fabriziof
Forumer storico
Buona segnalazione
Obbligazioni societarie HIGH YIELD e oltre, verso frontiere inesplorate - Vol. 1
- Creatore Discussione TRADING_IDEAS
- Data di Inizio
- Stato
Buona segnalazione
Leggevo oggi un report di moodys sul settore era negativo, domani lo posto.
iguanito
Forumer storico
Sono mesi e mesi che il settore immobiliare in Messico è in crisi (vorrei sapere cosa non lo è in quel posto a parte il traffico di stupefacenti) e molte società sono fallite. Questa aveva tenuto botta. Aveva....
Infrastructure
Mexico’s Budget Cuts Are Credit Negative for Infrastructure Companies
On 30 January, Mexico’s (A3 stable) Minister of Finance Luis Videgaray announced MXP18.1 billion of
infrastructure spending cuts in the federal government’s 2015 budget, a credit negative for Mexico’s
infrastructure sector. Reduced government spending on infrastructure diminishes business prospects for the
sector and raises questions about the government’s ability to implement its infrastructure plan.
The spending cuts reduce the business prospects of local companies such as OHL Mexico (unrated), the
local subsidiary of Spain’s Obrascon Huarte Lain S.A. (B1 negative), Promotora y Operadora de
Infraestructura, S.A.B. de C.V. (unrated), Empresas ICA, S.A.B. de C.V. (B2 stable), and international
companies that have shown interest in Mexican infrastructure projects, including Alstom (Baa3 positive) and
Siemens Aktiengesellschaft (A1 stable).
The fiscal responsibility measures also include cuts to the budgets of state-owned energy companies
Petroleos Mexicanos (A3/Aaa.mx stable) of MXP62 billion and Comisión Federal de Electricidad
(Baa1/Aaa.mx stable) of MXP10 billion. As shown in Exhibit 1, the two state-owned companies account for
58% of the total budget reduction. Details are yet to come, but the cuts will likely involve the cancellation
or postponement of key energy infrastructure projects. The infrastructure spending cuts are part of the
government’s Fiscal Responsibility Law to reduce this year’s public spending by MXP124.3 billion, or 0.7% of
Mexico’s GDP, to address the plunge in oil prices.
The transport sector will be the most affected since MXP11.7 billion (65%) of the government infrastructure
spending cuts are in this area. The measures include the indefinite suspension a high-speed passenger train
from Mexico City to Queretaro, which was at an early stage of the bidding process, and the cancellation of
the planned Transpeninsular passenger train from Mérida to Cancun. Thus, the government’s budget cut of
MXP11.7 billion translates into at least a reduction of MXN61.5 billion of infrastructure investments, which is
the total estimated cost of these projects, including private financing. As shown in Exhibit 2, these projects
constitute about 8% of the MXP814 billion investment in transportation for 2014-18. The total planned
investment in transportation was an ambitious 37% more than the 2007-12 plan.
In addition, the government will reevaluate the financial structure of the new Mexico City Airport, which has
a total estimated cost of MXP169 billion, of which 58% was to come from the federal government.
Moody's upgrades Dell's CFR to Ba2; outlook stable
Global Credit Research - 04 Feb 2015
Over $11.5 billion of rated debt affected
New York, February 04, 2015 -- Moody's Investors Service ("Moody's") upgraded Dell Inc.'s ("Dell") Corporate Family ("CFR") and Probability of Default ("PDR") ratings to Ba2 and Ba2-PD from Ba3 and Ba3-PD, respectively. In addition, Moody's upgraded Dell International LLC's (a debt issuing subsidiary of Dell Inc.) senior secured term loans and first lien notes to Ba1 from Ba2 and Dell Inc.'s unsecured notes to Ba3 from B1. The rating outlook is stable.
RATINGS RATIONALE
The upgrades reflect Moody's expectation Dell will remain committed to sizable debt reduction with gross reported debt falling to below $13.5 billion by the end of fiscal year ending January 2016 (fiscal year 2016) from nearly $18 billion as of the closing date of the LBO in late October 2013. Moody's expects adjusted gross leverage to improve to the mid 3x level by the end of fiscal year 2016 (or about mid 2x including the adjustment for the finance operations), supported by over $2 billion of free cash flow and mid single digit EBITDA growth over the next year.
This pace of de-leveraging is faster than Moody's had anticipated at the time of the LBO, as Dell has engaged in minimal M&A activity while benefiting from the rebound in the higher margin corporate PC market in the U.S. Moody's expects Dell's revenue growth rates from its PC business to temper to the low single digit range over the next year as the benefit from Windows operating system upgrades has largely occurred. But Dell will likely continue to gain market share through aggressive pricing, scale benefits, and good sales execution both in the U.S. and emerging countries. PC profit expansion may be limited by the higher growth of consumer markets, which will likely see growth from replacement-driven sales after the slowdown in sales of tablet devices.
Moody's expects the Enterprise Solutions Group (ESG) to grow by mid single digits over the next year, driven by a server refresh cycle as Microsoft ends support for its Windows Server 2003 operating system in July 2015. However, Moody's does not anticipate the same one-for-one replacement cycle in the server market as with PCs when Microsoft terminated support for Windows XP in April 2014. The server industry is affected by data-center consolidation, a movement to cloud computing, and an ongoing shift to "virtual" machines. Nonetheless, Moody's still expects Dell to see a boost in the server business, which accounts for the majority of revenue in ESG, with replacement units commanding higher selling prices given the increasing complexity of computing.
