Tuesday 12 June 2018 by FIIG Research Company updates

Company updates – Adani, Genworth US, JCP, Kindred, Petrobras, StockCo, Research updates its recommendations

This week, Adani completes senior secured debt issue, Genworth US deal expected to close, Kindred calls its 2023 notes, JC Penney downgraded by Moody’s, Petrobras’ early tender results, and StockCo seeks consent to refinance debt. Research provides a recommendation update

Adani completes issuance of senior secured debt

Adani Abbot Point Terminal (AAPT) recently completed the issuance of AUD329m of senior secured debt maturing in 2025. With this raising and the issuance of the USD500m bonds due 2022 issued in December 2017, AAPT has completed the refinancing of all debt due in 2018. The company’s next maturity is now about two years away, with AUD100m due in May 2020, following later that year by the maturity of AUD170m in November 2020.

The following Adani bonds are available to trade:

  • Adani AUD 7.10% May 2020 bond available at YTW – 4.55%pa
  • Adani USD 4.45% December 2022 bond available at YTW – 6.00%pa

Genworth US gets CFIUS approval, deal expected to close

The Committee on Foreign Investments in the United States (CFIUS) recently announced that it would not object to Genworth Financial’s (GNW) proposed acquisition by China Oceanwide Holdings Group (China Oceanwide). The CFIUS is a US panel that reviews foreign investments for potential national security threats.

CFIUS only opined on potential national security concerns. Following the announcement, the price on Genworth bonds rallied, with the 2021 bonds moving to about $103, after trading below par in recent weeks. The acquisition remains conditional on a number of other approvals, and could be caught in the current trade tensions between the US and China given the material restrictions for US companies to invest in the Chinese financial sector.

This announcement has no immediate impact on Genworth Financial Mortgage Insurance, the Australian subsidiary of Genworth Financial, given the restrictions imposed by APRA largely insulate the Australian business from its parent.

On 7 June 2018, GNW also reported its US Mortgage Insurance Review for 1Q18.

Key points:

  • GNW’s Mortgage Insurance (MI) unit reported net operating income of USD111m for the quarter, up USD74m sequentially and USD73m in the prior year period. This is due to a combination of low level claims of activity, growth in insurance in force, and the benefits associated with corporate tax reform
  • GNW continues to increase exposure to mortgages with an original LTV in excess of 95%
  • Management speculates that it could start sending modest dividend payments from US MI to the HoldCo by the end of 2018
  • The delinquency rate fell 2.75%, the lowest in several years, despite an uptick in the fourth quarter to 3.12% due to hurricane activity
  • GNW remains the fifth largest mortgage insurance company as measured by new insurance written in 1Q18 at USD9bn, down from USD10.2bn sequentially, but up from USD7.6bn a year ago

The Genworth USD 7.625% September 2021 bond rated ‘B’ is available at yield to worst of 6.09%pa., for wholesale clients only.

Kindred mandatory early redemption event

On 8 June 2018, existing noteholders of the Kindred USD 8.75% callable notes due 15 January 2023, should have received an email regarding Kindred Healthcare Inc.’s (Kindred) early redemption event.

The company intends to redeem all of the callable notes on issue with an aggregate call price of 106.563% of the outstanding principal amount of each note being redeemed.  The early redemption will take place on or soon after 2 July 2018.

If you have any questions please speak with your FIIG representative or call one of our fixed income experts on 1800 01 01 81.

JCP corporate rating downgraded by Moody’s

On 6 June 2018, Moody’s Investors Service (Moody’s) downgraded the corporate family rating of J.C. Penney Company, Inc. (JCP) to ‘B2’ from ‘B1’. Moody's also affirmed JCP’s senior secured ABL revolving credit facility at ‘Ba2’, and its senior secured term loan and senior secured notes were affirmed ‘Ba3’.

JCP’s secured second lien notes were downgraded to ‘B3’ and its senior unsecured notes were downgraded to ‘Caa1’. The rating outlook is stable. The company's SGL-1 rating has also been affirmed.

Moody’s states, "The downgrade reflects the continued weakness in operating performance coupled with the uncertainty in its strategic plan given the recent departure of its CEO. Although the company has opportunities for further improvements in merchandising, sourcing and operations as well as very good liquidity, significant headwinds remain. JCP must close the operating performance gap with its department store peers, as well as manage weak mall traffic and continued market share gains by off-price and online retailers."

The following JCP bonds are available to wholesale investors:

  • JCP USD 5.875% July 2023 bond rated ‘B+’ at YTW – 7.13%pa
  • JCP USD 8.625% March 2025 rated ‘B-‘ at YTW – 11.48%pa

Petrobras announced its early tender results

On 6 June 2018, Petrobras announced its early tender results for the USD4bn tender offer announced on 21 May. The offer affected:

  • Holders of the USD4.46bn and EUR3.46bn principal amount of outstanding notes (see Tender Group 1)
  • Holders of the USD7.97bn principal amount of outstanding notes (see Tender Group 2)

This link provides tables summarising the early tender results for Tender Group 1 and 2.

The following Petrobras bonds all rated ‘BB-‘ are available to wholesale investors:

  • Petrobras GBP 6.25% December 2026 bond at YTW – 5.43%pa
  • Petrobras USD 7.375% January 2027 bond at YTW – 7.29%pa
  • Petrobras USD USLIBOR+2.14% January 2019 bond at YTW – 2.64%pa

StockCo seeks consent to refinance senior debt

On 5 June 2018, StockCo Holdings Pty Ltd (StockCo) announced it is seeking consent, by way of a special resolution, from holders of its 8.75% notes due 6 October 2022. This is to amend certain terms of the notes as set out in the Notice of Meeting of Noteholders and Explanatory Memorandum dated 4 June 2018.

StockCo is seeking to refinance some of its senior funding facilities with a securitisation trust structure. A securitisation facility has been deemed more appropriate, as it scales with the business and will reduce funding costs. For more information, please see the full research update on the FIIG website.

The StockCo AUD 8.75% October 2021 bond is available at yield to worst of 6.18%pa for wholesale clients only.

Updated Factsheets

The following Factsheets have been updated:

  • DPNGP Finance Corporation AUD 6% October 2019 1st lien notes Factsheet. Retail version
  • DPNGP Finance Corporation AUD 6% October 2019 1st lien notes Factsheet. Wholesale version
  • JCP 5.875 USD July 2023 senior secured notes Factsheet
  • JCP 8.625% USD March 2025 2nd lien notes Factsheet

FIIG Research recommendation update

Following the publication of our Credit Compendium on 15 January 2018, we are providing this summary of new and changed recommendations over the past five months, as well as the list of all our current recommendations as of the date of this update.

Please see the full update available on the FIIG website to wholesale clients.