schultz announced a wide-reaching restructuring plan for the company in 2017 within weeks of starting the job after the credit rating was cut to junk.
    He pledged to shave $3 billion from costs by the end of this year, which involved slashing 25% of the workforce.
    That may now not be enough given the potential cost pressures from the company’s legal issues.
    “Even if Teva is successful in realizing the benefits from the restructuring by the end of 2019, Fitch believes there remain substantial challenges to Teva’s growth and cost structure,” Fitch Ratings said as it downgraded the company’s credit score deeper into junk territory last month.

    Back to list

    (BN) Rallye Short Sellers May Collect $507 Million on Default Swaps (June 2019)


    Rallye Short Sellers May Collect $507 Million on Default Swaps
    2019-06-27 10:09:16.434 GMT
    By Katie Linsell
    (Bloomberg) -- Hedge funds that bet on the demise of Rallye SA will get the pay day they chased for years after a bond auction to settle derivatives linked to the indebted retail group.
    Buyers of credit-default swaps on the parent of French supermarket chain Casino Guichard-Perrachon SA will collect about 85 percent of the amount insured, according to initial results on Thursday.
    That would equate to a pay out of about $507 million, based on data from the International Swaps & Derivatives Association.
    Rallye’s swaps were triggered after the group was placed in creditor protection last month to avoid collapse.
    Short sellers had been circling since 2015, when Muddy Waters Capital published a scathing attack on the debt-laden and opaque corporate web that has allowed Casino Chief Executive Officer Jean-Charles Naouri to keep control.
    “Today is the final conclusion of a bet, and in the end it looks like it was worth taking,” said Anthony Giret, an analyst at Spread Research in Lyon, France. “Many people have thought for some time that Rallye’s debt load isn’t sustainable.”
    Diameter Capital Partners is among those that may stand to gain from the settlement. Scott Goodwin’s $1.7 billion credit fund has bet against Rallye and recommended that investors buy swaps on its debt.
    It’s one of the most high-profile in a series of failures paying off for short sellers. Market makers including Citigroup Inc., which has been involved in long and short positions on Rallye, and BNP Paribas SA, which offered bets on the timing of a default, are on the list of bidders participating in the settlement auction.
    Rallye, the largest in a series of indebted holding companies Naouri controls, still faces months of negotiations for a debt restructuring in which lenders are expected to take losses.
    Rallye’s unsecured creditors are likely to swap their debt for new shares and take control of the company, according to Giret at Spread Research. Still, the safeguard procedure in France is so flexible that Naouri could keep control, an outcome that would be almost unheard of in the U.S. or U.K.
    The level of payment from credit swaps may influence the restructuring talks, according to Alain Lopez, an analyst at brokerage firm Octo Finances in Paris.
    “This should be a strong indication to Rallye’s administrators that the company’s debt is unsustainable and it needs a short-term solution,” said Lopez.
    “It’s not enough to kick the can down the road by extending maturities. Rallye debt needs a considerable haircut soon.”
    Final auction results for Rallye will be posted at 3 p.m. in London.

    Back to list

    (BN) Here’s What to Watch in European High-Yield Bonds This Week (June 2019)


    Here’s What to Watch in European High-Yield Bonds This Week
    2019-06-24 10:30:54.198 GMT
    By Laura Benitez and Marianna Aragao
    (Bloomberg) -- Two or three cross-border bond transactions may emerge in the coming days but it may take some weeks for Mario Draghi’s pledge of fresh stimulus to translate into a meaningful slate of new deals, syndicate bankers say.
    Looking further ahead, arrangers are expecting a busy July in terms of new issuance -- although next month’s volumes are unlikely to exceed the 10.3 billion euros-equivalent ($11.7 billion) achieved in May, the busiest month of the year so far.
    While investors in Europe are feeling encouraged by the ECB’s signals, as well as the growing conviction that the Fed will cut interest rates, idiosyncratic credit risks remain a key concern in Europe.
    “We view ECB’s fresh huge impact on the European high-yield market as a clear signal of deflation risk spreading into the Eurozone amid lower GDP growth,” analysts at Spread Research wrote in a client note last week.
    “However, while this predominantly inflates the performance of IG and BBs and to a lesser extent the lower scale of the ratings, we see growing risks of a mispricing of specific credit risk here, both in the primary and the secondary market,” the analysts said.
    Read More: HY Bond Market Emboldened by Bets on ECB’s Stimulus
    * The Markit iTraxx Crossover index has tightened ~57bps since the end of May to 251bps
    * Index yields denominated in euros are at 3.7%, near a YTD low of 3.6% in April and vs high of 5.2% in January, according to Bloomberg Barclays index data
    * Loewen Play, Atalian, Odigeo, Boparan, Tendam, Upfield (Flora Foods), El Corte Ingles among issuers publishing earnings this week
    * On the macro front:
    ** Fed Chairman Jerome Powell speaks at the Council on Foreign Relations in New York on Tuesday
    ** Spain and Germany’s HICP Inflation reports are due Thursday, while France and Italy are expected on Friday
    ** Next hustings, or political roadshow, for Tory leadership in U.K. scheduled for June 27
    ** Fed releases the results of part two of its annual bank stress tests on Thursday
    ** Group of 20 summit in Osaka, Japan on Friday and Saturday;
    President Trump and Chinese President Xi Jinping will meet on the sidelines to resume trade negotiations

    Issuance Volumes

    Bond sales in Europe with at least one speculative-grade rating total 31.7 billion euros-equivalent across 64 issues so far this year, according to data compiled by Bloomberg.
    * MTD sales total 3.2 billion euros vs 7.0 billion in June 2019
    * May supply stood at 8.56 billion euros vs 4.6 billion euros in May 2018
    * 50 deals were denominated in euros, 6 in British pounds and one in Swedish krona
    * Year-to-date tally marks a 19.2% percent decline compared to the same period of 2018

    Inflows Continue

    High-yield funds with a European focus saw $110 million of inflows, following inflows of $170 million in the week prior, BofAML analysts wrote in a client note on Friday, citing EPFR Global data.
    * Global high-yield funds recorded an inflow of $121 million while U.S. focused funds saw outflows of $278 million, the analysts said
    * U.S. corporate high-yield funds inflows fell to $602 million for the week ended June 19, vs $1.72 billion the week prior, according to Refinitiv’s Lipper US Fund Flows data

    Market Snapshot

    *T
    ================================================================
    Markets | Price | 1 Week | 1 Month | YTD
    ================================================================
    EUR IG (OAS) | 54.9| -11.1| -13.7| -38.8
    EUR HY (OAS) | 337.5| -32.2| -22.1| -116.6
    iTraxx Europe | 52.9| -8.0| -15.3| -35.5
    iTraxx Xover | 251.7| -22.9| -42.6| -102.0
    CDX IG | 55.2| -5.3| -9.8| -32.5
    CDX HY (price) | 107.6| +1.4| +1.8| +5.6
    CS Eur Lev Loan| 98.05| +0.06| -0.10| +1.51
    Stoxx Europe | | | |
    600 | 384.4| +6.0| +8.5| +46.8
    German 10Y | -0.31| -0.06| -0.19| -0.55
    *T
    *T
    ================================================================
    Total Returns (%) | 1 Day | 1 Week | 1 Month | YTD
    ================================================================
    Pan-European HY | -0.09| +1.18| +1.35| +7.65
    Ba-Rated | -0.09| +1.21| +1.70| +7.64
    B-Rated | -0.11| +0.99| +0.57| +7.27
    Caa-Rated | -0.06| +1.73| +0.92| +9.67
    EUR HY Excl. Fin | -0.06| +1.22| +1.56| +7.61
    GBP HY Excl. Fin | -0.31| +0.71| -0.85| +7.60
    US HY Excl. Fin | -0.02| +0.98| +1.43| +9.83
    *T

    * Total returns based on Bloomberg Barclays index data
    * Some information from people familiar with the transactions, who are not authorized to speak publicly and asked not to be identified

    Back to list

    (BN) High-Yield Bond Market Emboldened by Bets on ECB’s Stimulus (June 2019)


    High-Yield Bond Market Emboldened by Bets on ECB’s Stimulus
    2019-06-20 12:13:34.326 GMT
    By Marianna Aragao and Laura Benitez
    (Bloomberg) -- High-yield investors in Europe are feeling encouraged by Mario Draghi’s pledge of fresh stimulus once again.
    But some think the ECB president’s “whatever it takes” motto may not be enough to stem losses from idiosyncratic risks.
    Bond traders said buying activity was buoyant early on Thursday, adding that this week’s credit rally was being fueled by the ‘ECB bubble’ effect.
    High-yield bankers also noted the instant impact on the market and expect new issuance to increase in coming weeks as borrowers look to capitalize on lower all-in yields.
    “We have believed CSPP 2 was on the cards for some time but are now convinced it will happen,” Jeroen van den Broek, a credit strategist at ING Bank NV, said in an interview.
    The high-yield market is benefiting from expectation of further quantitative easing by the central bank, which revived investors’ search for yield, he said.
    See Also: U.S. Junk Bonds See Central Bank Boost, Yield at 16-Month Low
    While high-yield debt has been one of the biggest beneficiaries of ECB stimulus since 2016, Draghi’s easing pledge and lower interest rates shouldn’t be seen as a shield against underperformance in the market, according to Benjamin Sabahi, head of research at Spread Research.
    “We see growing risks of mispricing specific credit risk here, both in the primary and the secondary market,” Sabahi said, citing this year’s “negative returns on euro high-yield bonds from Senvion, Nyrstar, Boparan, Lecta or Teva.”

    Back to list

    (BN) Here’s What to Watch in European High-Yield Bonds This Week (June 2019)


    Here’s What to Watch in European High-Yield Bonds This Week
    2019-06-17 11:17:26.694 GMT
    By Laura Benitez
    (Bloomberg) -- The pace of high-yield bond issuance this week could be slower than the previous week due to a thin M&A pipeline, according to syndicate bankers.
    Sales this week could be dependent on refinancing activity, bankers said. Borrowers are ready to capitalize on a positive market backdrop, with better-rated names expected to continue driving supply this month, they said.
    High-yield sales totaled 1.9 billion euros ($2.1 billion) last week.
    Names in the pipeline include a deal from Loxam SAS, which obtained a 1.5 billion euro bridge loan for its Ramirent deal, as well as a 400 million to 500 million euro bond financing from Spanish publishing firm Promotora de Informaciones, known as Prisa.
    Double B names continue to keep activity ticking over, particularly as the yield on BBs has reached 2.3% from 2.6% during the May correction, according to Spread Research.
    "It was not surprising to see many BBs looking at the primary market to refinance their debt," Spread Research analysts wrote in a note, adding that the spread difference between single Bs and BB names has climbed to a record high of 325 basis points.
    * The Markit iTraxx Crossover index has tightened ~35bps since the end of May to 271 after widening ~60bps last month
    * Index yields denominated in euros are at 4% versus YTD low of 3.6% in April and a high of 5.2% in January, according to Bloomberg Barclays index data
    * Stark and Takko among issuers publishing earnings this week
    * On the macro front:
    ** It’s rate decision week: the Federal Reserve, the Bank of Japan and the Bank of England all set monetary policy
    ** Boris Johnson consolidates his position as front-runner to become the next U.K. prime minister, and the question of how a no-deal exit could work becomes more pressing
    ** This month’s G-20 summit will be in focus as the trade dispute between the U.S. and China rages on

    Issuance Volumes

    Bond sales in Europe with at least one speculative-grade rating total 30.4 billion euros-equivalent across 57 issues so far this year, according to data compiled by Bloomberg.
    * May supply stood at 8.56 billion euros vs 4.6 billion euros in May 2018
    * 50 deals were denominated in euros, 6 in British pounds and one in Swedish krona
    * Year-to-date tally marks a 13.1% percent decline compared to the same period of 2018

    Continued Outflows

    High-yield funds with a European focus saw $170 million inflows, following outflows of $544 million in the week prior, BofAML analysts wrote in a client note on Friday, citing EPFR Global data.
    * Global high-yield funds recorded an outflow of $80 million while U.S. focused funds saw inflows of $195 million, the analysts said
    * U.S. corporate high-yield funds returned to inflows with investors adding $1.72 billion for the week ended June 12, according to Refinitiv’s Lipper US Fund Flows data

    Market Snapshot

    *T
    ================================================================
    Markets | Price | 1 Week | 1 Month | YTD
    ================================================================
    EUR IG (OAS) | 66.4| -1.4| +3.5| -27.4
    EUR HY (OAS) | 371.3| -5.2| +13.6| -82.8
    iTraxx Europe | 60.9| -0.8| -4.1| -27.5
    iTraxx Xover | 272.9| -1.3| -5.5| -80.8
    CDX IG | 61.5| +1.4| -1.0| -26.3
    CDX HY (price) | 106.3| -0.1| -0.3| +4.2
    CS Eur Lev Loan | 98.01| -0.01| -0.15| +1.47
    Stoxx Europe 600| 379.3| +1.1| -2.2| +41.7
    German 10Y | -0.25| -0.03| -0.14| -0.49
    *T
    *T
    ================================================================
    Total Returns (%) | 1 Day | 1 Week | 1 Month | YTD
    ================================================================
    Pan-European HY | +0.01| +0.46| +0.41| +6.40
    Ba-Rated | +0.04| +0.33| +0.84| +6.35
    B-Rated | -0.01| +0.63| -0.43| +6.23
    Caa-Rated | -0.18| +1.05| -0.61| +7.80
    EUR HY Excl. Fin | +0.03| +0.55| +0.77| +6.31
    GBP HY Excl. Fin | -0.15| +0.23| -2.14| +6.84
    US HY Excl. Fin | -0.03| +0.35| +0.76| +8.77
    *T
    * Total returns based on Bloomberg Barclays index data
    * Some information from people familiar with the transactions, who are not authorized to speak publicly and asked not to beidentified

    Back to list

    (BN) Here’s What to Watch in European High-Yield Bonds This Week (June 2019)


    Here’s What to Watch in European High-Yield Bonds This Week
    2019-06-10 09:49:59.668 GMT
    By Marianna Aragao and Laura Benitez
    (Bloomberg) -- The high-yield primary market is likely to remain active this week. A fresh M&A transaction emerged on Monday and more deals could follow as borrowers are encouraged by the more positive secondary tone.
    Italian generic drugmaker Doc Generici Srl kicked off a roadshow for a 470 million euro ($531 million) debt financing to support its acquisition by ICG and Merieux Equity Partners, and bankers are expecting to bring another two or three deals this week.
    Spreads measured by the Markit iTraxx Crossover index have tightened so far in June after widening last month.
    Financing deals for M&A-related transactions have been subdued this year and Doc Generici’s sales will help boost volumes.
    According to Spread Research, bonds earmarked to refinance existing debt represented 52% of new issuance this year, while those issued to finance LBOs and M&A accounted for just 13%.
    Another high-yield borrower that could join the M&A-related pipeline is Loxam SAS. The company, rated BB- by S&P and with a capital structure dominated by bonds, obtained a 1.5 billion euro bridge loan for its Ramirent deal.
    * A public holiday across parts of Europe is likely to weigh on today’s activity, but shouldn’t deter mandates to emerge from tomorrow, bankers say
    * The Markit iTraxx Crossover index has tightened ~33bps since the end of May to 274 after widening ~60bps last month
    * Index yields denominated in euros are at 4.09% versus YTD low of 3.6% in April and high of 5.2% in January, according to Bloomberg Barclays index data
    * Klockner Pentaplast, KME, Stark, Iceland Foods among issuers publishing earnings this week
    * On the macro front:
    ** U.K. takes center stage, with labor market data due for release on Tuesday and the first Conservative Party leadership ballot on Thursday as the race to succeed Theresa May heats up
    *** U.K. manufacturing output fell the most in almost 17 years in April and the economy as a whole shrank for a second straight month
    ** Euro-area industrial production will be released on Thursday, and final CPI data from France and Italy on Friday
    ** ECB President Mario Draghi speaks at a conference in Frankfurt on Wednesday, and Euro-area finance ministers meet in Luxembourg Thursday, with Italy’s debt load on the agenda
    ** On the trade front, investor attention will return to China talks, although Treasury Secretary Steven Mnuchin said “main progress” may occur when Presidents Donald Trump and Xi Jinping meet at the G-20 summit later in June

    Issuance Volumes

    Bond sales in Europe with at least one speculative-grade rating total 29.1 billion euros-equivalent across 54 issues sofar this year, according to data compiled by Bloomberg.
    * May supply stood at 8.56 billion euros vs 4.6 billion euros in May 2018
    * 48 deals were denominated in euros, five in British pounds and one in Swedish krona
    * Year-to-date tally marks a 16.1% percent decline compared to the same period of 2018

    Continued Outflows

    High-yield funds with a European focus saw another week of redemptions, with outflows of $544 million in the week ending June 5, following outflows of $268 million in the week prior, BofAML analysts wrote in a client note on Friday, citing EPFR Global data.
    * Global high-yield funds recorded an outflow of $231 million while U.S. focused funds saw outflows of $598 million, the analysts said
    * In the U.S., corporate high-yield funds posted another week of outflows with $3.2 billion withdrawn for the week ended June 5, according to Refinitiv’s Lipper US Fund Flows data
    Market Snapshot

    *T
    ================================================================
    Markets | Price | 1 Week | 1 Month | YTD
    ================================================================
    EUR IG (OAS) | 68.8| -2.9| +9.1| -24.9
    EUR HY (OAS) | 379.3| -0.2| +26.5| -74.9
    iTraxx Europe | 62.3| -8.6| -4.0| -26.1
    iTraxx Xover | 275.4| -32.4| -5.6| -78.2
    CDX IG | 62.6| -7.4| -0.5| -25.2
    CDX HY (price) | 105.9| +1.5| -0.7| +3.9
    CS Eur Lev Loan | 98.02| -0.02| -0.21| +1.48
    Stoxx Europe 600| 378.3| +7.8| +1.1| +40.6
    German 10Y | -0.23| -0.03| -0.19| -0.48
    *T
    *T
    ================================================================
    Total Returns (%) | 1 Day | 1 Week | 1 Month | YTD
    ================================================================
    Pan-European HY | +0.16| +0.42| -0.84| +5.92
    Ba-Rated | +0.13| +0.62| -0.23| +6.00
    B-Rated | +0.22| +0.05| -1.87| +5.56
    Caa-Rated | +0.23| -0.00| -2.85| +6.69
    EUR HY Excl. Fin | +0.19| +0.43| -0.41| +5.74
    GBP HY Excl. Fin | -0.04| -0.24| -3.78| +6.60
    US HY Excl. Fin | +0.33| +0.93| -0.14| +8.39
    *T
    * Total returns based on Bloomberg Barclays index data
    * Some information from people familiar with the transactions, who are not authorized to speak publicly and asked not to be identified

    Back to list

    (BN) Carlyle-Owned Chemical Firm Chided by Analyst Over Transparency (June 2019)


    Carlyle-Owned Chemical Firm Chided by Analyst Over Transparency
    2019-06-04 10:43:11.152 GMT
    By Katie Linsell
    (Bloomberg) -- A structural rejig at Dutch chemical company Nouryon has prompted an analyst rebuke amid a gathering investor backlash against opaque financial disclosure by junk-rated borrowers.
    Spread Research cut Nouryon’s transparency score one level to 2 out of 5, highlighting the reorganization plans.
    Understanding of Nouryon’s earnings will decrease and investors will lose access to historical numbers, head of credit research Benjamin Sabahi wrote in a note.
    High-yield investors are becoming more vocal in criticizing companies that limit financial disclosure and this year set up a lobby group -- European Leveraged Finance Alliance -- to fight their corner.
    Allianz Global Investors and Janus Henderson Investors are among the founding members of ELFA.
    Read more: Junk-Bond Investors Push Back on Private Company Restrictions
    Spread Research already downgraded Nouryon’s transparency score after the company issued bonds in September because it had stopped providing a breakdown by division of its earnings before interest, tax, depreciation and amortization.
    Nouryon, formerly AkzoNobel Specialty Chemicals and bought by Carlyle Group last year, has also angered investors by forcing them to agree to NDA-style click-through agreements to read its financial data online.
    A spokeswoman for Carlyle declined to comment on Nouryon’s disclosure.
    Investor frustration at the firm may now be weighing on the performance of its bonds. Nouryon’s $605 million of notes maturing in October 2026 are quoted at the lowest since January while its 485 million euros ($545 million) of bonds due the same month are at their weakest since February, according to data compiled by Bloomberg.

