Tuesday 21 August 2018 by FIIG Research Company updates

Company updates - Barminco, CBA, JC Penney, Praeco, QBE, Stockco and updated Newcrest factsheet

This week, proposed Barminco/Ausdrill merger and Barminco FY18 results reported, CBA issues world’s first bond by blockchain, Colombus Gold to buy majority stake in IAMGOLD’s Maripa Project, JC Penney quarterly results and downgrade, Praeco upgraded by Moody’s, QBE reports positive momentum in annual results, StockCo operating update and updated Newcrest factsheet

Barminco/Ausdrill proposed merger

On 15 August 2018, mining services company Barminco Holdings Pty Ltd (Barminco) announced that it had entered into an agreement to merge with Ausdrill Ltd, creating the second largest mining services company in Australia. Under the agreement, Barminco shareholders will own about 22% of the merged entity.

We view the proposed merger as positive for Barminco noteholders, providing greater revenue diversity and lower leverage. Further, Barminco noteholders will have the benefit of holding debt security of a listed company, with continuous disclosure requirements as well as easier access to equity capital.

The merger is subject to a number of condition precedents and has an anticipated completion on 31 October 2018.

Read the full report here.

Barminco releases overall strong FY18 results

On 14 August 2018, Barminco also release its FY18 results showing strong earnings and solid liquidity.

Read the full report here.

We have the following Barminco bond available to wholesale investors only:

  • Barminco USD 6.625% May 2022 at a YTW of 6.18%pa rated B by S&P and B1 by Moody’s. View Factsheet.

CBA arranges world’s first bond issuance using blockchain

On 10 August 2018, the International Bank for Reconstruction and Development stated it had mandated the Commonwealth Bank of Australia (CBA) as the exclusive arranger of the world's first bond issuance solely using blockchain technology.

The use of blockchain for bond issuance can offer efficiency benefits for both issuers and arrangers by simplifying settlement processes. The technology can be used for both registry and payment systems, consolidating payments by investors and title transfers by issuers into single, instant transactions. Prior to this transaction, CBA experimented blockchain based bond issuance with government entity Queensland Treasury Corporation. In January 2017, the bank arranged issuance of cryptobond for Queensland, by utilizing blockchain technology. It was a trial transaction carrying no debt obligation, with Queensland acting as both the issuer and investor to test the process.

Fintech innovations such as these will help traditional banks reduce operating costs and also mitigate the risk of disruption by new fintech firms.

JC Penney – quarterly results reported and downgrade by S&P

On 16 August, JC Penney reported their FY18 results.

The results showed that total sales decreased 7.5% to USD2.76bn compared to USD2.99bn in 2Q17. The decline was primarily the result of the 141 stores that closed in 2017. Comparable sales increased 0.3% for the second quarter. The company revised down its full year earnings per share guidance to USD (1.00)-(0.80) from USD (0.07)-0.13 as a result of its intention to liquidate some stock as part of its effort to reduce inventories and net leverage increased to 5.2x at 2Q18 from 5.1x at 1Q18.

To read the results click here.

On 17 August 2018, S&P and Moody’s both downgraded the credit ratings of JC Penney after it reported weak operating results. Key points: 

  • The downgrade means the 8.625% 15 March 2025 Notes re-rated at CCC+ no longer meet our credit screening criteria and will therefore be removed from the FIIG DirectBond filter list meaning clients will no longer able to purchase the notes maturing in 2025. Rather, clients will be able to sell on instruction.

  • The rating action does not affect Clients’ ability to trade the 5.875% Notes due in 2023.

To read the full report click here.

Praeco upgraded by Moody’s 

On 20 August 2018, Moody’s upgraded two series of Praeco senior secured debt and changed the outlook of the ratings from stable to positive.

We also touch on the structure of the 7.13% 2022 notes and likely refinancing of those notes in 2020 in our full report here.

QBE reports positive momentum in annual results

On 16 August 2018, QBE Insurance Group Limited reported its 1H18 results.

Overall QBE reported a good outcome, with the group reporting positive momentum in both volume and rates across its main operating regions, Australia and New Zealand, Europe, and US. Operating profitability was mixed, although the underlying strength of the underwriting business which includes claims, commissions and expenses, reported a meaningful improvement.

To read the full report click here.

StockCo Holdings – operating update

On 20 August 2018, we released an update on StockCo Holdings Ltd.

Broadly, we expect the financial performance of StockCo for the year ended June 30 2018, to fall in line with our expectations, as we believe the short term effects of the drought in New South Wales are more likely to be felt through lower demand for financing and a slowdown in revenue growth.

To read the full wholesale and retail reports click here.

New Factsheets

  • Newcrest Finance Pty Ltd USD 4.20% October 2022 senior unsecured bond rated BBB- by S& P and Baa3 by Moody’s. View Factsheet.

Please note yields are accurate as of 22 August 2018, subject to change. S&P ratings are shown.