Tuesday 26 June 2018 by FIIG Research Company updates

Company updates – Axssesstoday, Frontier, JEM Southbank, Qantas, Virgin, Windstream

Axsesstoday and StockCo are now available to retail investors, Frontier CFO resigns, JEM Southbank expected to call 2020 notes soon, Moody’s affirms Qantas and Virgin ratings, and Windstream debt exchange offer

Axsesstoday now available to retail clients

Axsesstoday Group has issued AUD30m fixed rate 7.50% notes due 2021 and AUD50m floating rate notes due 2021. These notes are now available to retail investors with Research assigning an Outperform recommendation in its coverage. The credit outlook is Positive:

  • Axsesstoday AUD 7.50% June 2020 callable bond available at YTW – 6.36%pa.View Factsheet
  • Axsesstoday AUD BBSW+6.50% October 2020 callable bond available at YTW – 3.49%pa. View Factsheet

Axsesstoday is an ASX listed company. It provides commercial equipment and vehicle finance to small and medium businesses via a distribution channel of retailers and referrers.

The full research report is available to all investors.

Frontier CFO calls it quits

On 21 June 2018, Frontier Communications Corporation (Frontier) announced that R. Perley McBride, executive vice president and chief financial officer, had resigned from the company for personal reasons. Mr McBride will remain in his position until 31 August to help transition responsibilities. Frontier has stated that search for a replacement is underway.

Following the resignation, Frontier shares were down 6.7%, matching its lowest point since February, according to this article. In its 4Q17 earnings report, the company officially suspended the 1Q18 $0.60 dividend to help reduce leverage – see its debt maturity profile as of 31 December 2017 below:

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Source: company reports

Frontier plans to use the USD250m in savings from paying dividends including the convertible debt to continue paying down debt. However, the dividend savings will only pay down 1% of the outstanding debt. During 4Q17, the telecom purchased USD110m worth of unsecured debt. Total debt is still huge at USD17.6bn and the telecom only has USD362m in cash on hand.

The following Frontier bonds are available to trade:

  • Frontier USD 8.5% April 2020 bond; rated ‘B-‘ at YTW – 6.90%pa
  • Frontier USD 9.25% July 2021 bond; rated ‘B-‘ at YTW – 9.80%pa
  • Frontier USD 6.25% September 2021 bond; rated ‘B-‘ at YTW – 9.98%pa
  • Frontier USD 7.125% January 2023 bond; rated ‘B-‘ at YTW – 14.24%pa
  • Frontier USD 11.0% June 2025 callable bond; rated ‘B-‘ at YTW – 14.89%pa
  • Frontier USD 8.5% April 2026 bond; rated ‘B+’ at YTW 8.38%pa

JEM Southbank to refinance its 2020 notes

We have provided a research update on JEM Southbank's intention to refinance its 2020 notes as soon as possible. The process to enable this financing transaction requires a number of approvals including from the Queensland state, the concession grantor for the project.

The company has indicated that it intends to finalise the refinancing and call the 2020 notes on or about 27 July 2018. Although no irrevocable notice of redemption has been issued yet, we believe there is a very high likelihood that the 2020 notes will be called on or about that date.

The notes can be called and repaid at any time after 28 June 2018. The amount due will be the face value of the notes and accrued interest since 29 June 2018. Given the lack of stated notice period in the documentation, we believe noteholders might receive little to no notice of the actual call.

Read the full update available on the FIIG website to all investors.  Please call your relationship manager for more information.

Moody’s update on passenger airlines including Qantas and Virgin

On 4 April 2018, Moody’s provided an in depth sector update, Market specific considerations continue to dominate under a revised methodology, citing that credit quality remains unchanged for passenger airlines. The affirmed ratings are:

  • Qantas Airways Ltd unchanged, outlook stable – please call your relationship manager for details if you are a wholesale client
  • Virgin Australia Holdings Ltd at ‘B2’, outlook negative
  • Air New Zealand Ltd at ‘Baa2’, outlook stable

These unchanged credit ratings reflect Moody’s belief that country-and-company-specific factors, which are hard to reflect fully in a global scorecard, continue to support the above three carriers’ credit profiles.

The following Qantas bonds are available to all investors:

  • Qantas AUD 7.50% June 2021 bond available at YTW of 3.06%pa
  • Qantas AUD 7.75% May 2022 bond available at YTW of 3.32%pa
  • Qantas AUD 4.40% October 2023 bond available at YTW of 3.51%pa

The longer dated 2026 maturity is only available to wholesale investors at YTW of 3.86%pa.

The following Virgin bonds all rated ‘B-‘ are available to trade for wholesale investors only :

  • Virgin AUD 8.25% May 2023 bond available at YTW – 7.50%pa
  • Virgin USD 8.5% November 2019 bond available at YTW – 6.42%pa
  • Virgin USD 7.875% October 2021 bond available at YTW – 7.18%pa

Windstream Services debt exchange offer

Windstream Services LLC (Windstream) is offering to exchange various bond securities including its 7.75% senior unsecured notes due 15 October 2020 (ISIN: US97381WAN48) in order to extend the company’s maturity profile.

The company is offering holders the option to exchange the notes for new 9.375% senior second lien notes due 2024. We recommend noteholders do not take the offer and consider selling their position now due to the recent positive price action and noting Windstream’s weak credit profile and recent 2020 notes downgrade to CCC.

All holders of the effected notes have been contacted directly.

The following Windstream bonds are available to trade:

  • Windstream USD 7.75% October 2020 bond; rated ‘CCC’ available to wholesale investors only at YTW – 12.00%pa
  • Windstream USD 8.625% October 2025 bond available to all investors at YTW of 9.15%pa

Please note yields are accurate as of 26 June 2018, subject to change. S&P ratings are shown.


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