    Back to list

    (BN) Here’s What to Watch in European High-Yield Bonds This Week (June 2019)


    Here’s What to Watch in European High-Yield Bonds This Week
    2019-06-03 10:01:40.702 GMT
    By Laura Benitez and Marianna Aragao
    (Bloomberg) -- Bond sales may pick up slowly this week with a handful of deals being readied by syndicate desks in London.
    However, arrangers say the decision to push the button will depend heavily on the absence of market volatility.
    The Markit iTraxx Crossover index continued to widen Monday with trade war tensions still weighing on risk assets. In May the index of 75 speculative-grade credit default swaps jumped the most in a month since October 2014.
    While there’s a possibility that two euro-denominated double-B names could emerge this week, bankers cautioned that the weakening backdrop could delay execution.
    In addition, a lack of M&A-activity is seen as a further brake on new issue volumes in Europe. “Some of the big transformative M&A transactions are missing from this year’s pipeline so far, and that is naturally affecting the outlook,” Kevin Foley, head of leveraged finance capital markets at JP Morgan Chase Bank NA said in an interview last week.
    High-Yield Bond Sales Pick Up While Returns Flash Red: May Wrap The low level of new-money bond sales, or supply from LBOs, is leaving investors with limited arbitrage potential between the primary and the secondary market, analysts at Spread Research said in a client note.
    The analysts added that this is further exacerbating specific credit risks and short-term volatility.
    “We expect the primary market to be closed this week with investors still focused on cleaning their portfolios of troubled issuers,” they said.
    * Bilfinger kicks off investor meetings today, marking its return to the market after it tabled a planned deal late last year
    * The Markit iTraxx Crossover index has widened ~63bps since the beginning of May to 312; it is still below the 368bps level seen at the start of the year
    * Index yields denominated in euros are at 4.19% versus YTD low of 3.6% in April and high of 5.2% in January, according to Bloomberg Barclays index data
    * As earnings season winds down, Matalan, Cirsa and Swissport are some of the names reporting figures this week
    * On the macro front:
    ** U.S. President Donald Trump meets U.K. Prime Minister Theresa May in London Monday
    ** Tuesday sees the euro-area inflation release, while the U.K. composite PMI is due on Wednesday
    ** ECB meeting is on Thursday; the central bank will release new forecasts and President Mario Draghi is likely to provide more details for the third round of TLTROs due to begin in September
    ** Prime Minister May steps down as Conservative Party leader on Friday

    Issuance Volumes

    Bond sales in Europe with at least one speculative-grade rating total 28.0 billion euros-equivalent across 50 issues so far this year, according to data compiled by Bloomberg.
    * May supply stood at 8.56 billion euros vs 4.6 billion euros in May 2018
    * April sales totaled 10.3 billion euros vs 10.5 billion euros a year earlier
    * 44 deals were denominated in euros, five in British pounds and one in Swedish krona
    * Year-to-date tally marks a 16.6% percent decline compared to the same period of 2018

    Continued Outflows

    High-yield funds with a European focus saw outflows of $268 million in the week ending May 29, following outflows of $511 million in the week prior, BofAML analysts wrote in a client note on Friday, citing EPFR Global data.
    * Global high-yield funds recorded an inflow of $129 million while U.S. focused funds saw outflows of $109 million, the analysts said
    * In the U.S., corporate high-yield funds saw outflows of $5.1b for the week ended May 29, according to Refinitiv’s Lipper US
    Fund Flows data

    Market Snapshot

    *T
    ================================================================
    Markets | Price | 1 Week | 1 Month | YTD
    ================================================================
    EUR IG (OAS) | 69.6| +1.8| +15.8| -24.1
    EUR HY (OAS) | 375.5| +16.0| +45.1| -78.7
    iTraxx Europe | 73.3| +5.4| +14.7| -15.1
    iTraxx Xover | 316.5| +23.3| +63.8| -37.2
    CDX IG | 70.3| +5.5| +12.6| -17.5
    CDX HY (price) | 104.6| -1.3| -3.1| +2.5
    CS Eur Lev Loan | 98.06| -0.09| -0.34| +1.52
    Stoxx Europe 600| 366.4| -10.3| -23.9| +28.8
    German 10Y | -0.21| -0.06| -0.23| -0.45
    *T
    *T
    ================================================================
    Total Returns (%) | 1 Day | 1 Week | 1 Month | YTD
    ================================================================
    Pan-European HY | -0.27| -0.40| -1.60| +5.47
    Ba-Rated | -0.18| -0.18| -1.10| +5.35
    B-Rated | -0.43| -0.79| -2.52| +5.51
    Caa-Rated | -0.56| -1.35| -3.13| +6.69
    EUR HY Excl. Fin | -0.33| -0.45| -1.32| +5.29
    GBP HY Excl. Fin | -0.23| -0.53| -3.41| +6.85
    US HY Excl. Fin | -0.36| -0.56| -1.26| +7.40
    *T
    * Total returns based on Bloomberg Barclays index data
    * Some information from people familiar with the transactions, who are not authorized to speak publicly and asked not to be identified

    Back to list

    (BN) Aldesa Discussing With Banks to Extend RCF: Spread Research (June 2019)


    Aldesa Discussing With Banks to Extend RCF: Spread Research
    2019-06-03 09:00:30.699 GMT
    By Laura Benitez
    (Bloomberg) -- Aldesa is in discussions with its banks to extend the maturity of its EU100m RCF due in May 2020, Spread Research said in a note, citing a conference call with the company on Friday.
    * The company said it expects to close the talks before August
    * "We believe some extension is possible but only for a couple of months as the EU250m senior secured notes are the real stumbling block," Spread Research said in the note
    * Separately, Lucror analysts wrote that Aldesa is assessing refinancing options for its bonds due in April 2021; Lucror too cited the call
    * Aldesa’s 2021 notes are lingering near the lowest level this year after falling the most since they were priced in 2014 on Friday following disappointing 1Q earnings
    ** The bonds rose 2.2 points today to 53.2, according to pricing source CBBT at 9:29am London time
    * Lucror said Aldesa’s ability to refinance its bonds does not seem a possibility in public debt markets at present
    * Aldesa could try to monetize some or all its projects outside of the restricted group which currently account for EU93m equity value according to the company, Spread Research said
    ** Spread Research maintained its stable-to-negative credit view on the group and keeps an underweight recommendation on the bonds

    Back to list

    (BN) Atalian Bonds Fall to Record Low After Earnings Delayed Again (May 2019)


    Atalian Bonds Fall to Record Low After Earnings Delayed Again
    2019-05-29 11:24:52.301 GMT
    By Antonio Vanuzzo and Laura Benitez
    (Bloomberg) -- French maintenance contractor La Financiere Atalian’s debt sank to record lows after it postponed earnings for a second time, adding to investors’ worries about its finances.
    Atalian’s 625 million euros ($697 million) of bonds due in May 2024 fell 4 cents on the euro to 63 cents, while its 350 million euros of senior-unsecured notes maturing in May 2025 dropped 2.7 cents on the euro to 63 cents, according to data compiled by Bloomberg.
    “Clearly the market has lost patience and prefers to exit positions on a name which has aggressively re-leveraged its balance sheet,” said Benjamin Sabahi, head of credit research at Spread Research in Lyon, France.
    Auditors for the group requested additional time to complete a review of the company’s U.K. arm specializing in mechanical and electrical installations and maintenance, according to a statement Wednesday.
    Atalian, which missed an earlier publication date for the results on April 29, said it will release its 2018 and first quarter 2019 earnings “in the coming weeks.”
    The company has until the end of June to publish earnings before breaching conditions on its debt, according to bond documentation.
    Separately, the firm appointed founder Frank Julien as CEO alongside three independent directors to the board of its holding company “following a review of its governance and management structure,” according to the statement.
    The firm’s debt load rose during last year to 6.6 times earnings in the third quarter, from 4.2 times in March 2018, according to Atalian’s last available results statement.
    A spokeswoman for Atalian didn’t respond to emails and calls seeking comment.

    Back to list

    (Les Echos) Casino : les 10 questions que pose la sauvergarde de Rallye (May 2019)


    Les ventes à découvert vont-elles continuer ? Jean-Charles Naouri va-t-il perdre le contrôle de Casino ? Quel impact sur les enseignes de Casino ? Dix questions et dix réponses sur un événement rare.

    1) Rallye va-t-il réussir à restructurer sa dette ?
    Le processus de restructuration va être compliqué. La solution la plus indolore pour le groupe serait un étalement de ses dettes sur 10 ans.
    Celui-ci peut être imposé aux créanciers par le tribunal de commerce de Paris à l'issue de la sauvegarde. A condition que ce rééchelonnement soit viable.
    « Rallye n'est pas confronté à un problème ponctuel de liquidité, mais à un surendettement structurel, estime Anthony Giret, analyste chez Spread Research. Une restructuration, nécessitant un abandon partiel de créances, paraît inévitable. »
    Celle-ci frapperait essentiellement les créanciers obligataires qui détenaient fin 2018 1,3 des 2,9 milliards d'euros de dette du groupe.
    « La dette bancaire est quasi entièrement garantie par les actions Casino détenues par Rallye, souligne Anthony Giret. Il y a donc peu de leviers possibles sur les banques. »
    De nombreuses questions se posent : la valorisation de Rallye, la part de capital que pourraient recevoir les créanciers en échange de leur abandon de créance.
    « L'issue de la restructuration reste incertaine, et il faudra plusieurs mois avant que l'on y voie plus clair », avertit Barclays.
    Il faut intégrer toutes les holdings (Euris, Finatis et Foncière Euris) qui contrôlent Rallye et qui font aussi l'objet de la sauvegarde. Les deux administrateurs judiciaires, Hélène Bourbouloux et Frédéric Abitbol sont des spécialistes des dossiers épineux.

    2) Les ventes à découvert vont-elles se poursuivre et est-ce la faute de Muddy Waters ?
    La décision surprise de Rallye de se placer en procédure de sauvegarde - qui a fait monter l'action de Casino - a pu prendre à revers les vendeurs à découvert, ces investisseurs qui parient sur une baisse du cours.
    Jeudi, avant l'annonce de Rallye, les ventes à découvert portaient encore sur 35 % du capital flottant de Casino.
    Certains ont donc dû racheter leurs positions. Si l'action Casino repart durablement à la hausse, cela devrait décourager une partie des « short sellers ».
    Mais ceux qui estiment que les problèmes de Casino dépassent la seule question de son lien avec l'endettement de Rallye maintiendront la pression sur le groupe.
    Depuis 2015, l'Américain Muddy Waters, critiquait la dette des holdings de Casino. En même temps, il a longtemps vendu la valeur à découvert. A partir de septembre 2018, Casino est devenu l'une des cibles privilégiées des fonds qui jouaient l'action à la baisse.
    Certains parlent de phénomène auto-réalisateur, voire de manipulation de cours. Mais si « Muddy Waters a attaqué, c'est parce que « le groupe souffrait d'un déficit de communication et en raison de la complexité de ses structures de contrôle », note un investisseur.
    L'Autorité des Marchés Financiers a enquêté 3 ans sur les agissements de Muddy Waters et sur la communication du groupe. Elle pose surtout la question de la possibilité de vendre à découvert tout en publiant des notes à charge comme le fait l'Américain.
    Le Collège de l'AMF doit maintenant décider s'il y a lieu de poursuivre le fonds. A Wall Street, l'activiste passe pour un lanceur d'alerte.

    3) Quelle sera la réaction des créanciers protégés par des CDS ?
    Les CDS sont des produits dérivés agissant comme une assurance contre le défaut de paiement d'un emprunteur.
    Les investisseurs et créanciers de Rallye qui ont acheté cette protection se verront indemnisés de leurs pertes si le comité de détermination de l'Isda décide que le placement de Rallye sous sauvegarde est un « événement de crédit » de nature à déclencher le paiement.
    Il devrait se réunir mardi prochain. Pour le marché, la réponse semble acquise : les prix de tous les CDS de Rallye ont bondi à un niveau correspondant au remboursement attendu. Le risque est qu'une fois payés, les porteurs d'obligations soient moins intéressés au sauvetage de Rallye.

    4) Pourquoi l'action Casino grimpe et celle de Rallye baisse ?
    Casino a terminé la séance de vendredi en hausse de 7,48 %. Le principal problème du distributeur était le fait de devoir verser des dividendes élevés pour permettre à la cascade de ses actionnaires (Rallye, Finatis, Euris) de payer leurs intérêts d'emprunts.
    Libéré de cette contrainte par la sauvegarde qui permet à Rallye de ne pas faire face dans l'urgence à ses échéances financières, Casino devrait pouvoir mener son plan de redressement plus sereinement et dégager des cash-flows plus importants pour poursuivre son désendettement.
    La mise en sauvegarde de Rallye réduit également la pression exercée par les fonds. Rallye, pour sa part, a plongé de 61 %. Si la procédure de sauvegarde protège pour l'instant le groupe d'une action de ses créanciers, elle confirme qu'il est dans une situation difficile.

    5) Qui sont les créanciers de Rallye ?
    L'une des premières étapes de la procédure de sauvegarde sera d'établir l'inventaire exact des dettes de Rallye.
    Il est probable que l'on voit rapidement apparaître autour de la table des fonds spécialisés dans la dette décotée.
    Ces derniers rachètent leurs créances aux porteurs d'obligations ou aux banques pour une portion faible de leur valeur faciale, puis comptent sur la conversion de la dette en capital, ou un retour à meilleure santé du débiteur pour réaliser une plus-value.
    Le prix très faible des obligations de Rallye sur le marché secondaire (moins de 25 % de leur valeur faciale vendredi) pourrait susciter des appétits.

    6) Quelle est l'attitude des banques vis-à-vis de Rallye ?
    D'une certaine façon, les banques peuvent rester sereines. Certes, un de leurs gros débiteurs est en procédure de sauvegarde mais, contrairement aux détenteurs de dette obligataire, l'essentiel de leurs prêts est nanti sur des titres Casino.
    Ce n'est pas le cas pour la ligne de crédit de 500 millions d'euros accordée en septembre par BNP Paribas, Crédit Agricole CIB, Natixis (BPCE), Crédit Mutuel et HSBC.
    Toutefois, cette ligne qui a déjà été tirée à hauteur de 202 millions par Rallye, est, dit-on, gagée sur d'autres actifs de la holding, à commencer par sa filiale GO Sport qui a cédé en mars sa filiale Courir pour 283 millions à Equistone Partners.
    Selon nos informations, des divergences commenceraient cependant à apparaître au sein du pool bancaire. Certains s'interrogeraient a posteriori sur le soutien accordé à Rallye à l'époque, alors que la situation était déjà critique.

    7) Quel impact la sauvegarde de Rallye a-t-il sur l'activité des enseignes de Casino ?
    « Casino n'est pas concerné par cette procédure et reste concentré sur l'exécution de son plan stratégique », a déclaré le directeur financier David Lubek vendredi.
    La sauvegarde gèle le versement de dividendes. Casino aura plus de cash-flows pour investir, dans un premier temps. La valeur des actifs de Rallye (essentiellement 51 % de Casino) augmente quand le cours de Casino grimpe.
    Les créanciers y sont sensibles. Au-delà de la restructuration de sa dette, le sauvetage de Rallye dépend donc en grande partie des performances de Casino qui va devoir prouver qu'il peut progresser sur un marché français de la grande distribution très compétitif.

    8) Casino va-t-il devoir céder des actifs ?
    Les créanciers de Rallye n'ont pas le pouvoir de vendre des actifs de Casino. Mais dans le cadre d'une négociation globale sur sa dette Rallye pourrait demander à Casino de procéder à des ventes.
    Cela pourrait toutefois léser les actionnaires minoritaires.

    9) Combien valent les actifs et qui pourrait les reprendre ?
    Vendredi matin, la capitalisation boursière de Casino s'élevait à 3,37 milliards d'euros, pour un cours de 30 euros.
    Un banquier estime que les actifs du groupe mis bout à bout justifieraient une valorisation de 60 euros par action.
    CBD qui abrite les activités de Casino au Brésil, affiche une valorisation d'environ 3,34 milliards d'euros à la Bourse de São Paulo.
    Casino en exerce le contrôle mais n'en possède qu'une fraction du capital. En 2012, Monoprix, que Casino possède à 100 %, était valorisée à hauteur de 2,34 milliards d'euros.
    Mais le groupe a cédé pour environ 500 millions de murs de magasins. Cdiscount est coté à Paris sous le nom Cnova. Sa capitalisation se monte à 1,10 milliard d'euros.

    Amazon est déjà partenaire de Monoprix pour la livraison en une heure. La possibilité d'un rachat de Monoprix, voire de Franprix, par le géant du e-commerce hante les observateurs.
    Mais ce n'est peut-être qu'un fantasme. En septembre 2018, Casino a rejeté une offre de reprise de Carrefour que Carrefour a démenti avoir faite.
    Son PDG, Alexandre Bompard n'en croit pas moins que la distribution française est appelée à se concentrer. Carrefour Brésil pourrait aussi lorgner sur la filiale brésilienne Pao de Açucar.
    L'un de ses premiers actionnaires n'est autre qu'Abilio Diniz, l'ancien propriétaire de la société, victime d'un bras de fer avec Jean-Charles Naouri.

    10) Jean-Charles Naouri peut-il perdre le contrôle de Casino ?
    Dans l'immédiat, Jean-Charles Naouri reste aux manettes de Rallye mais il est assisté de deux administrateurs judiciaires.
    Il demeure PDG de Casino, non concerné par la sauvegarde. Rallye a nanti la quasi-totalité de ses actions Casino (51 % du capital).
    Les banques ne peuvent céder ces titres pendant la procédure de sauvegarde, mais leurs droits sont conservés.
    « Les créanciers obligataires, s'ils abandonnent une partie importante de leur dette, pourraient réclamer en échange d'être majoritaire au capital de Rallye, explique Anthony Giret chez Spread Research.
    Cette solution nécessite l'aval des créanciers, mais également celui des actionnaires. » Il faudra donc convaincre Jean-Charles Naouri de céder le contrôle.
    Le PDG a 70 ans. Il n'a pas d'enfant au sein du groupe et il n'y a pas de numéro 2 attitré. Il avait désigné au « Financial Times » Jean-Paul Mochet, le patron de Franprix, et Régis Schultz, celui de Monoprix comme potentiels dauphins.

    Back to list

    (Reuters) Casino: Jean-Charles Naouri peut-il garder le contrôle de son groupe? (May 2019)


    PARIS (Reuters) - La mise en place d’un plan de sauvegarde de Rallye, tout en allégeant la pression sur sa filiale Casino dont le titre rebondit en Bourse vendredi, suscite des interrogations sur la capacité de Jean-Charles Naouri à conserver le contrôle de son groupe.
    Prise en étau entre une dette de 2,9 milliards d’euros et la chute du titre Casino qui constitue à la fois son principal actif et sa garantie auprès de ses prêteurs, la holding a été contrainte, jeudi, de demander la protection du tribunal de commerce de Paris afin de suspendre le remboursement de sa dette et de pouvoir la renégocier avec ses créanciers.
    La procédure était la seule issue pour protéger Casino, dont la génération de trésorerie est en grande partie absorbée par le dividende qu’il sert à sa maison-mère, afin que celle-ci puisse payer ses intérêts financiers.
    Cette annonce a pris les vendeurs à découvert à revers et fait rebondir le titre Casino qui a clôturé en hausse de 7,48% à 30,03 euros après avoir chuté de plus de 20% depuis le début de l’année.
    La valeur reste la plus “shortée” du marché français, selon les données de IHS Markit. Les ventes à découvert comptaient pour 35% de son capital flottant le 23 mai, contre 28% dix jours plus tôt.
    De son côté, Rallye a fini la séance en repli de 61,25% à 2,9450 euros.
    Casino a fait savoir vendredi matin, lors d’une brève déclaration lue par son directeur financier, que Rallye n’avait pas perdu le contrôle de sa filiale.
    Pourtant la question du contrôle de Casino sera posée, en fonction des modalités d’une restructuration pilotée par deux administrateurs judiciaires d’expérience, Hélène Bourbouloux et Frédéric Abitbol.
    CRÉANCIERS OBLIGATAIRES
    Pour nombre de spécialistes, la procédure devrait déboucher sur une perte du contrôle d’un groupe constitué par Jean-Charles Naouri à partir de 1991 grâce à de multiples strates d’endettement.
    La cascade de holdings chapeautant Rallye, Foncière Euris, Finatis et Euris (non côtée), elle aussi endettée, a également été mise sous sauvegarde.
    “Nous ne pensons pas qu’un simple rééchelonnement de maturités sera suffisant”, estime Anthony Giret, analyste crédit chez Spread Research, pour qui Rallye n’a pas un simple problème de liquidités mais souffre d’une structure surendettée intenable dans le temps.
    L’issue la plus probable, selon lui, serait de voir les créanciers obligataires, qui portent 40% de la dette de Rallye, échanger leurs créances contre du capital et devenir ainsi les actionnaires de contrôle de la holding qui détient 51% de Casino.
    Le solde de la dette de Rallye est détenu par des banques, notamment BNP Paribas, BPCE ou le Crédit agricole.
    Contrairement aux porteurs d’obligations, les banques ont en leur possession les titres Casino apportés en garantie aux prêts de Rallye. Elles peuvent toujours décider de les vendre sur le marché. Les créanciers obligataires n’ont pas ce levier.
    Une augmentation de capital, souvent opérée dans les opérations de restructuration, peut limiter la dilution de l’actionnaire de contrôle. Mais cette hypothèse semble peu probable compte-tenu de l’endettement des holdings de tête du groupe.
    L’hypothèse d’une perte du contrôle de Jean-Charles Naouri constitue aussi le scénario central de nombre d’analystes, comme ceux de Bryan Garnier, Oddo ou Kepler Cheuvreux.
    “La seule voie de sortie consisterait en une réduction drastique de la dette se soldant par un changement de contrôle et un départ de Jean-Charles Naouri”, estiment ceux de Kepler Cheuvreux dans une note intitulée “Le Chant du cygne de Rallye”.
    “Ce serait la seule issue permettant à Casino de sortir renforcé, d’éviter un nouveau démantèlement de ses actifs”, ajoutent-ils, estimant que “le vrai problème ne réside pas dans les “attaques spéculatives” régulièrement dénoncées par le distributeur mais par la masse de dettes de sa maison-mère.
    QUAND MUDDY WATERS SE RAPPELLE A CASINO
    A ce stade, Casino n’a donné aucune indication sur ce que pourrait être le niveau de son dividende, qui pourrait être abaissé, du moins pendant la période de sauvegarde, selon certains analystes.
    Le distributeur a versé environ 340 millions d’euros de dividendes en 2018, dont 51% à Rallye.
    Le fonds Muddy Waters, qui s’était attaqué le premier à la galaxie Casino, pour sa pile de dettes et une complexité financière masquant selon lui des résultats dégradés, a estimé vendredi que la sauvegarde de Rallye “était une “justification retentissante des avertissements lancés en 2015”.
    Il a également encouragé l’Autorité des marchés financiers (AMF) - qui a ouvert une enquête après la chute du cours de Casino à la fin 2015 provoquée par un rapport au vitriol du fonds - à “diriger davantage son focus sur les avertissements des sceptiques que sur les sceptiques eux-mêmes”.
    Pascale Denis, édité par Jean-Michel Bélot et Matthieu Protard
    Back to list

    (Refinitiv) European high-yield turns sombre as volatility hits (May 2019)


    May 14 2019
    European high-yield turns sombre as volatility hits
    Exuberant conditions in European high-yield have quickly come undone by wider market volatility that has weighed on recent issuance and poses a threat to a pipeline which consists mostly of price-sensitive issuers.
    Some 18 out of 27 bonds issued since the start of April are trading below reoffer, according to Tradeweb data compiled by IFR, demonstrating how much sentiment has moved since trade tensions escalated between the US and China.
    The iBoxx euro liquid high-yield index widened to 3.88% at Monday’s close, compared to this year’s low of 3.46% on April 23, according to Refinitiv Eikon data.
    “It’s simply a reaction to some bullish trends among issuers, who have been opportunistically raising cash in the bond market at a time when the market was ignoring key risks surrounding the US-China trade war,” Benjamin Sabahi, head of credit research at Spread Research, told IFR.
    Among the new issues, EG Group and Consus Real Estate are among the worst hit.
    The petrol station operator’s senior secured €300m 3.625% Feb 2024 note is down to 97.8, while the German property developer’s senior secured €400m 9.625% May 2024 note is down to 95.6, after pricing with a discount at 98.5.
    Spread Research’s Sabahi said the lack of fresh paper, strong redemptions and substantial coupon payments, together with inflows, had led to a favourable market for issuers, seeing bonds for companies with poor fundamentals trade up.
    “When the market corrects, bonds without any premium like the new Eircom or FNAC Darty ones in so-called defensive sectors, or bonds of cyclical sectors in the secondary market for which investors just face the reality of weak Q1 results trade down,” he said.
    MATERIAL IMPACT
    These widening yields could have a material impact on volumes, according to a senior banker. Issuers are already struggling, with the majority of last week’s offerings failing to price at the tight end of talk.
    “More than half of the calendar is highly sensitive price sensitive, so there isn’t much room for price movement,” he said.
    While M&A financings saw a pick-up in recent weeks, issuance this year has been dominated by Double B refinancings and is likely to continue to do so as the upcoming M&A financing pipeline remains constrained.
    This means the level of issuance will be highly dependent on attractive pricing levels that allow companies to break even when paying to redeem bonds early.
    This reliance on Double B issuers has been highly unusual, at 70%, compared to the highest share of 58% in 2017 according to Spread Research data that goes back to 2013.
    So far this week, there has only been a tap for Verisure priced on Monday [L5N22P4Y4], with no further deal announcements made on Tuesday.
    This comes in stark contrast with the last three weeks, which saw at least four deals price, according to IFR data.
    A second banker said some issuers that were looking at this week have lost their sense of urgency as pricing points have become less attractive.
    He expects upcoming deals to be met with more scrutiny from investors.
    “The credit will be really important, whereas for the last couple of weeks, we felt like anything could go.
    There will still be a market for [risky deals] as there has been little yield on offer,” the banker said.
    In terms of issuance picking up, “it requires a bit more clarity to see whether we’re going up and down from here, or sideways for a while,” the first banker said.
    “If investors are willing to put their best foot forward to buy primary, deals will come. If they’re saying, I’ll buy but only if you make it cheap enough where I have to, deals won’t come.”
    High-yield funds still saw inflows last week, according to data from JP Morgan and Spread Research, but this may not last.
    Sabahi expects to see outflows catch up with the market widening, he said.

    Back to list

    (BN) Distressed-Debt Funds Face Losses on Nyrstar Restructuring Bet(May 2019)


    Distressed-Debt Funds Face Losses on Nyrstar Restructuring Bet
    2019-05-10 08:41:28.975 GMT
    By Luca Casiraghi and Antonio Vanuzzo
    (Bloomberg) -- Distressed-debt funds are facing losses after a failed effort to take control of metal producer Nyrstar NV.
    Holders of 955 million euros ($1.1 billion) of bonds may recover about 50% of face value in a debt restructuring that transfers the company to commodity trader Trafigura Group, according to investors, who asked not to be identified because the terms are private.
    More than 90% of bond investors agreed to the deal to avoid insolvency, paving the way for a court-led process in the U.K.
    Avenue Capital Management, Monarch Alternative Capital and Warwick Capital Partners are among funds that bought the notes last year, hoping to take control and profit from a debt-for- equity swap, people familiar with the matter said.
    The plan backfired because they underestimated how urgently Nyrstar needed money and how quickly its largest shareholder would stump up the cash in its own bid for control.
    “Buying Nyrstar notes to take control of the company was a bit of wishful thinking as Trafigura has skin in the game,” said Felix Fischer, global head of research at Lucror Analytics in Singapore.
    Wishful Thinking
    Officials for Trafigura and Nyrstar declined to comment on the deal. A spokesman for Avenue, which sold its position before the restructuring agreement, also declined to comment.
    Officials at Monarch and Warwick didn’t return calls and emails seeking comment.
    Alchemy Partners is also among funds that purchased bonds, people familiar with the matter said last month, though it’s unclear when they were involved.
    A spokesman for Alchemy wasn’t immediately available to comment. Most distressed funds bought Nyrstar’s bonds between September and early November, during which time the price fell from about 90 cents on the euro to about 50 cents, according to people familiar with the trades.
    The funds were still trying to get organized when the zinc giant announced it got $650 million of new money from Trafigura, they said.
    The commodity trader is at once Nyrstar’s largest shareholder, supplier, customer and senior-secured finance provider.
    It will hold a 98% stake in Nyrstar after the restructuring.
    “In the restructuring process Trafigura held all the cards,” said Marc Pierron, a senior credit analyst at Spread Research in Lyon, France.
    Still, the recovery for distressed-debt investors could have been lower and funds that bought at the bottom may double their investments.
    Trafigura initially proposed a write-off of more than 80%, and Nyrstar’s bonds dropped as low as 25 cents on the euro in February, according to data compiled by Bloomberg.
    Bondholders pushed back, leading to the current package now worth about 50% of the original face value, with possible extra gains tied to the price of zinc, according to investors, who asked not to be named.
    On April 29, Nyrstar announced that a majority of creditors signed up for the deal.
    *T
    ================================================================
    Bondholder Package
    ================================================================
    Nyrstar’s bondholders will receive a package with a face value of 568 million euros, including:262.5 million euros of Trafigura perpetual bonds80.
    6 million euros of Trafigura senior notes225 million euros of instruments linked to zinc pricesIn exchange, they’ll cancel 955 million euros of existing debtDeal accepted by holders of about 90 percent of Nyrstar bonds maturing in 2019, 2022 and 2024.
    *T
    The worst losses may be faced by some of Nyrstar’s bank lenders, with Deutsche Bank AG in line to write down as much as70% of face value.
    Insurance and syndication of its loan will mitigate some of the bank’s losses.
    “For bondholders it was likely difficult to have a say given Trafigura was putting its hands on the company’s assets in exchange of financing Nyrstar’s working capital needs,” Pierron said. “The final deal is relatively decent for the bondholders.”
    --With assistance from Jack Farchy and Andy Hoffman.
    To contact the reporters on this story:
    Luca Casiraghi in London at lcasiraghi@bloomberg.net;
    Antonio Vanuzzo in London at avanuzzo@bloomberg.net
    To contact the editors responsible for this story:
    Vivianne Rodrigues at vrodrigues3@bloomberg.net
    Abigail Moses

    Back to list

    (Oblis) Retour sur les résultats de Teva (May 2019)


    Victime de la concurrence des génériques, le Copaxone, médicament vedette de Teva, a vu ses ventes nettement reculer. Teva reste malgré tout optimiste, confirmant ses prévisions annuelles. Les investisseurs et certains analystes le sont un peu moins. Le géant des médicaments génériques, I'lsraélien Teva Pharmaceuticals a rapporté une baisse de 15% de son chiffre d'affaires à 4,29 milliards de dollars au premier trimeslre 2019. Cette baisse s'explique principalement par la concurrence des traitements génériques à son produit vedette, Ie Copaxone,le traitement contre la sclérose en plaques. Rien qu'aux Etats-Unis et en Europe, les ventes de Copaxone ont chuté de respectivement 56% et 26%. Au-delà du Copaxone, Teva a pâti également d'une baisse des recettes dans la vente de produits respiraloires et de la baisse de régime de ses activités génériques aux Ëtats-Unis. Les trois premiers mois de 2019 se soldent par une perte nette de l05 millions de dollars contre un bénéfìce d'un milliard un an avant. " Nous avons dû faire face à la perte d'exclusivité des produits-clés Copaxone et ProAir au profit de la concurrence des génériques", a déclaré le PDG Kare Schultz cité dans le communiqué, lequel souligne toutefois le succès des relais de croissance organique à long terme, en particulier de Ajovy (traitement antimigraine) et de I'Austedo (destiné à lutter contre les mouvements involontaires). Kare Shulz a également indiqué que " la deuxième année du programme de restructuration de deux ans avalt débuté de manière prometteuse. Nous sommes en voie de réduire notre base de coûts totaux de 3 milliards de dollars d'ici la fin de 2019 et nous avons atteint une réduction de 2,5 milliards de dollars à ce jour, tout en continuant de réduire notre dette." Teva Pharmaceuticals maintient toutefois ses prévisions annuelles, avec un chiffre d'affaires compris entre 17 et 17,4 milliards de dollars et un bénéfice par action enlre 2,20 et 2,50 dollars, selon Zonebourse. Ces déclarations n'ont pas convaincu les investisseurs et les analystes. Des rendements obligataires volatiles A Wall Street, I'action Teva Pharmaceulicals a connu une volatilité importante dans les heures qui ont suivi la publication des résultats trimestriels. Sur le marché obligataire, plusieurs créanciers ont préféré vendre leurs obligations, suivant ainsi la recommendation de certains analystes, ce qui a entraîné un recul des prix et une remontée des rendements. "Nous ne modifions pas notre recommendation de vendre les obligations Teva après une publication trimestrielle que nous considérons comme faible ", a par exemple indiqué la société de recherche en crédit Spread Research. Bien que le groupe ait réaffirrmé ses prévisions, les ratios de crédit continuent à se dégrader au niveau le plus faible jamais enregistré, malgré les énormes réductions de coûts engagées depuis I'année dernière. Et les nouveaux médicaments (Austedo, Ajovy) sont loin de compenser les énormes pertes de revenus sur les médicaments de spécialité, a-t-elle ajouté. Et d'estimer que le marché obligataire va sans doute réévaluer les risques de crédit de Teva, à mesure que le plan de réduction de coûts approche de son terme et que la direction n'en a pas annoncé un nouveau. Pour ne citer qu'elle, l'obligation Teva Phamaceutical Finance Co BV en USD au coupon de 2,95% et d'une maturité égale au 18 décembre 2022 se traite désormais aux alentours de 94% du nominal sur le marché secondaire, soit un rendement de 4,78%. L'obligation notée BB dans la catégorie spéculative est libellée par coupures de 2.000 dollars.
    Back to list

    (L'Opinion) Altice desserre enfin l’étau de sa dette (May 2019)


    Altice desserre enfin l’étau de sa dette
    A force de cessions et de restructurations financières, le groupe de Patrick Drahi retrouve la confiance des investisseurs

    Les faits — L’entité européenne du spécialiste des télécoms et des médias a réalisé une nouvelle opération de refinancement. Les cessions d’actifs l’aident aussi à alléger le poids de sa dette. Depuis le 1er janvier, le cours d’Altice Europe a rebondi de 66 %.

    Le pire n’est pas toujours sûr, disait Paul Claudel. Pour Altice, il est peut-être même passé. L’opérateur, hier étouffé par 50 milliards d’euros de dettes et fragilisé par l’hémorragie de son portefeuille d’abonnés, est en train de redresser la barre.
    Une scission des activités dans le câble aux Etats-Unis, puis plusieurs cessions d’actifs ont permis de clarifier la structure du spécialiste des télécoms et des médias, et d’alléger la barque financière qui menaçait de prendre l’eau, il y a moins de deux ans.

    Lundi, le groupe contrôlé par Patrick Drahi a annoncé une nouvelle opération de refinancement de sa dette.
    In fine, la holding Altice Europe, qui chapeaute l’ensemble des activités en France, Portugal, Israël et République dominicaine, va économiser 110 millions d’euros par an.
    L’échéancier des emprunts a été une nouvelle fois allongé, la maturité moyenne de la dette passe de 6 à 6,5 ans. Le terme le plus rapproché reste 2022, mais à cette date il n’y a plus qu’un milliard d’euros à rembourser.
    D’ici là, Altice aura certainement vendu d’autres actifs ce qui l’aidera à alléger sa structure financière. « La dette brute d’Altice Europe reste proche de 29 milliards d’euros, mais le groupe a pu rembourser 1,4 milliard d’euros grâce aux cessions réalisées ces derniers mois.
    Il ne se contente pas de repousser la maturité de son endettement, c’est évidemment une bonne nouvelle », commente Jean-René Meduri, analyste-crédit chez Spread Research.
    Seul (et gros) bémol : si les clients sont revenus – SFR a grosso modo regagné le million d’abonnés qui s’étaient envolés –, le revenu par abonné ne suit toujours pas.
    Fibre optique au Portugal. Outre les médias et les télécoms, l’ingénierie financière est un vrai métier chez Altice. En devenant client de son réseau de fibre optique, SFR FTTH, dont il vient de vendre 49,9 %, Altice gagne deux fois : il a encaissé le produit de la cession (1,8 milliard d’euros) et touche aujourd’hui les revenus versés par son ancienne entité, qui a été déconsolidée. « Compte tenu des projections de raccordement en fibre de cinq millions de foyers d’ici à quatre ans contre 1 million actuellement, cela représente environ 750 millions d’euros de revenus potentiels en année pleine, poursuit Jean-René Meduri. Cela explique en partie la prévision du groupe d’une hausse de 3 % à 5 % du chiffre d’affaires d’Altice France en 2019. » La rentabilité aussi devrait s’améliorer cette année. Au premier trimestre, l’Ebitda de SFR, principal actif du groupe, a grimpé de 7 % une fois retiré l’impact négatif de la TVA sur l’offre presse de l’opérateur, impact qui n’apparaîtra plus au deuxième trimestre. Seul (et gros) bémol : si les clients sont revenus – SFR a grosso modo regagné le million d’abonnés qui s’étaient envolés –, le revenu par abonné ne suit toujours pas. Il s’est même contracté ces derniers mois, ce qui s’est traduit par un recul de 3 % des revenus de SFR au premier trimestre, à 2,52 milliards d’euros. La prochaine actualité d’Altice sera sans doute la cession d’une partie de son réseau de fibre optique au Portugal. Compte tenu de l’équipement du pays – déjà 4,5 millions de foyers raccordés sur un total de 5,3 millions à couvrir d’ici à l’année prochaine –, ce bijou de famille pourrait être valorisé entre 6 et 7 milliards d’euros, estiment des analystes. Le groupe de Patrick Drahi pourrait donc empocher environ 3,5 milliards s’il choisit de n’en conserver que 50,1 %. L’affaire devrait être rondement menée : dix candidats potentiels se sont déjà manifestés, a récemment déclaré le directeur général d’Altice Portugal. L’an dernier, la vente d’une série d’infrastructures (pylônes en France et au Portugal, fibre optique en France, tours de la filiale dominicaine...) a permis à Altice Europe d’encaisser 4 milliards d’euros de cash.
    Back to list

    (BN) Companies in Big Refinance Push While Credit Rally Has Legs (April 2019)


    Companies in Big Refinance Push While Credit Rally Has Legs
    2019-04-29
    By Marianna Aragao and Tasos Vossos
    (Bloomberg) -- Fearing a repeat of the 2018 selloff in European credit markets, some companies are opting to swallow relatively higher repayment costs now in order to secure longer term savings.
    French retailer Fnac Darty SA will pay 18.7 million euros ($20.8 million) to redeem a bond instead of waiting until September, when a scheduled call price would have been cheaper.
    Elsewhere, investment firm Wendel SA is utilizing a make-whole provision to retire notes maturing in 2020 and 2021 ahead of schedule.
    “The companies are saying who knows how the market is going to be in the second half. Let’s do it now at a low funding cost and be on the safe side,” said Thomas Neuhold, a Vienna-based money manager at Gutmann Kapitalanlage AG, which oversees about 9 billion euros of assets.
    “They are probably doing the right thing. No matter who is coming, the market is willing to buy at any price at the moment.”
    A lack of yield elsewhere and central bankers from Frankfurt to Stockholm turning more dovish this month have continued to boost the appeal of corporate bonds.
    Euro investment-grade corporate bond yields have tumbled to 0.73 percent, their lowest in 15 months, while those on speculative- grade debt declined to 3.6 percent, near the lowest since June, according to Bloomberg Barclays indexes.
    These lows haven’t gone unnoticed. “We decided to do these liability management transactions in the context of a low borrowing cost environment, ” Wendel spokeswoman Caroline Decauxsaid via email.
    The firm will announce the bonds’ redemption price on May 17.
    Confidence Game
    Last week Fnac sold two tranches of euro notes to refinance a bond maturing in 2023 rather than waiting for a scheduled call date on Sept. 30 -- under that scenario the company would have paid a redemption price of 101.
    625 percent, less than the current bid price of 102.522, according to data compiled by Bloomberg.
    This decision was based on the retailer’s confidence that current market conditions would allow it to reduce coupons significantly to compensate for the additional premium, according to a person familiar with the transaction.
    The new euro notes due in five years priced at 1.865 percent while the bond maturing in seven years came at 2.65 percent.
    The coupon on its existing 2023 is 3.25 percent.
    Other high-yield issuers including Rexel SA and Loxam SAS adopted a similar strategy this year, redeeming notes a few months before a step down in call price.
    Such an approach has seen high-yield borrowers in Europe pay 24 million euros in extra costs so far in 2019, according to estimates by Spread Research, a credit research firm.
    The rally in yields has also triggered some unorthodox approaches from financial services borrowers.
    When Coventry Building Society decided to replace an old contingent convertible bond earlier this month, instead of waiting to do it around the scheduled call date in November, it launched a buyback.
    The U.K. lender accepted to pay 102.25 percent of face value for the notes that investors sold back.
    This year’s additional repayments costs “reflect how careful issuers have been regarding potential spread widening in the second half of the year if the market corrects,” according to Benjamin Sabahi, head of credit research at Spread Research.
    “It’s not surprising to see companies acting opportunistically given the market rally this year and how hungry for paper investors are,” he said.

    Back to list

    (Refinitiv) HEMA recovers but analysts remain cautious - IFR News (April 2019)


    HEMA recovers but analysts remain cautious - IFR News
    11-Apr-2019 17:01:35
    LONDON, April 11 (IFR) - Dutch retailer HEMA's bonds, which had plummeted on Wednesday, recovered after management gave a positive impression on its results.
    Be that as it may, analysts remain cautious given the weakness of the numbers released.
    "The conference call was constructive, and management announced a strategic shift, driven by Ramphastos, which we find to be promising as it could unlock growth potential for HEMA," Spread Research analyst Anthony Giret said in a client note.
    "Reducing debt and deleveraging also seems to be a key strategic priority, but this is mainly conditional upon improving operating performance, in our view."
    The results released on Wednesday morning, prior to the afternoon call, showed Q4 adjusted Ebitda fall to €38.5m, an 8% slump on the previous year thanks to a drop in Dutch and French sales. Full-year Ebitda fell to €117m, a 12% fall.
    The Dutch retailer's €150m 8.50% senior unsecured 2023 note bore the brunt. Having gained 10 points since the start of the month, it plunged eight to a 70 bid.
    It is now bid around 75, according to Tradeweb.
    One investor said the bonds may have traded up prior to the results due to short-covering, with big moves being reasonable given the paper's relative illiquidity.
    He said he would be more concerned had the bonds traded up further following the results release.
    Management confirmed a €35.8m equity injection from the new sponsor Ramphastos, although this was slightly short of the €40m announced at the time of the acquisition in October [see related content].
    HEMA also said it had decided to sell its bakeries network as part of its debt reduction plans.
    While analysts took note of the heightened yields offered by HEMA's bonds, with the 2023s now around 18.5%,
    they think they are insufficient given the short-term risks involved.
    Spread Research’s Giret said it would be challenging for the business to delever to less than 6x, creating significant refinancing risk.
    Net leverage for 2018 was 6.6x, up from 5.5x the previous year thanks to heavy working capital outflows, despite a €36m equity injection in November.
    Given the reduced revolving credit facility headroom, after HEMA's RCF was cut by €20m to €80m, "available liquidity is at the forefront of our minds", CreditSights analysts said, although they are somewhat comforted by a €10m unsecured working capital backstop facility Ramphastos is providing.
    "Whilst the prospective sale of the bakery and commitment of the sponsor to pay down debt are steps in the right direction, we have seen HEMA's inventory overhang wreak havoc on its bond prices before," the analysts said.
    As announced at the time of the takeover, Ramphastos is acquiring most of a senior PIK note issued by an affiliate of Lion Capital, the previous owner, and it will be turned into equity before Easter.
    It was HEMA's first conference call under its new ownership, having skipped the call for its third-quarter results.
    Still, despite Wednesday's fall, HEMA's 2023 bond is still up from around 67 bid at the start of the year. It was issued at par in July 2017, together with a €600m senior secured 2022 FRN.
    The results came at a tricky time for retail issuers in the European high-yield market, with Debenhams falling into administration earlier this week.

    Back to list

    (Refinitiv) Cyclicals pounce on market bounce - IFR News (April 2019)


    Cyclicals pounce on market bounce - IFR News
    08-Apr-2019 16:52:22
    LONDON, April 8 (IFR) - Ineos and Italmatch are making fast work of taking advantage of a bounce in investor appetite for cyclical credits, both bringing transactions tapping into the strong gains seen in their debt since the start of the year.
    The two issuers' outstanding bonds hit all-time lows last year as concerns around the end of easy central bank liquidity gripped the market.
    However, the tone has since completely reversed, leading investors to search for yield in all corners of the credit market once again.
    Swiss chemicals company Ineos took full advantage of this, pricing a €770m 7NC3 senior secured note (Ba1/BB+/BBB-) at 2.875%, from 3.25% area IPTs and 3% area talk.
    Analysts saw the deal paying practically no new issue premium below 3%. Pricing compares to its €550m 2.125% Nov 2025 which was bid around 2.60% pre-announcement, according to Tradeweb. The bond was bid at 3.80% at the start of December.
    CreditSights analysts said the pricing does not offer enough compensation given the potential downside, citing worries including economic slowdown, particularly in China, and oil price uncertainty.
    Q4 Ebitda was down 37% to €356m compared to a year earlier, due to inventory holding losses that resulted from the decline in crude oil and product prices. Full-year Ebitda fell to €2.3bn, compared to €2.5bn in 2017.
    Despite the downturn and heightened capital expenditures, the company paid a €1.45bn dividend in February.
    Benjamin Sabahi, head of credit research at Spread Research, said in a note that yields in the Single B sector, which includes a lot of cyclical issuers, do not account for lower growth that will potentially hit cyclical high-yield issuers by year-end.
    An investor said that, while she liked Ineos despite the poor results based on its free casfhlow generation, pricing had gone too tight.
    "It's a long-duration low-coupon bond, so it's the kind of thing that will implode when the market moves," she said.
    "It seems like people are excited for no reason at the moment. Both what happened in December and the rally now are overreactions. The market is so nervous that it goes from one extreme to an extreme."
    The deal, via global coordinators Barclays and JP Morgan, was an opportunistic refinancing of the company's €770m 4% May 2023 note, on which the redemption price steps down to 101 from 102 on May 1.

    NEXT DOSE
    Italmatch will be next to test appetite, having started a roadshow for a €200m tap of its outstanding €410m Sep 2024 note (B3/B), which had priced at 475bp over Euribor.
    Proceeds refinance a bridge loan that was taken out to finance its acquisition of BWA Water Additives.
    In addition to the financing, Bain and Italmatch's management are making an equity contribution of €90m.
    IPTs are 99.00 area. The original tranche was bid at 99.40 pre-announcement at Monday's open but subsequently traded down slightly to 99.10, according to Tradeweb data.
    If the deal prices above 98.75, it will be fungible with the original tranche, leads said in the mandate announcement.
    The outstanding tranche has rallied strongly since the start of the year, when it was bid at 94.
    The Italian company's deal has been expected since the original transaction financing Italmatch's buyout by Bain in September, when the issuer said it would make a significant acquisition and part-finance it with debt.
    The prospect of further debt had concerned investors at the time and the company had ended up cutting the amount of additional senior secured debt that could be raised on top of the initial deal.
    The acquisition brings leverage up to 5.3x, the maximum limit allowed after changes to the last deal's documentation.
    Italmatch's roadshow ends on Wednesday via joint global coordinators BNP Paribas, Goldman Sachs and Citigroup.

    Back to list

    (BN) Europe’s Shrinking High-Yield Market May Narrow Spreads Further (April 2019)


    Europe’s Shrinking High-Yield Market May Narrow Spreads Further
    2019-04-02 07:00:01.0 GMT

    By Marianna Aragao
    (Bloomberg) -- A raft of bond repayments is looming over Europe’s high-yield market, shrinking further the amount of investable debt amid lackluster new issuance volumes.
    Nexi Capital SpA, Worldpay Finance Plc and Perstorp Holding AB are among speculative-grade borrowers planning to repay outstanding bonds, which may hand back as much as 3.9 billion euros ($4.4 billion) of cash to investors, according to estimates by credit research firm Spread Research.
    “The combination of repayments, inflows and very low supply means more cash in the hands of investors, which in the short- term could help spreads tighten further if they turn to the secondary market to reinvest,” said Daniel Lamy, a credit strategist at JPMorgan Chase Bank NA in London. “This cash also provides a buffer against market volatility, avoiding forced selling like we saw late last year.”

    Those narrowing spreads could spur opportunistic bond sales in Europe as price power swings back in favor of issuers. Last month saw Cemex SAB de CV, Faurecia SE and Sappi Papier Holding GmbH print new deals inside initial price thoughts on the back of strong demand. And a 700 million euro bond backing the buyout of Johnson Controls International Plc’s battery unit was also oversubscribed, despite concerns around loose terms.
    Supply, Demand

    High-yield bond sales totaled 10.2 billion euros in the first three months of 2019, down 45 percent on the same period of last year, according to data compiled by Bloomberg. High-Yield Bankers Fear Another Slow Quarter for Sales in Europe “Bond buyers have less and less supply from which to choose as borrowers predominantly turn to the loan market for fresh paper such as recap or M&As, and I don’t see that trend changing any time soon,” said Benjamin Sabahi, head of credit research at Spread Research.
    While supply dwindled, inflows have seen a resurgence. For the second time in March, high-yield funds saw a weekly inflow of over 500 million euros in the week ended March 20, bringing the year-to-date inflow to 2.7 billion euros, according to a March 22 research note from JPMorgan. This compares to outflows of 5.4 billion euros in the first quarter of 2018.
    These inflows “will continue to provide a strong technical bid for bonds since the primary market is so depressed right now,” Sabahi said.
    But the lack of issuance coupled with redemptions also adds to concerns about the high-yield market shrinking in Europe. This comes after years of cannibalization from leveraged loans, which have typically been the preferred route for sponsors in leveraged buyouts and are increasingly attracting high-yield borrowers looking to refinance their debt.
    Perstorp is the latest issuer to opt out of bonds by selling dollar- and euro-denominated term loans to refinance its existing notes. Another example is Nexi, which is set to repay outstanding debt and raise a new loan as part of its IPO plan. The par value of bonds outstanding in the ICE BofAML Euro High Yield Index peaked in 2015 at 317.0 billion euros and has since drifted lower to 275.5 billion euros, data from March 28 shows.
    Without new issuers coming to the market, “the market will shrink a little further until the end of this cycle,” according to JPMorgan’s Lamy. The trend may only reverse if a major economic downturn prompts credit-rating cuts, pushing issuers from investment grade into high yield, he said.

    To contact the reporter on this story:
    Marianna Aragao in London at mduartedeara@bloomberg.net
    To contact the editors responsible for this story:
    Sarah Husband at shusband@bloomberg.net
    Charles Daly


    Back to list

    (BN) Davidson Kempner Is Said to Be Latest Fund Buying Senvion Bonds (March 2019)


    Davidson Kempner Is Said to Be Latest Fund Buying Senvion Bonds
    2019-03-22 13:32:38.537 GMT


    By Antonio Vanuzzo and Laura Benitez
    (Bloomberg) -- Davidson Kempner Capital Management has built a stake in the bonds of troubled wind-turbine maker Senvion, following similar moves by rival Anchorage Capital Group, according to people familiar with the matter.
    The investor has bought up some of Senvion’s 400 million euros ($452 million) of notes maturing in October 2022, the same debt targeted by Anchorage Capital Group, the people said, asking not to be named because the information isn’t public. Officials at Davidson Kempner and Senvion declined to comment.
    Senvion is preparing for negotiations with its creditors on restructuring its debt amid mounting financial pressure following project delays, cost overruns and profit warnings. On Wednesday, the Centerbridge-owned manufacturer said it had appointed turnaround specialist Neil Robson as chief restructuring officer. Robson recently helped steer a 1 billion- euro debt restructuring of German metal recycling company Scholz Holding AG.
    Hedge funds buying up bonds at distressed levels could profit in a restructuring if new money is found to refinance debt facilities and prevent an insolvency, potentially spurring a recovery in the notes. They could also end up owning the firm if the rescue hands control to creditors in a debt-for-equity swap.
    The 2022 notes are currently quoted at around 40 cents on the euro, according to data compiled by Bloomberg. “It’s not surprising to see hedge funds buying into the debt,” said Remi Ramadou, a credit analyst at Spread Research who covers Senvion notes. “The most probable scenario is a debt restructuring with a debt for equity swap.”
    Senvion’s debt also includes a 825 million euros guaranteed loan. A 50 million block of the facility traded earlier this week at around 70 cents on the euro, according to the people.
    Read More: Anchorage Is Said to Build Position in Battered Senvion Bonds

    --With assistance from Luca Casiraghi.

    To contact the reporters on this story:
    Antonio Vanuzzo in London at avanuzzo@bloomberg.net;
    Laura Benitez in London at lbenitez1@bloomberg.net
    To contact the editors responsible for this story:
    Vivianne Rodrigues at vrodrigues3@bloomberg.net
    Chris Vellacott


    Back to list

    (BN) Salini Is Said to Face Pressure to Rescue Construction Industry (March 2019)


    Salini Is Said to Face Pressure to Rescue Construction Industry
    2019-03-13 17:43:08.852 GMT


    By Antonio Vanuzzo and Luca Casiraghi
    (Bloomberg) -- Salini Impregilo SpA, Italy’s largest construction company, is being pressured to help bail out the wider industry as a condition for financing its proposed investment in Astaldi SpA, according to four people familiar with the matter.
    State-owned lender Cassa Depositi e Prestiti SpA will help Salini take a 65 percent stake in its biggest competitor if it uses the funds to invest in smaller rivals, the people said, asking not to be named because the negotiations are private. Some of Astaldi’s bank lenders may also only be willing to increase their exposure for a sector-wide solution, the people said.
    Salini offered in February to save Astaldi from insolvency with a 225 million-euro ($254 million) capital increase, but may have less than 150 million euros available for the transaction, the people said. The Milan-based firm is the sole bidder and the only Italian builder capable of consolidating the sector, which has been struggling for years amid tight government spending and soured foreign projects.
    “Cherry picking Astaldi’s specific projects instead of taking over the company would have been better,” said Marc Pierron, a senior credit analyst at Spread Research in Lyon, France. “Integrating the whole Astaldi presents a higher execution risk and financial needs. That’s why Salini’s offer is conditional to the banks providing new bonding lines and the presence of a co-investor.”

    Broader Stabilization

    A spokesman for Cassa Depositi pointed to comments made by its Chief Executive Officer Fabrizio Palermo on Feb. 27, saying that any possible intervention in Astaldi would aim at a broader stabilization of the sector. The spokesman declined to comment further.
    Officials at Salini and Astaldi also declined to comment on the matter.
    Salini has to file a detailed restructuring proposal to a court in Rome by the end of March and a majority of Astaldi’s 40 bank lenders must back the plan for it to be approved, the people said. No plan has yet been submitted, they said. Astaldi had 1.3 billion euros of net debt and 3.3 billion euros of guarantees in 2017, according to the last publicly available full-year earnings. The company’s board has approved the proposal, which includes repaying preferential and pre-deductible creditors, converting unsecured creditors into shareholders and selling assets.
    Salini also aims to create a new group to invest in Astaldi. That would allow Cassa Depositi to skirt rules that prevent it from rescuing distressed firms and allow it to bid for assets of other troubled builders, they said. Astaldi filed for creditor protection after a re- capitalization plan failed last year. Hurt by a slump in Italy’s construction sector, Condotte SpA and CMC di Ravenna SpA, the nation’s third and fourth largest builders, also started court proceedings.
    “Over the last few earnings calls, Salini made clear its goal was to reach an investment-grade rating, but in order to achieve it the company needs to deleverage significantly,” Pierron said. “Salini’s potential bid for the whole construction activity of Astaldi goes in the opposite direction.” Read more: Italian Builders Add $118 Billion Worry to Banks’ Problems (1)

    --With assistance from Chiara Albanese.

    To contact the reporters on this story:
    Antonio Vanuzzo in London at avanuzzo@bloomberg.net;
    Luca Casiraghi in London at lcasiraghi@bloomberg.net
    To contact the editors responsible for this story:
    Vivianne Rodrigues at vrodrigues3@bloomberg.net


    Back to list

    (BN) Distressed Debt Gurus Get a 90 Percent Scorching (March 2019)


    Distressed Debt Gurus Get a 90 Percent Scorching: Chris Bryant
    2019-03-11 08:20:29.871 GMT


    By Chris Bryant
    (Bloomberg Opinion) -- When a company’s bonds trade near 30 cents on the euro, that would usually be the moment for distressed debt specialist Centerbridge Partners to show up and put the heat on the owners. The private equity firm holds some of bankrupt U.S. utility PG&E Corp.’s notes, for example. But Centerbridge has found itself on the other side of the table in the case of the struggling wind turbine manufacturer Senvion SA. It is the owner of the listed German company. A succession of profit warnings and worries about Senvion’s financial stability have wiped out more than 90 percent of the value of the Centerbridge funds’ majority equity stake. Meanwhile, the manufacturer’s 400 million euros ($452 million) of 3.875 percent coupon bonds, due in 2022, yield a staggering 40 percent.
    Talks with the lending banks and bondholders now loom large and Centerbridge may have to sink more money into the company. It shouldn’t dally too long.
    Centerbridge bought Senvion from India’s Suzlon Energy Ltd. in 2015 for about 1 billion euros, when the seller was trying to cut its large debt load. Together with co-investor Arpwood Partners, the private equity firm sold about one-quarter of the shares to investors the following year, allowing Centerbridge to recoup some of its original equity outlay. Since then, Senvion’s problems have piled up.
    Competition has intensified in the wind farm industry and contract auctions have put downward pressure on pricing. Senvion has already closed several factories and cut hundreds of jobs. Last year the company compounded its troubles by failing to deliver projects on time, triggering penalty payments and a big jump in working capital. It’s had bad luck too. The discovery of a live bomb from World War II held up installation at one of its sites. The chief executive and finance director have been replaced.
    In February, Senvion said it had commissioned a restructuring opinion and would delay the publication of its full-year earnings. It had almost 150 million euros of cash at the end of September, but a 125 million-euro revolving credit line has since been drawn, which suggests liquidity became tight. Net debt is at least 5.5 times 2018 Ebitda, estimates Remi Ramadou of Spread Research.
    The company and its lenders have hired financial advisers and lawyers, Bloomberg News has reported, cementing the impression that a capital restructuring lies ahead. In view of Centerbridge’s debt expertise and the likelihood that hedge funds now hold quite a lot of the distressed bonds, the restructuring talks should be lively. Senvion needs financial relief but it’s not clear who’s going to provide it and on what terms – hence the sorry state of the bonds. It raised 62.5 million euros in fresh capital from Centerbridge and others last year but it has burned through much of that.
    The liquidity pressures should ease once delayed orders are completed, inventory decreases and customer payments are received. However, Senvion is smaller than market leaders such as Vestas Wind Systems A/S, General Electric Co. and Siemens Gamesa Renewable Energy SA, which might make it difficult to achieve the economies of scale needed to stay competitive. While it has won orders in places like India and Chile, its sales are too skewed toward stagnating European markets.
    Centerbridge has publicly backed the new management’s turnaround plan, but hasn’t yet matched that rhetoric with more funds. Writing a check would avert the risk that Senvion’s customers use the restructuring as a pretext to try to recoup project prepayments from its banks. The company has a 825 million euro letter of guarantee facility, which might allow just that. And more than half of it has been pledged, according to Jefferies analyst Stephen Lienert.
    The fact that Centerbridge hasn’t yet stumped up the extra cash might indicate that it wants more breathing space from the banks and for bondholders to take a haircut, perhaps in return for equity. It’s also possible that a white knight will emerge – the wind-turbine servicing contracts might be attractive – but any bidder may wait to see if Senvion fails first.
    Another option is for Centerbridge to buy some of the company’s debt itself, an approach that investment firm Brait SE took during the restructuring of British retailer New Look. Those involved shouldn’t hang around. Senvion depends on cash advances from customers when they place orders. The longer its bonds look distressed, the bigger the chance that clients will shop elsewhere.
    Wind turbines are rightly beloved by those still hoping we can avoid the cataclysm of an over-heating planet. In this case, though, it’s private equity that’s been scorched.

    To contact the author of this story:
    Chris Bryant at cbryant32@bloomberg.net
    To contact the editor responsible for this story:
    James Boxell at jboxell@bloomberg.net
    Centerbridge was forced to scale back its ambitions. The owners originally hoped to raise as much as 700 million euros but the share sale brought in just 294 million euros.
    The guarantees are senior to Senvion’s high-yield bond. It’s probable, though, that any customers who did ask for their money back would be hit with a break-fee, which might deter some of them.


    Back to list

    (BN) UPC Bonds Will Be Transferred to Sunrise, Won’t Trigger CoC (February 2019)


    UPC Bonds Will Be Transferred to Sunrise, Won’t Trigger CoC
    2019-02-28 15:40:07.160 GMT


    By Marianna Aragao
    (Bloomberg) -- Acquisition by Sunrise of UPC’s Swiss operations (including its existing notes) won’t trigger a change of control of the bonds, according to a company statement.
    * As part of the transaction, Sunrise will acquire a portion of the target group’s outstanding debt totaling ~CHF3.6b: statement
    * This includes UPC’s existing senior and senior secured notes issued by UPC Holding, UPCB Finance IV Ltd and UPCB Finance VII Ltd
    * Sunrise will undertake a rights issue to raise ~CHF4.1b to fund the residual cash payment of ~CHF2.7b
    ** Proceeds from the issue will also repay ~CHF1.1b of certain existing Sunrise debt, resulting in net leverage of ~3.0x
    * Transaction is "credit positive" as new combined entity will be a stronger player than UPC or Sunrise on a standalone basis, able to better compete with incumbent Swisscom, Jean-Rene Meduri, an analyst at Spread Research says
    * New combined entity leverage of 2.7x (post expected synergies) is "well below" current net leverage at the UPC Holding’s level of 4.0x, Meduri says
    * NOTE: Earlier, Liberty Global Sells Swiss Unit to Sunrise for $6.3 Billion

    To contact the reporter on this story:
    Marianna Aragao in London at mduartedeara@bloomberg.net
    To contact the editors responsible for this story:
    Sarah Husband at shusband@bloomberg.net
    Charles Daly


    Back to list

    (BN) Senvion Says It Will Meet Its Debt Covenants Amid Bond Slump (February 2019)


    Senvion Says It Will Meet Its Debt Covenants Amid Bond Slump
    2019-02-21 14:32:32.600 GMT


    By Laura Benitez
    (Bloomberg) -- Wind turbine group Senvion SA said it will not breach covenants on its debt, after a profit warning on Wednesday prompted a slump in the company’s bonds.
    The company "expects to comply with its covenants," a Senvion spokesman said by email on Thursday, declining to discuss details of conditions on its debt facilities, because the information isn’t public.
    Senvion said its expectations about meeting its covenant test is based on preliminary results and available data as of December.
    The company revised down sales and earnings guidance on Wednesday, its second profit warning in four months, citing project delays and cost overruns. Moody’s Investors Service cut its outlook on the company’s debt to negative from stable in November, attributing its decision to weak orders amid tough competition. Senvion’s 400 million euros ($453 million) of bonds maturing in October 2022 are quoted at about 36 cents on the euro, compared with almost 90 cents in October, before the earlier profit warning on Nov. 1, according to data compiled by Bloomberg. Read More: Senvion Warning is ‘Deja Vu,’ Estimates May Be Halved: Citi
    The company’s struggles make an eventual debt restructuring more likely and may put pressure on its access to liquidity, according to Remi Ramadou, a credit analyst at Spread Research. Senvion’s spokesman refuted Ramadou’s view and said the company has sufficient access to cash. "Senvion has sufficient liquidity," the spokesman said.
    "All banking lines are available to draw on, if and when Senvion requires them." The company has access to 125 million euros of a revolving credit facility that remained undrawn and most of 825 million euros in guarantee facilities, according to the company.
    Senvion, whose main shareholder is Centerbridge Partners, will report its full annual results on March 14.

    To contact the reporter on this story:
    Laura Benitez in London at lbenitez1@bloomberg.net
    To contact the editors responsible for this story:
    Sarah Husband at shusband@bloomberg.net
    Chris Vellacott, Abigail Moses

    Back to list

    (Refinitiv) Risk-on mood boosts HY ETFs but caution prevails (February 2019)


    Risk-on mood boosts HY ETFs but caution prevails
    IFR 2271 16 February to 22 February 2019

    European high-yield ETFs saw huge inflows last week, demonstrating the continued appeal of passive investing.
    Inflows hit €374m, the third largest amount in four years, according to Spread Research, helping to sustain the rally seen so far this year after a detrimental 2018. This brings year-to-date inflows to €555m - more than the €539m that entered funds for the whole of last year. The inflows bolstered the iBoxx euro liquid high-yield index, which has rallied to 4.48% from its early-January peak of 5.11%. The index has delivered a 2.6% total return so far.
    “The money we saw come into the ETF market last week looks like momentum money,” said Michael John Lytle, chief executive officer at Tabula Investment Management, which launched a CDS-based European high-yield ETF in January.
    Like other risk asset classes, European high-yield has been boosted by a risk-on rebound after the Federal Reserve softened its bias toward raising rates. “If you have a cash position and you want to be exposed immediately to the performance of the high-yield market, these passive products are a great way of doing that without taking a view of any particular manager or approach,” Lytle said. “Also, if your signals change and you want to take some risk off the table, it’s much easier to get out and adjust your position.”
    This year the benefits of inflows have accrued to ETFs and short-term high-yield funds, while long-term high-yield funds have seen outflows. This suggests defensiveness, according to Benjamin Sabahi, Spread Research’s head of credit research. “It was a clever strategy at the end of last year - with negative noise - to get invested in ETFs and account for macro risk,” he told IFR. “There is so much cautiousness in the market with this rally and the likelihood that we’re going to have additional profit warnings as in Q3 and Q4; that’s the reason investors have been seeking ETFs in order to not be exposed to idiosyncratic risks.”
    The primary market has echoed the caution, with only one new issue this year - for crossover credit Telecom Italia. The rest of the supply has come from increases and mirror notes on bonds that were trading too low to be tapped.

    UNCERTAINTY AHEAD
    Some active managers hoped last year’s battering, driven by huge price drops on idiosyncratic stories, would make the case for active managers against passive funds. For Tabula’s Lytle, the appeal of ETFs is not necessarily a reflection of the underperformance of active managers. “Good active managers are always going to be worth investing in, as long as they produce alpha.”
    “The amount of money in the passive bucket is growing, as a reflection of how businesses are developing. Across the fixed income asset class, people need good, passive allocation tools, independent of how active managers have performed.” Given how much the market has moved despite looming uncertainties in the backdrop, it is not clear how far the rally will extend.
    “Markets are being very optimistic given corporate earnings, questions regarding China, and the deterioration of official data,” said Spread Research’s Sabahi. “I’m not expecting inflows to continue. Investors will question and balance the yield offered versus what we have in the macro backdrop. Today, we’re not paid for that.”
    ETFs are likely to remain in focus as uncertainty prevails regarding the global economy and central bank policy, given their liquidity compared with high-yield bonds. High-yield bonds were troubled by even worse liquidity than usual late last year, when investors tried to preserve whatever returns they made as the market plummeted. In this environment of volatility, Lytle expects fund flows to be driven by risk appetite throughout the year. However, he notes that, so far, ETF investors seem to be adding to their credit risk allocation, most likely in recognition of a positive credit risk premium.

    Yoruk Bahceli can be joined : yoruk.bahceli@thomsonreuters.com : +44 20 7542 7571

    Back to list

    (BN) Vallourec Lenders Are Said to Seek Exit in Choppy Oil Market (January 2019)


    Vallourec Lenders Are Said to Seek Exit in Choppy Oil Market
    2019-01-31 09:13:37.430 GMT


    By Luca Casiraghi, Laura Benitez and Francois de Beaupuy
    (Bloomberg) -- Some Vallourec SA creditors are trying to cut exposure to the French steel tube maker amid concerns it will struggle to adhere to its debt commitments, according to people familiar with the discussions.

    At least two of the firm’s lenders are looking to sell their pledges to Vallourec’s revolving-credit facilities at about 75 percent of face value, the people said, asking not to be identified because the talks are private. Potential buyers have been approached in London, they said. The company had 2.2 billion euros ($2.5 billion) of undrawn credit facilities at the end of September. Its bonds and shares fell on Thursday.

    Vallourec has suffered as crude and power producers deferred or canceled projects amid successive oil routs and competition from renewable energies. Outstanding commercial paper, a type of short-term debt that’s highly sensitive to investor confidence, fell to a three-year low of 161 million euros in December from a peak of 598 million euros in September 2017, according to data from the Banque de France.

    A Vallourec spokesman declined to comment on market transactions. The company manages its commercial paper program according to its needs, he added, pointing to a Nov. 26 statement that described the company’s liquidity situation as “sound,” citing the undrawn facilities and 769 million euros of cash.

    The company’s 550 million euros of bonds due in October 2022 fell 0.3 cents on the euro on Thursday to a record low of 67.6 cents, according to data compiled by Bloomberg. Shares dropped as much as 4.3 percent to the lowest since Jan. 3.

    The bonds extended declines after Morgan Stanley analysts said last week that the company could breach a covenant regulating its credit facilities at the end of the year. To be in compliance with its loan terms, Vallourec’s net debt must not exceed its equity at the end of 2019. Banks agreed to loosen that ratio in 2017, according to its annual report.

    Vallourec said in November that net debt rose by a third in the first nine months of the year to 2.1 billion euros, but that it expects to meet its debt covenants at the end of 2019 as continued growth in oil and gas activity and cost savings boost earnings. It added that it’s working on a plan to make its German operations more competitive.

    To shore up its balance sheet during the rout in oil prices, Vallourec raised capital, shut or sold plants, shed thousands of jobs in Europe, streamlined operations in Brazil and bought a tube producer in China to compete in Asian markets.

    “We’re following step by step with the company’s management the implementation of the plan and the return to cash flow break-even,” said Nicolas Dufourcq, chief executive officer of French state-owned bank Bpifrance, which has a 15 percent stake in Vallourec. “Despite the fact that the market in the second half of 2018 was tougher than expected, the plan is being carried out.”

    In addition to the credit facilities, Vallourec has 400 million euros of bonds due in August and a further 1.7 billion euros due by 2024, according to data compiled by Bloomberg.

    “The company has plenty of room to repay the bond due to mature in August 2019 thanks to the undrawn revolver,” said Marc Pierron, a senior analyst at Spread Research in Lyon, France.

    “Its longer-term bond repayments could prove problematic, however, should financial performance not improve and if banks are not willing to refinance the credit facility.”

    To contact the reporters on this story:
    Luca Casiraghi in London at lcasiraghi@bloomberg.net
    Laura Benitez in London at lbenitez1@bloomberg.net
    Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net

    To contact the editors responsible for this story:
    Vivianne Rodrigues at vrodrigues3@bloomberg.net
    Abigail Moses, Chris Vellacott

    Back to list

    (BN) Here’s What to Watch in European High-Yield Bonds This Week (January 2019)


    Here’s What to Watch in European High-Yield Bonds This Week
    2019-01-28 11:20:33.634 GMT


    By Marianna Aragao
    (Bloomberg) -- A relatively small floating-rate note sale from Parts Europe SA, formerly Autodis, could reopen the issuance window in Europe’s primary market after the slowest January for junk bond sales since 2016.

    The France-based auto parts distributor plans to sell 175 million euros ($200 million) of senior secured bonds due in May 2022, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. Proceeds will refinance a drawn revolving credit facility and partly redeem the company’s existing floating rate notes.

    While modest in size and with a structure that may appeal to loan investors, the single-B offering could provide a litmus test for a wary market that last year saw returns swing into the red and at least 18 deals being pulled or postponed.

    Only Telecom Italia SpA has priced speculative-grade notes so far this month and bankers say the current pipeline is looking thin. The upcoming earnings season may also hamper near-term issuance prospects. SMCP SA and Tendam Brands SAU, formerly Cortefiel, are among issuers reporting results or sale updates this week.

    “The pipeline of new deals seems pretty weak,” analysts at Spread Research said in a client note on Monday. “We still see a much more challenging year for corporates and less incentive to call existing bonds.”

    On the macro front, credit investors will be braced for an eventful week that includes trade talks in the U.S. and the Federal Reserve’s rates decision on Wednesday. Closer to home, U.K. lawmakers will again be voting on Brexit on Tuesday.

    See Also: What to Watch in European Credit Markets This Week

    Europe Inflows

    High-yield funds with a European focus saw inflows of $360 million in the week to Jan. 23, BofAML analysts wrote in a client note on Friday, citing EFPR data. The region received the lion’s share of the inflows to the asset class globally last week.

    * Global high-yield funds recorded an outflow of $14m, while U.S. focused funds recorded inflows of $230 million, the BofAML analysts said

    * High-yield funds denominated in euro saw their first inflow in nearly three months, with $0.4 billion in inflows, Wells Fargo analysts wrote in a client note, also citing EPFR Global data for week to Jan. 23

    * In the U.S., corporate high-yield fund inflows swung back to outflows with $264 pulled for the week ended Jan. 23, according to Lipper Fund Flows data

    To contact the reporters on this story:
    Marianna Aragao in London at mduartedeara@bloomberg.net

    To contact the editors responsible for this story:
    Sarah Husband at shusband@bloomberg.net
    Charles Daly

    Back to list

    (Refinitiv) Atalian plummets on shareholder investigation - IFR News (January 2019)


    Atalian plummets on shareholder investigation - IFR News
    2019-01-22 11:52:23.00 GMT


    By Yoruk Bahceli
    LONDON, Jan 22 (IFR) - French cleaning and facilities management company Atalian's bonds plummeted on Tuesday morning on its announcement of an investigation into its principal shareholder.

    Its leading shareholder, Franck Julien, has been placed under formal investigation by French authorities for misuse of corporate assets in connection with the payment by Atalian of invoices related to work at a Brussels building owned by the shareholder, the company said in a statement. Two employees of the company are also under investigation.

    Atalian and its officers are not the subject of proceedings, it added.

    Its €625m 4% 2024 senior note lost over seven points on Monday's close, sinking to around 68 bid earlier on Tuesday morning, but has recovered some of the losses, now trading around 71, according to Tradeweb data.

    When Atalian last came to the bond market in April 2018, it referred to the matter as a risk factor, stating that an investigation into its relationship with a subcontractor had led to the identification of deficiencies in its internal controls, which could expose it or its shareholder to liability.

    The risk was reiterated in its Q3 results in November, when the company announced Julien was scheduled to appear before the authorities.

    "In our view, downside from the probe is largely reputational for now, particularly for the shareholder," analysts at Lucror Analytics said in a note.

    The analysts said they would become more concerned if Atalian itself were subject to a formal investigation.

    Benjamin Sabahi, head of credit search at Spread Research, said he expects little impact on Atalian, as the group has taken the right measures to deal with the investigation so far, conducting an internal investigation into the invoices and cooperating with the authorities.

    But the potential of a weakening of the group's relationship with Julien raises questions about future financial support for the highly levered company, according to Sabahi.

    Atalian's bonds have already been in trouble since last year, as leverage crept up thanks to its acquisition of British peer Servest and weaker-than-expected earnings. S&P downgraded the company one notch to B in November, while Moody's has its B2 rating on a negative outlook.

    The company said in December it could bring another shareholder into its capital structure, according to analysts, with support from the main shareholder.

    "Management recently somewhat dashed investors' hopes of a rights issue and we believe that this has to be connected to the current investigation concerning its controlling shareholder," Sabahi said.

    The other option is for it to sell its stake in Getronics, an information and communications technologies company, according to analysts.

    Yoruk Bahceli can be joined : yoruk.bahceli@thomsonreuters.com : +44 20 7542 7571

    Back to list

    (BN) Here’s What to Watch in European High-Yield Bonds This Week (January 2019)


    Here’s What to Watch in European High-Yield Bonds This Week
    2019-01-21 11:36:42.861 GMT


    By Marianna Aragao
    (Bloomberg) -- Investors are turning to Europe’s high-yield secondary market as primary activity is struggling to gain traction this month.

    The Markit iTraxx Crossover index extended tightening into a fourth week on Monday following a sell-off in December that took spreads to the highest level in more than two years. Some adjustment is probably taking place as there’s a sense the move in spreads last month was overdone, analysts said.

    High-yield funds with an European focus saw their first inflow in fifteen weeks, according to Bank of America Merrill Lynch, although the size is relatively small.

    Bankers are assessing whether the improved tone in the secondary market is good enough for the launch of new deals. Spread Research, in a note, said the pipeline of leveraged buyouts is thin, adding that borrowers are prevented from seeking cheaper refinancing as secondary prices are still below those of October.

    While a handful of deals are being explored, it looks increasingly likely that they may be pushed to the latter part of the quarter, bankers said. In the sterling market, at least two borrowers have mandated banks for issuance but a timeline for the transactions is not clear as higher funding costs remain a sticking point.

    So far this month, only Telecom Italia has tapped the market, raising 1.25 billion euros ($1.4 billion), according to Bloomberg data. This compares to 4.2 billion euros from seven borrowers in the same period of 2018.

    Italy’s largest phone company paid a hefty premium for being the first in the market and the fact that it issued a profit warning barely days after that may cloud the picture for others. The company’s bonds declined across the board on Friday after it revealed a slowdown.

    This week, investors will be watching out for other trading updates, including from gaming group William Hill this morning and Eurotunnel operator Getlink on Tuesday. U.K. Prime Minister Theresa May’s next steps on Brexit later on Monday and the European Central Bank’s policy decision on Thursday will also be on buyers’ focus in the coming days.

    See Also: What to Watch in European Credit Markets This Week

    Modest Inflow

    High-yield funds with a European focus saw inflows of $69 million in the week to Jan. 16, the first inflow in fifteen weeks, BofAML analysts wrote in a client note on Friday, citing EFPR data.

    * Global high-yield funds and U.S. focused funds recorded outflows of $190 million and $56 million, respectively, the BofAML analysts said

    * Europe High Yield Funds were posting their 15th consecutive weekly outflow in the week ended Jan. 16, according to EPRF

    * In the U.S., corporate high-yield fund inflows more than tripled to $3.3 billion for the week ended Jan. 16, according to Lipper Fund Flows data

    --With assistance from Laura Benitez.

    To contact the reporters on this story:
    Marianna Aragao in London at mduartedeara@bloomberg.net

    To contact the editors responsible for this story:
    Sarah Husband at shusband@bloomberg.net
    V. Ramakrishnan

    Back to list

    (BFW) Adient’s Credit Reiterated Underweight at Spread Research (January 2019)


    Adient’s Credit Reiterated Underweight at Spread Research
    2019-01-18 09:57:23.587 GMT


    By Laura Benitez
    (Bloomberg) -- Adient’s underweight recommendation was reiterated as the company may not have reached a floor in light of concerns around the group’s ability to recover its margins as well as its upcoming refinancing plans, Remi Ramadou, a credit analyst at Spread Research wrote in a client note.

    * The U.S. automotive seating supplier is in talks with its banks to refinance existing secured debt to gain financial flexibility

    * The company’s EU1b 3.5% Aug. 2024 senior secured notes dropped almost 4 points after the group posted first-quarter results on Wednesday and announced its refinancing plans

    * "In our view, these new talks with bankers mean that Adient is under increasing pressure, since the net leverage ratio will probably hit a new high," said Ramadou

    * Adient recently amended its term loan’s credit agreement by increasing the maintenance net leverage ratio to 4.5x, from 3.5x previously: Spread Research

    * Spread Research expects the company’s EBITDA to be around $990m in 2019

    ** The expected decline in operating earnings would lead to an increase in reported net leverage to around 3.0x as of end- September 2019, from 2.3x the previous year, according to forecasts

    To contact the reporters on this story:
    Laura Benitez in London at lbenitez1@bloomberg.net

    To contact the editors responsible for this story:
    Sarah Husband at shusband@bloomberg.net
    V. Ramakrishnan

    Back to list

    (BN) Euro High-Yield Bounce Back in 2019 Not a Consensus Forecast (January 2019)


    Euro High-Yield Bounce Back in 2019 Not a Consensus Forecast
    2019-01-15 11:17:50.870 GMT


    By Marianna Aragao
    (Bloomberg) -- Credit strategists are split in their forecasts for returns in Europe’s high-yield bond market after the worst year for the asset class in a decade.

    A compilation of expectations from sell-side analysts shows forecasts range between minus 0.9 percent and 3 percent. This compares with a loss of 3.6 percent in 2018. In the U.S., most forecasters expect returns to rebound in 2019.

    Most of the corporates in euro high-yield bond market currently have “fairly decent credit quality”, Citigroup strategist Hans Lorenzen wrote in a note dated Jan. 2. They have been less affected by the releveraging or deterioration in covenants seen in the investment-grade and leveraged loan markets, he said.

    See also: European Junk Bonds Will Lead Recovery for Risk Assets: Barings

    But Morgan Stanley analysts, in an outlook note in November, wrote the bear market in European credit has further to run, forecasting a loss of 0.9 percent. Technical and fundamental pressures are building in 2019, with “end-of-cycle concerns prompting increased scrutiny of balance sheet quality and refinancing needs,” said the note.

    To contact the reporters on this story:
    Marianna Aragao in London at mduartedeara@bloomberg.net

    To contact the editors responsible for this story:
    Sarah Husband at shusband@bloomberg.net
    V. Ramakrishnan

    Back to list

    (BFW) Algeco Could Refi EU190m FRN Bonds in February: Spread Research (January 2019)


    Algeco Could Refi EU190m FRN Bonds in February: Spread Research
    2019-01-10 10:45:54.334 GMT


    By Laura Benitez
    (Bloomberg) -- Algeco could refinance its EU190m floating rate notes at 101 after the group receives proceeds from the sale of Target Logistics, Remi Ramadouat, a credit analyst at Spread Research wrote in a client note.

    * Algeco will receive ~EU365m from the sale in 1Q19 after the repayment of some credit lines, the note said

    * The EU190m FRN notes are trading around 99.5, which leaves a little upside in case of a refinancing at 101

    * Reiterates its “Underweight” recommendation for other bonds of the company due to the group’s high net leverage, exposure to cyclical industries and potential acquisitions funded with cash

    * The price of its fixed notes through a make-whole is too high and could discourage management from repaying these notes for now

    * “We do not rule out that Algeco may trigger its call option to redeem annually 10% of its fixed-rate secured notes at 103 starting from February 2019”

    * Algeco sold a ~EU1.4b equiv. bond in January last year to refinance all its existing debt stack, and then tapped its fixed and floating-rate 2023 notes in November for refi purposes

    * During the group’s last conference call, management reiterated its intention to IPO over the medium term

    * “In our view, we believe that such a move will not take place before all bonds become callable, i.e. February 2020, since it will be costly to redeem all bonds through the make-whole provision": Spread Research

    To contact the reporters on this story:
    Laura Benitez in London at lbenitez1@bloomberg.net

    To contact the editors responsible for this story:
    Sarah Husband at shusband@bloomberg.net
    V. Ramakrishnan

    Back to list

    [FRENCH] (Agefi) L'interview finance: « Le marché de la dette d’entreprise sera marqué par une aversion pour le risque en 2019 » (January 2019)


    08/01/2019
    By Laurent Chemineau

    Benjamin Sabahi, responsable de la recherche chez Spread Research.

    Lien vers l'interview

    « Ce qui a davantage accéléré la dégradation du marché de la dette d’entreprise, c’est le niveau des chiffres – chiffres d’affaire, Ebitda, perspectives – au deuxième trimestre 2018, et leur qualité au troisième trimestre 2018 », explique Benjamin Sabahi.

    Laurent Chemineau can be joined at https://www.agefi.fr

    Back to list

    (BFW) Boparan May Face Debt Restructuring, Spread Research Says (December 2018)


    Boparan May Face Debt Restructuring, Spread Research Says
    2018-12-13 11:04:08.59 GMT


    By Laura Benitez
    (Bloomberg) -- A debt restructuring could be looming sooner or later for Boparan, given the overly leveraged balance sheet and pension deficit, Anthony Giret, a senior credit analyst at Spread Research, wrote in a client note on Thursday.

    * New asset sales will help reduce debt but the source has partly dried up and this is not likely to be meaningful enough

    * Says concerned about deep operational issues and margin deterioration, in the context of challenging macro environment in the U.K.

    * Boparan’s liquidity profile is theoretically adequate for the next two years after it extended its RCF last quarter to March 2021 from Jan. 2019, Giret said, who holds a negative credit view on the name

    ** However, this is conditional on a successful repayment of the 2019 bonds in due time

    * Boparan also revised down its maintenance covenant on Nov.19 requiring a minimum EBITDA level to GBP75m from GBP100m -- like for like LTM EBITDA stands at GBP100m

    * The company’s planned use of disposal proceeds to repay 2019 bonds has upset 2021 bondholders this year who want all bonds repaid pro rata, and may resort to legal action

    ** Nov. 20: Boparan Sets Repayment Schedule For GBP250m Bonds Due in July

    * In spite of the positive impact on leverage from recent asset sales, pro-forma net leverage increased by 1.3x y/y to a very high 6.8x at the end of 1Q, or an even higher 9.1x on an adjusted basis (mostly due to the substantial pension deficit - GBP268m)

    * Boparan said last month it was working with advisers Paul Hastings and Rothschild to review existing lending facilities

    * Read More:
    * Boparan Reviews Credit Facilities With Advisers as Bonds Decline
    * U.K.’s Chicken King Testing Creditor Patience as Maturities Loom

    To contact the reporters on this story:
    Laura Benitez in London at lbenitez1@bloomberg.net

    To contact the editors responsible for this story:
    Sarah Husband at shusband@bloomberg.net
    V. Ramakrishnan

    Back to list

    Press Release : Spread Research and EthiFinance take the high ground! (December 2018)


    Press Release : Spread Research and EthiFinance take the high ground!
    2018-12-05


    Lyon, Paris, December 5th 2018 - Spread Research and EthiFinance are pleased to announce their sponsorship of the French gliding championships. Gliding is a sport that demands a combination of human intelligence and an appreciation of natural elements. It appeals to human virtues and develops knowledge of and a huge respect for the environment. Spread Research and EthiFinance have decided to support the growth of this sport given its reflection of the values evident in the integration of financial and extra financial analysis for the rating of companies.

    « In addition, we are proud to have sponsored a young pilot full of promise. Xavier Michalon has already collected numerous titles such as first place at the 2018 PACA Regional, fifth place at the 43rd International of Issoudun, and 10th place at the 2018 French Junior Championships. Xavier is currently preparing for the Southern African Championships. We wish him every success », comments Julien Rérolle, president of Spread Research.

    About Spread Research :

    Established in 2004, Spread Research is an independent credit research provider and a credit rating agency. Since its tie-up in February 2017 with EthiFinance, the leading French provider of ESG analysis and manager of the Gaia index ®, the group also provides non-financial ratings and advice in order to assist investors and companies in the management of risks and opportunities related to sustainable development. Spread Research has been registered as a credit rating agency with the European Securities and Markets Authority (ESMA) since July 2013; it is registered as an ECAI (External Credit Assessment Institution) with the European Banking Authority (EBA) and with the European Insurance and Occupational Pensions Authority (EIOPA). Spread Research is a signatory of the PRI and co-founder of PREF-X, the FinTech service for the private bond market.
    To learn more: www.spreadresearch.com

    Contacts Investisseurs et Médias :

    Emmanuel Dovergne / Keima – Tél. : +33 1 56 43 44 63 / emmanuel.dovergne@keima.fr
    Julien Rérolle / Spread Research – Tél : +33 4 78 95 34 04 / julien.rerolle@spreadresearch.com

    Back to list

    (BN) Casino Debt Swaps Rise to Record as French Protests Add Pressure (December 2018)


    Casino Debt Swaps Rise to Record as French Protests Add Pressure
    2018-12-11 09:30:27.345 GMT


    By Katie Linsell
    (Bloomberg) -- The cost of insuring debt of supermarket chain Casino Guichard-Perrachon SA rose to a record after weeks of civil unrest in France.
    Credit-default swaps protecting Casino’s bonds for five years rose nine basis points to 619 basis points on Monday, signaling a 41 percent probability of default within that period, according to data from CMA. That’s the highest closing price since CMA began tracking the data in 2009, and the contracts were little changed on Tuesday.
    The Yellow Vest or Gilets Jaunes protests, named for the high-visibility jackets worn by demonstrators, are adding to investor concerns about Casino’s ability to support its indebted parent Rallye SA. French stores have lost about 1 billion euros ($1.1 billion) in revenue since the beginning of the demonstrations last month, according to the French retail federation.

    “Casino has definitely been impacted by the Gilets Jaunes, like other retailers,” said Christine Kam, an analyst at brokerage firm Octo Finances in Paris. “It also still has the extra problem of Rallye’s leverage which weighs on sentiment.”
    Casino remains focused on executing its deleveraging plan and reducing its net debt in France by 1 billion euros this year, while continuing to invest in its operations, a spokesman for the retailer said in response to questions about the move.
    The protests, started with a grass-roots movement against fuel tax hikes, led the government to postpone planned legislation that would have forced retailers to increase prices.
    That will be negative for Casino and rival Carrefour SA, according to analysts at Kepler Cheuvreux, who have a hold recommendation on both companies.
    Credit-default swaps on Carrefour rose 8.5 basis points on Monday to 116 basis points, the highest since 2013, CMA data show. Contracts on another retailer, Auchan, rose nine basis points on Monday to a record 234 basis points, CMA data show.
    Both were little changed on Tuesday.

    Officials at Carrefour and Auchan declined to comment on the moves. A wider gauge of high-yield risk sentiment rose to the highest level since July 2016 on Monday. The Markit iTraxx Europe Crossover Index fell seven basis points on Tuesday to 349.5 basis points, according to CMA.

    “Longer-term concerns are still there due to continued high leverage and weak cash generation,” Anthony Giret, an analyst at Spread Research in Lyon, said of Casino. “In a bearish market for risky assets such as the one we’ve had since October, Casino and Rallye are likely to underperform.”

    To contact the reporter on this story:
    Katie Linsell in London at klinsell@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net Abigail Moses

    Back to list

    [FRENCH] (Agefi) Atalian entend accélérer son désendettement en ouvrant son capital


    Par Yves-Marc Le Réour

    Contrôlé à 95% par la famille Julien, le groupe de services externalisés songe également à céder sa participation dans Getronics.

    Confronté à une érosion de ses marges et aux effets temporairement dilutifs de certaines acquisitions, Atalian est désormais plus prudent sur son désendettement. Le groupe de services externalisés aux entreprises affichait au 30 septembre dernier une dette nette de 1,33 milliard d’euros, correspondant à 6,6 fois son excédent brut d’exploitation (Ebitda) hors impact de la norme IFRS 16 sur les contrats de location, contre 5,8 fois à fin juin 2018 et 5,7 fois en données pro-forma fin 2017.
    Cette dégradation provient essentiellement de la prise de contrôle du britannique Servest, d’un cash-flow libre négatif et du versement d’un dividende exceptionnellement élevé. «La renégociation d’importants contrats en France a pesé sur les marges du groupe», relève Benjamin Sabahi, responsable de la recherche crédit chez Spread Research. Alors qu’il visait auparavant un levier financier de 4,5 fois dans les deux prochaines années, le groupe familial anticipe désormais un ratio compris entre 5 et 5,5 fois d’ici 3 à 4 ans en s’appuyant sur sa génération de cash-flow. Mais ce levier pourrait être ramené aux alentours de 4,5 fois grâce à l’entrée de partenaires stratégiques à son capital et à la monétisation de sa participation de 28,3% dans Getronics Services au Royaume-Uni, valorisée environ 100 millions d’euros dans ses comptes. Cette cession permettrait à elle seule de réduire de 0,5 fois son ratio d’endettement net.
    La famille Julien, qui détient 95% du capital, a déjà donné son accord à l’entrée d’investisseurs potentiels. A plus court terme, le groupe continuera à optimiser son besoin en fond de roulement et il souligne que les dividendes distribués retomberont dès l’an prochain à leur rythme de croisière d’environ 5 millions d’euros, contre 29 millions pour l’exercice en cours.
    Si les résultats du quatrième trimestre 2018 devraient demeurer mitigés, «le rattrapage attendu concernant la rentabilité des nouveaux contrats et les synergies de coût découlant de l’intégration de Servest feront sentir leur plein effet en 2019», souligne Benjamin Sabahi.
    La liquidité d’Atalian a en outre augmenté sur le trimestre écoulé, en atteignant 219 millions d’euros contre 198 millions au deuxième trimestre, alors que le groupe n’a aucune échéance de dette avant 2024. «La communication financière et la transparence sont nettement améliorées», jugent de leur côté les analystes crédit d’Octo Finances, en ajoutant que les obligations ont une rémunération attrayante comprise entre 7,5% et 8%.
    Yves-Marc Le Réour can be joined at https://www.agefi.fr

    Back to list

    Riskiest Junk Bonds Make Surprise Appearance in New Issue Market (November 2018)


    Riskiest Junk Bonds Make Surprise Appearance in New Issue Market
    By Laura Benitez

    (Bloomberg) -- Investor appetite for risky new deals is about to be tested even as Europe’s high-yield market is smarting from one of the biggest selloffs since 2016. Stada Arzneimittel AG and Cognita Schools Ltd are this week marketing bonds rated CCC to help finance their respective buyouts. The low-rated deals will be the first real test of demand for triple C paper since Akzo Nobel Specialty Chemicals sold 485 million euros ($547 million) of Caa1 notes in September.
    "A combination of seasonally declining liquidity, a poor technical backdrop, and increasing fundamental concerns are making access to primary markets challenging for lower quality credits," said Fraser Lundie, co-head of credit at Hermes Fund Managers Ltd in London, which manages 36 billion pounds ($46 billion) of assets. “There’s a lot of pain for lower quality credit, particularly those in the triple C range.”
    In the wake of the recent sell off, which has seen yields of European sub-investment-grade debt climb to their highest level for more than two years, and with year-end rapidly approaching, investors are positioned cautiously to preserve returns or minimize losses. But borrowers with a need to fund buyouts may not be able to wait for the optimal spot to issue debt. And that’s the case for both these deals.
    Cognita’s proposed 255.3 million-euro offering will support its acquisition by Jacobs Holding AG. Stada’s planned 250 million-euro sale will help pay out minority shareholders in the German drugmaker, which include activist hedge fund Elliott Management Corp.
    Stada’s Debt Sale for Delisting Set to Swell Leverage Ratio

    Risk Off

    Triple C issuance by non-financial corporates in Europe has shrunk to 2.1 billion euros-equivalent so far this year, compared with 5.7 billion euros in 2017, according to data compiled by Bloomberg. And most of this year’s triple C-rated supply has emanated from sponsor backed deals for buyouts where leverage multiples have typically been higher.
    The significant repricing the market has undergone in recent weeks means pricing expectations among investors for new issues are likely to have increased.
    Remi Ramadou, a credit analyst at Spread Research said in a note published on Thursday that he does not recommend buying Stada’s new unsecured bonds below 7.5 percent, which represents a premium of 50 basis points over the existing unsecured notes. Given that secured notes are currently trading at a yield- to-worst of about 4.4 percent for a net secured leverage of 5.1 times, bonds paying about 7.5 percent would offer a fair premium of 300 basis points for one turn of leverage, in spite of the uncertainties amid the deleveraging prospects, Ramadou said. Both Cognita and Stada are selling bonds as part of bigger financing packages that include leveraged loans. Those loans haven’t experienced a smooth ride among investors.
    Playing in their favor could be that they are sponsor- backed credits rather than corporate deals, where many of the recent blow ups have occurred. Even though leverage may be higher, investors have taken comfort in the perceived due diligence process conducted by private equity firms during leveraged buyouts.

    To contact the reporter on this story:
    Laura Benitez in London at lbenitez1@bloomberg.net
    To contact the editors responsible for this story:
    Sarah Husband at shusband@bloomberg.net
    Charles Daly, Tom Freke

    Back to list

    (Refinitiv) European HY sees second largest outflow – Spread Research


    27 November 2018 By Yoruk Bahceli

    The European high-yield market saw outflows surge to €1.4bn last week, the second largest level recorded by Spread Research data.
    The credit research firm, which has tracked the data since 2010, said the scale of outflow was on par with that recorded during February’s correction.

    Short-term high-yield funds lost €234m, bringing losses year-to-date to €3bn, while long-term funds saw €1.1bn exit, one of the largest outflows ever for that segment. This brings year-to-date outflows to €6.6bn for long-term funds.
    Spread Research said some long-term funds are becoming forced sellers in order to meet redemptions, even with huge discounts on prices.
    ETFs were not saved either, seeing outflows of €77m.

    With last week’s losses, overall European high-yield funds have lost €9bn year-to-date, compared to €3.9bn in 2017.

    Yoruk Bahceli can be joined : Yoruk.Bahceli@refinitiv.com

    Back to list

    [FRENCH] (Agefi) Les signatures fragiles face à des investisseurs moins complaisants


    Les signatures fragiles face à des investisseurs moins complaisants
    par Florent Le Quintrec

    Les échecs d’émissions se multiplient ces dernières semaines, après une année marquée par des secousses macro et microéconomiques.


    Le marché obligataire européen a connu un nombre inhabituel d’opérations abandonnées ou reportées ces dernières semaines. Plusieurs signatures non investment grade ont renoncé à placer leur papier, évoquant des conditions de marché défavorables. Fin septembre, My Money Bank avait reporté une émission de covered bonds de 500 millions d’euros, qu’il vient de réussir à placer ; début octobre, Ingenico a dû remettre à plus tard le placement de 300 millions de titres hybrides. Puis Volksbank et Van Lanschot ont retiré leur emprunt subordonné AT 1 (additional tier one), de respectivement 150 millions et 75 à 100 millions d’euros. RCI Bank aurait également abandonné l’idée d’émettre une obligation en livres à cinq ans. En high yield, Bilfinger a renoncé à émettre 250 millions, devenant le neuvième émetteur à abandonner ou reporter une opération sur ce segment, même si Dometic, qui avait suspendu son émission en juin, a finalement émis 300 millions en septembre.
    Le contexte n’y est pas étranger : remontée des taux longs, guerre commerciale lancée par Donald Trump, Brexit à l’issue toujours incertaine, turbulences sur les marchés émergents et, plus récemment, déboires budgétaires de l’Italie ont refroidi les marchés. « La volatilité accrue a rendu les investisseurs plus nerveux. La construction des livres d’ordres semblant ne pas pouvoir se passer comme prévu pour certains émetteurs, ceux-ci ont préféré se retirer du marché avant l’opération », explique Emmanuel Schatz, head of corporate credit & ABS chez Ostrum Asset Management.
    En high yield, ce phénomène a atteint des sommets cette année, mais pas uniquement pour des raisons macroéconomiques. « Environ six milliards d’euros d’opérations ont été annulés depuis le début de l’année, pour un total d’émissions de 62 milliards toutes devises confondues, ce qui doit constituer un record, estime Benjamin Sabahi, responsable de la recherche crédit chez Spread Research. En plus des problèmes macro¬économiques, il y a eu des chocs de gouvernance, comme chez Samsonite, et des mauvais résultats qui ont fait chuter certaines obligations de 40 à 50 points, à l’image de CMC Di Ravenna. Toujours dans la construction, le groupe Astaldi a aussi fait défaut, poussant les investisseurs à davantage de prudence, notamment dans le ‘retail’ et la construction. »

    Ecartement des spreads

    Autre élément d’inquiétude, la multiplication des profit warning consécutifs à une émission : l’allemand Tele Columbus et le français Fives ont revu à la baisse leurs per¬spectives quelques semaines seulement après avoir placé leurs titres.
    En termes d’offre, les candidats à une émission doivent désormais consentir certains efforts. « Les émissions qui ont été retirées du marché sont soit trop ‘covenant-¬lite’, soit trop gourmandes sur le ‘spread’. Il est compliqué pour un investisseur de sortir une ligne de son portefeuille pour faire de la place à ce type de papier », analyse Philippe Lespinard, chief investment officer et co-head of fixed income chez Schroders.
    La documentation de ces emprunts, qui suscite l’ire de certains gérants tant elle est devenue permissive ces dernières années, évolue peu selon les observateurs, hormis sur le sujet sensible des restricted payments (remontée de dividendes, rachat d’actions…), qui peut faire l’objet de discussions avec les investisseurs. C’est donc sur le rendement que les émetteurs doivent désormais se montrer plus souples. Pour preuve, le spread moyen sur le marché du high yield a progressé de 95 points de base (pb) depuis janvier, à 440 pb par rapport au taux sans risque.
    De quoi anticiper un ralentissement du marché l’année prochaine. « Tous les émetteurs, y compris ceux ayant des business models cycliques ou plus fragiles, se sont beaucoup financés sur les marchés depuis trois ans et ont moins de besoins aujourd’hui. Les émetteurs ‘high yield’ rembourseront de moins en moins souvent en payant le ‘call’ [option de remboursement anticipé, NDLR], donc la tendance à la baisse des volumes sur le marché primaire devrait se poursuivre en 2019 », estime Benjamin Sabahi.

    Florent Le Quintrec can be joined at https://www.agefi.fr

    Back to list

    (Refinitiv) Spread Research to launch governance risk score


    Spread Research to launch governance risk score
    By Yoruk Bahceli

    Spread Research is launching methodology to score governance risk as part of its credit analysis as high-yield investors’ focus on governance issues grows.
    The French ratings agency, which also provides independent credit research focused on sub-investment-grade companies to the buyside, announced on Thursday that it is launching the methodology in partnership with its environmental, social and governance division, EthiFinance.
    The methodology will assign credits a governance score to be included in Spread’s credit view. The agency expects to be able to identify a potential spread impact from weak governance. The score will be based on 15 criteria of governance, which are grouped into five categories, Pierre-Yves Le Stradic, head of research at EthiFinance, told IFR.
    The categories address shareholder behaviour, board considerations, leadership and auditors, as well as a fifth segment that looks at various other governance issues, including related party transactions.
    Le Stradic said that much of current ESG research focuses on long-term concerns from the perspective of shareholders, while high-yield investors are concerned with whether or not the company will pay them back in a shorter timeframe.
    He added that the 15 criteria were chosen in line with likelihood of occurence in a shorter rather than longer period of time and based on issues that pertain to creditors rather than shareholders.
    European high-yield investors are also increasingly focusing on ESG issues and integrating these concerns into their credit analysis. That many high-yield issuers are non-listed and restrict access to their investor relations sites has been a particular challenge for those investors.
    “The challenge that was upon us was to drive consistent information in a universe where most issuers are non-listed. We’ve been focusing on criteria where the availability of the information is quite high,” Le Stradic said.
    Spread Research is launching its methodology at a time when the high-yield market is seeing more and more single-name sharp moves as bonds see big price drops on bad news thanks to tight coupons that do not leave room for error.
    “It’s important to bear in mind that, in an expensive high-yield and credit market, asset managers simply can’t afford to have losses between 10 points for a marginal problem up to 80-90 in very stressed scenarios,” Spread’s head of research Benjamin Sabahi told IFR.
    “This is an asymmetric market we are talking about, so if you have a weak score in terms of governance, you have to be punished by that as the spread impact can be sizeable.”
    Sabahi added that investors need to be clear in differentiating between transparency and governance risks.
    “Investors have a tendency to mix up problems. You could have a company that is very good in terms of transparency … but that company could still default on its debt,” he said, citing the infamous example of Abengoa.
    Spread will integrate the new framework into its coverage by the first half of 2019 and hopes to include social and environmental factors into its analysis thereafter.

    Yoruk Bahceli can be joined : Yoruk.Bahceli@refinitiv.com

    Back to list

    (BFW) Spread Research to Weigh Company Governance in Credit Analysis (October 2018)


    Spread Research to Weigh Company Governance in Credit Analysis
    2018-10-25 13:01:10.369 GMT


    By Katie Linsell
    (Bloomberg) -- Spread Research, an independent high-yield research firm based in Lyon, France, is adding a new methodology focused on borrowers’ corporate governance to enhance its analysis, according to a statement.
    * Approach to consider 15 criteria relating to governance, including:
     ** shareholders
     ** board considerations
     ** executive leadership
    * Co. will publish a governance score for each borrower out of 5 and will disclose how score should impact the bond spread
    * Co. plans to rate ~200 companies in first half of next year
    * Methodology developed with EthiFinance, division of Spread Research focused on environmental, social and governance standards
     ** Co. plans to add environmental and social factors to analysis in due course


    To contact the reporter on this story:
    Katie Linsell in London at klinsell@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net Abigail Moses

    Back to list

    (BN) OHL Shares, Bonds Fall as First Half Losses Highlight Challenges (September 2018)


    OHL Shares, Bonds Fall as First Half Losses Highlight Challenges
    2018-09-27 10:54:57.808 GMT


    By Macarena Munoz and Katie Linsell
    * (Bloomberg) -- Shares and bonds of Obrascon Huarte Lain SA fell on doubts about the future direction of the Spanish builder’s business following the sale of its concessions unit.
    OHL’s 270 million euros ($316 million) of notes due March 2023 slumped 10 cents on the euro to 85.5 cents, the biggest decline in about two years, according to data compiled by Bloomberg. The shares fell as much as 23 percent to 1.98 euros, their lowest level since August 2016.
    * OHL completed the sale of its concessions unit in April to Australia’s IFM Investors, valuing the unit at 2.78 billion euros. Investors who were encouraged when the sale was announced in October as a move to reduce OHL’s debt load are still looking for more signs of improvement in the construction business that remains.
    * “After the divestment, OHL is more of a pure construction company and the results of the remaining business so far haven’t been great,” said Marc Pierron, a senior credit analyst at Spread Research in Lyon. “They have a decent amount of work to do to turn around the construction business.”
    * OHL last night reported six-month losses of 843.6 million euros compared to a 32.1 million-euro loss a year earlier. Most of the losses, 550.5 million euros, were due to an accounting adjustment as a result of the sale of its OHL Concesiones unit, the company said.
    * “Even after all efforts done to clean the financial structure and restructure the company, the situation is still not on course,” Angel Perez, an analyst at Renta 4 Banco in Madrid, wrote in a note to clients.

    To contact the reporters on this story:
    Macarena Munoz in Madrid at mmunoz39@bloomberg.net; Katie Linsell in London at klinsell@bloomberg.net To contact the editors responsible for this story:
    Beth Mellor at bmellor@bloomberg.net
    Charles Penty, Andrew Blackman

    Back to list

    (BFW) "Huge" Interest Savings for AkzoNobel Chemicals: Spread Research (September 2018)


    "Huge" Interest Savings for AkzoNobel Chemicals: Spread Research
    2018-09-21 08:48:50.766 GMT


    By Ruth McGavin
    (Bloomberg) -- AkzoNobel Specialty Chemicals has locked in "huge" cash interest savings on its LBO financing by cutting pricing versus what was initially offered during syndication, and by increasing the amount of loans by 85% vs 79%, according to a report by Spread Research.
    * Cash interest expenses will be ~EU340m, down 19% vs the EU420m it would have paid based on opening price talk across its loans and bonds: report
    * This marginally improves projections for net adjusted leverage, report says, to 5.2x total at end of 2019 from 5.3x initially expected, 4.6x at end of 2020 vs 4.8x, and 4x at end of 2021 vs 4.4x
    * Free cash flow seen at EU425m in 2020 and EU480m in 2021
    * Spread Research notes a 100bps premium vs CCC+/B- rated bonds in more stable markets, and says the bond should perform well up to FY19, "before the re-leverage risk could materialize amid covenant-lite documentation"
    * NOTE: Final terms for loans here and bonds here: Bloomberg


    To contact the reporter on this story:
    Ruth McGavin in London at rmcgavin1@bloomberg.net To contact the editors responsible for this story:
    Tom Freke at tfreke@bloomberg.net
    V. Ramakrishnan

    Back to list

    (BN) Hedge Funds Cut Shorts in Casino Bonds After Rallye Lifeline (September 2018)


    Hedge Funds Cut Shorts in Casino Bonds After Rallye Lifeline
    2018-09-19 15:03:23.263 GMT


    By Katie Linsell
    * (Bloomberg) -- Short sellers in French supermarket chain Casino Guichard-Perrachon SA were burned this week when its indebted parent got a last-minute loan lifeline.
    * Hedge funds have been scrambling to cut short positions on both companies’ bonds since Rallye SA announced on Sunday that it had signed a 500 million-euro ($585 million) credit facility.
    Shorts on Casino fell by 63 million euros from a record 373 million euros last week, while those on Rallye fell by 23 million euros to 56 million euros, according to IHS Markit Ltd.
    * The new loan, which doesn’t require a pledge of Casino shares as collateral, will help Rallye pay about 970 million euros of bonds due by the end of March. Casino’s plunging share price has threatened to limit Rallye’s access to existing credit lines because most require the stock as collateral.
    * “It’s a big step for Rallye, which is already regaining the market’s confidence,” said Benjamin Sabahi, head of credit research at Spread Research in Lyon, France. “The loan must have caught a lot of investors by surprise. The bonds have recovered a great deal.”
    * Casino’s most-shorted bond, its 744 million euros of notes due in June 2022, rose 2 cents on the euro this week to 92 cents, the highest in more than a month, according to data compiled by Bloomberg. Rallye’s 300 million euros of bonds due in March jumped 16 cents on the euro to 98 cents, the data show.
    * Credit-default swaps protecting against losses on Casino’s bonds for five years fell 99 basis points this week to 414 basis points, while contracts insuring Rallye’s bonds dropped by the equivalent of more than 1,300 basis points to about 1,510 basis points, according to data from CMA.

      Loan Terms

    * “It will be necessary to ask Rallye to unveil the terms of the credit facility and if drawing on it is subject to any particular criteria,” Alain Lopez, an analyst at brokerage firm Octo Finances, wrote in a note to clients on Monday. “We find it hard to believe that Rallye’s banks have given it a gift.”
    * The loan has no pledge over Casino’s shares, floor on Casino’s share price or other link to Casino, Franck Hattab, Rallye’s chief executive officer, said in response to questions about the facility. Hattab declined to comment further on the terms of the loan.
    * “The group is pleased that investors are once again interested in the fundamentals of the company and in the success of its recent initiatives,” a Rallye spokesman said separately, referencing a recently-announced partnership between Casino’s Monoprix chain and Amazon.com Inc.
    * A spokesman for Casino said the performance of the company is in line with guidance. “We are looking for this to be reflected in further improvement in the share price,” he said.

      Share Surge

    * Casino’s stock has surged 43 percent from a 22-year low on Sept. 3. It was trading at 37.9 euros a share at 4:50 p.m. in Paris on Wednesday, the highest level since May, data compiled by Bloomberg show.
    * Still, bearish investors are holding onto their downward bets, with short interest little changed from a record 18.9 percent of Casino’s outstanding shares on Friday, according to IHS Markit’s data.
    * Casino has been in a battle with short sellers including Carson Block, whose Muddy Waters fund disclosed a bet against its stock in late 2015. He’s taken aim at the retailer’s complicated financing amid brutal competition in France and sent the shares tumbling with a tweet last month that said Casino hadn’t published accounts as required for one of its subsidiaries.

    --With assistance from Thomas Beardsworth, Lisa Pham and Neil Denslow.

    To contact the reporter on this story:
    Katie Linsell in London at klinsell@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net Abigail Moses

    Back to list

    (BN) Casino Share Price Nears Danger Zone for Rallye’s Debt Due 2019 (September 2018)


    Casino Share Price Nears Danger Zone for Rallye’s Debt Due 2019
    2018-09-03 14:54:48.112 GMT


    By Katie Linsell
    * (Bloomberg) -- The latest plunge in French grocer Casino Guichard-Perrachon SA is pushing its indebted parent Rallye SA into a precarious position, according to analysts.
    * Rallye must pledge Casino shares as collateral to draw down most of its credit lines and, with the stock price below 27 euros ($31), it will run out of collateral by the time it needs to refinance debt next year, said Anthony Giret, an analyst at Spread Research in Lyon, France. Bank of America Corp. analyst Tanya Kovacheva calculates a lower threshold of 26.4 euros, according to a note she wrote to clients last month.
    * Casino’s shares were trading near a 22-year low at 26.5 euros at 4:50 p.m. in Paris.
    * “If Rallye pledged all its Casino shares to draw on credit lines today, they would barely cover the 2019 debt maturities at the current share price,” said Giret. “There is hardly any more room. It’s really on the edge.”
    * Most of Rallye’s facilities require it to pledge Casino stock worth 130 percent of the amount drawn. The current price means that Rallye won’t have enough Casino shares left next year if it uses credit lines to repay this year’s debt maturities, the analysts said. Casino’s Chief Executive Officer Jean-Charles Naouri controls the grocer through Rallye.
    * “The speculation over the Casino share price and its relation to Rallye’s ability to meet its bond commitments is being driven by a few investors,” said Franck Hattab, Rallye’s chief executive officer. “We can reassure the investors who support Rallye and Casino, and who are confident that the share price will be built back, that the share price threshold being guessed at is a long way from reality. We are well aware of our debit commitments and we are working with all our partners to achieve long-term growth for the business.”
    * Rallye has 300 million euros of bonds coming due next month, when it also must repay exchangeable bondholders 370 million euros. It has 300 million euros of bonds maturing in March and 50 million euros of loans due next year, according to the company’s first-half earnings. The company also had 302 million euros of commercial paper outstanding in July, according to the latest data from the French central bank.
    * Out of 1.7 billion euros of undrawn credit lines, 1.4 billion euros require share pledges as collateral, according to Rallye’s results as of June 30.

    To contact the reporter on this story:
    Katie Linsell in London at klinsell@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net Abigail Moses

    Back to list

    (BN) Lowell Considers Funding Alternatives to Junk-Bond Market (August 2018)


    Lowell Considers Funding Alternatives to Junk-Bond Market
    2018-08-30 09:23:25.884 GMT


    By Thomas Beardsworth
    * (Bloomberg) -- Europe’s most leveraged debt collector is considering alternative funding options amid concerns it may be locked out of the high-yield bond market.
    * Lowell is discussing the possibility of issuing debt secured by its portfolios of defaulted consumer loans, Chief Financial Officer Colin Storrar said in an interview on Wednesday after reporting second-quarter earnings. The Leeds, England-based company has sufficient cash and available credit from its revolving loan -- as well as other financing options -- and management doesn’t “anticipate coming back to the high-yield market anytime soon,” he said.
    * While some bondholders are opposed to Lowell issuing asset- backed securities because it would subordinate their claims, they appreciate the need for the company to find cheap financing to support growth, Storrar said. Morgan Stanley said in June that Lowell had “very little possibility” of selling junk bonds after investors pushed back on an offering by rival Intrum AB.
    * Lowell, which owes banks and investors about $3 billion, last issued bonds in January to finance its acquisition of Intrum’s Nordic assets. It pays 3.5 percent over benchmark rates for a bank-lending facility it more than doubled in May, about half the indicative cost of raising money in the bond market after a selloff in its publicly-traded debt this year.
    * Asset-backed debt “comes with a lower coupon and free cash flow,” Storrar said. “But I’m mindful of the hesitation of bondholders, not least with regard to the security position. I took time this morning to understand and respond to those concerns,” he said, referring to an investor call on which he said there were more than 100 analysts.
    * Lowell’s outstanding bonds, which yield about 7 percent, would still be fair value if the company raised 200 million pounds of asset-backed securities, said Benjamin Sabahi, head of credit research at Spread Research, who recommends buying the notes.
    * Storrar declined to comment on whether Lowell will exercise an option in November to redeem 230 million pounds ($299 million) of 11 percent junior bonds, its most expensive debt, at 108.25 percent of face value. Investors shouldn’t assume that Lowell will use future financing to buy back bonds rather than grow its business, he said.
    * Separately, competitor Arrow Global Group Plc’s chief executive officer said in an interview on Thursday that the company doesn’t need to raise money in bond markets until 2024.

    To contact the reporter on this story:
    Thomas Beardsworth in London at tbeardsworth@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net Abigail Moses, Shannon D. Harrington

    Back to list

    (BN) BNP Paribas Is Said to Offer Bet on Timing of Rallye Default (August 2018)


    BNP Paribas Is Said to Offer Bet on Timing of Rallye Default
    2018-08-29 12:05:26.182 GMT


    By Katie Linsell and Thomas Beardsworth
    * (Bloomberg) -- BNP Paribas SA traders started pitching derivatives trades that allow investors to lock in prices now on future bets that Rallye SA could default when it needs to refinance debt, according to people familiar with the matter.
    * The bank is circulating prices for so-called forward credit-default swaps on the indebted parent of French supermarket chain Casino Guichard-Perrachon SA, said the people, who asked not to be identified because the information is private. The trades insure Rallye’s bonds starting at specific dates in the future and may appeal to investors who believe the company has enough cash to avoid an imminent default.
    * Rallye is under pressure to repay at least 970 million euros ($1.1 billion) of debt by the end of March and a further 230 million euros of bank loans in 2020. Investors are concerned it may be unable to cover debt maturities because most of its credit lines require it to pledge Casino shares, which fell to a 22-year low this month.
    * “Given Rallye’s current liquidity, debt maturity profile and Casino share price, there should be no problem in 2019 but the question is: will it be sustainable the following year?” said Anthony Giret, a credit analyst at Spread Research in Lyon, France. “The problem could happen in 2020 when Rallye has bank loans to refinance, so this kind of instrument makes sense.”

      Credit Lines

    * A spokesman for BNP Paribas in London declined to comment on the trades. Rallye’s Chief Executive Officer Franck Hattab said he’s “confident” in the company’s ability to refinance or extend bank loans and credit lines.
    * “We cannot comment on bank products, but Rallye has a strong liquidity position with more than 1.7 billion euros of confirmed and undrawn credit lines,” he said in response to questions about forward trades. “The average maturity of these lines is 3.6 years and, to maintain this liquidity, Rallye pays commitment fees on all the lines so that the 1.7 billion euros is fully committed.”
    * Hattab said in June that the company will cover debt maturities until at least the end of 2019 using existing credit lines and issuing new bonds. He said he didn’t foresee any difficulty accessing credit lines that require pledging Casino shares to draw down. Out of the 1.7 billion euros of undrawn credit lines, 1.4 billion euros require pledges as collateral, according to Rallye’s first half results.
    * Rallye’s ability to refinance its debts was brought into focus in June, after Barclays Plc analysts said Casino had “significantly negative” free cash flow and its parent may struggle to meet maturities. Goldman Sachs Group Inc. also released research at the time advising clients to sell Rallye bonds and buy five-year credit-default swaps.
    * Swaps on Rallye now imply a 27 percent chance of default within one year and a 76 percent probability within five years, CMA data show.
    Forwards might appeal to investors who only want insurance for a specific period of time. They’re usually structured by offsetting two swaps of different maturities, meaning protection kicks in after the shorter leg expires, according to Ulf Erlandsson, a portfolio manager at startup hedge fund Glacier Impact in Stockholm, which hasn’t done the trade on Rallye.
    * “The view might be that the company has cash lasting until a certain date, so default protection up until that date is not that valuable,” he said. “At some point -- for example a bond maturity/redemption -- you might have a liquidity crunch and a lot of people want to own protection for that point in time.” Swaps also cost less the further in the future they start.
    * The upfront payment for one-year protection starting in two years drops to 10 percent, or 1 million euros on 10 million euros of debt, from 13.5 percent beginning now, according to BNP Paribas prices sent last week.
    * “It saves you some costs if you have the conviction that you only need to be protected from year two onwards,” said Ulrich Von Altenstadt, the Munich-based managing director at XAIA Investment GmbH, which also hasn’t bought forwards on Rallye.

    To contact the reporters on this story:
    Katie Linsell in London at klinsell@bloomberg.net; Thomas Beardsworth in London at tbeardsworth@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net Abigail Moses

    Back to list

    (BN) Altice Europe Markets Bonds After Raising $2.5 Billion in Loans (July 2018)


    Altice Europe Markets Bonds After Raising $2.5 Billion in Loans
    2018-07-16 13:30:44.999 GMT


    By Katie Linsell
    (Bloomberg) -- Altice Europe NV is seeking to raise about $2 billion in the bond market after obtaining $2.5 billion in new eight-year loans in a plan to get billionaire Patrick Drahi a step closer to tackling a debt load that has spooked investors.
    The Amsterdam-based company plans to sell $1.25 billion of bonds denominated in dollars and 650 million euros ($761 million) of bonds in the single currency, according to a person familiar with the matter, who asked not to be identified because the information is private. As the latest in a string of moves to shore up its finances, the loan refinancing strengthens Altice Europe’s liquidity profile, it said in a statement Monday before news of the bond sale had emerged.
    Investors dumped Altice stock last year over concerns that it couldn’t maintain its debt, which stood at about 32 billion euros at the end of the first quarter. The company has put the brakes on acquisitions, spun off its U.S. unit and is pursuing asset sales. It said last month it will raise 2.5 billion euros in cash by selling stakes in transmission towers in France and Portugal.
    “Altice Europe is back for the first time in the bond market since October and will be testing investor confidence since the big selloff of last year,” said Jean-Rene Meduri, an analyst at Spread Research in Lyon. “The term loan new issue that went smoothly last week paved the way for further refinancing.”
    Altice Europe shares fell 0.4 percent to 3.15 euros at 3:29 p.m. in Amsterdam.

      Maturity Wall

    Altice Europe plans to use the new loan proceeds to pay back a portion of its French unit’s $4 billion in senior secured notes due May 2022, according to the statement. The proceeds from the bond sales will also be used to redeem a portion of notes due in 2022, people familiar with the matter said on Monday.
    The company is facing a wall of maturities, with more than 8 billion euros of debt due in that year alone, its latest earnings presentation shows. Between now and then it has more than 2 billion euros of debt due for repayment, the filing shows.
    The phone and cable company initially sought to raise $2 billion from investors in the new loans, according to people familiar with the matter last week. After increasing the margin on the loans it was able to boost the size to $2.5 billion, said the people, who asked not to be identified because the matter is private.

    To contact the reporter on this story:
    Katie Linsell in London at klinsell@bloomberg.net To contact the editors responsible for this story:
    Shelley Robinson at ssmith118@bloomberg.net; Rebecca Penty at rpenty@bloomberg.net Kim Robert McLaughlin

    Back to list
    © 2018 Spread Research