The Ba2 rating also incorporates the considerable key man risk associated with Michael Dell's majority stake and the long term potential exit of Silver Lake, which may lead to another levering event. Potential event risk could also arise if Dell is unable to achieve sustained revenue growth, especially in light of the possible waning hardware refresh cycle in fiscal year 2017. Moody's believes that Dell could ramp up its M&A activity to propel the top line or expand its technology footprint to remain competitive against technology peers with more diversified product, software and service offerings. Uncertainty over whether the strategic shift to higher margin enterprise solutions can be achieved organically remains a rating constraint. Since the LBO, virtually all of free cash flow has been used to pay down debt along with some cash on hand, which may not be a sustainable financial policy in the future.
The stable outlook is based on Moody's expectation that Dell will preserve its solid liquidity profile by growing its Enterprise solutions business in the mid single digits and its PC business in the low single digits through fiscal year 2016. Moody's anticipates that free cash flow will be used primarily for debt payments with some modest M&A activity.
Moody's could upgrade Dell's ratings if the company were to show greater revenue and profit contribution from the non-hardware businesses, sustained annual revenue growth of at least mid single digits, high single digit adjusted operating margins, and gross debt to EBITDA below 3 times. In addition, the risk of a significant levering event would have to be considered remote. The rating could be lowered with sustained erosion of market share, reported adjusted operating profit margins lower than 3%, or revenue declines from a contraction of the PC and server markets. Also, any indications of a change in Dell's financial policies, such that gross debt to EBITDA is expected to exceed 4 times beyond fiscal year 2016 could also pressure the rating down.
Ratings upgraded:
Dell Inc.
Corporate Family Rating to Ba2 from Ba3
Probability of Default Rating to Ba2-PD from Ba3-PD
Senior unsecured rating to Ba3 (LGD5) from B1 (LGD5)
Dell International LLC
Term Loans to Ba1 (LGD2) from Ba2 (LGD2)
First lien notes to Ba1 (LGD2) from Ba2 (LGD2)
The rating outlook is stable.
The principal methodology used in these ratings was Global Technology Hardware published in October 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
Global Credit Research - 04 Feb 2015
Over $11.5 billion of rated debt affected
New York, February 04, 2015 -- Moody's Investors Service ("Moody's") upgraded Dell Inc.'s ("Dell") Corporate Family ("CFR") and Probability of Default ("PDR") ratings to Ba2 and Ba2-PD from Ba3 and Ba3-PD, respectively. In addition, Moody's upgraded Dell International LLC's (a debt issuing subsidiary of Dell Inc.) senior secured term loans and first lien notes to Ba1 from Ba2 and Dell Inc.'s unsecured notes to Ba3 from B1. The rating outlook is stable.
RATINGS RATIONALE
The upgrades reflect Moody's expectation Dell will remain committed to sizable debt reduction with gross reported debt falling to below $13.5 billion by the end of fiscal year ending January 2016 (fiscal year 2016) from nearly $18 billion as of the closing date of the LBO in late October 2013. Moody's expects adjusted gross leverage to improve to the mid 3x level by the end of fiscal year 2016 (or about mid 2x including the adjustment for the finance operations), supported by over $2 billion of free cash flow and mid single digit EBITDA growth over the next year.
This pace of de-leveraging is faster than Moody's had anticipated at the time of the LBO, as Dell has engaged in minimal M&A activity while benefiting from the rebound in the higher margin corporate PC market in the U.S. Moody's expects Dell's revenue growth rates from its PC business to temper to the low single digit range over the next year as the benefit from Windows operating system upgrades has largely occurred. But Dell will likely continue to gain market share through aggressive pricing, scale benefits, and good sales execution both in the U.S. and emerging countries. PC profit expansion may be limited by the higher growth of consumer markets, which will likely see growth from replacement-driven sales after the slowdown in sales of tablet devices.
Moody's expects the Enterprise Solutions Group (ESG) to grow by mid single digits over the next year, driven by a server refresh cycle as Microsoft ends support for its Windows Server 2003 operating system in July 2015. However, Moody's does not anticipate the same one-for-one replacement cycle in the server market as with PCs when Microsoft terminated support for Windows XP in April 2014. The server industry is affected by data-center consolidation, a movement to cloud computing, and an ongoing shift to "virtual" machines. Nonetheless, Moody's still expects Dell to see a boost in the server business, which accounts for the majority of revenue in ESG, with replacement units commanding higher selling prices given the increasing complexity of computing.
The Ba2 rating also incorporates the considerable key man risk associated with Michael Dell's majority stake and the long term potential exit of Silver Lake, which may lead to another levering event. Potential event risk could also arise if Dell is unable to achieve sustained revenue growth, especially in light of the possible waning hardware refresh cycle in fiscal year 2017. Moody's believes that Dell could ramp up its M&A activity to propel the top line or expand its technology footprint to remain competitive against technology peers with more diversified product, software and service offerings. Uncertainty over whether the strategic shift to higher margin enterprise solutions can be achieved organically remains a rating constraint. Since the LBO, virtually all of free cash flow has been used to pay down debt along with some cash on hand, which may not be a sustainable financial policy in the future.
The stable outlook is based on Moody's expectation that Dell will preserve its solid liquidity profile by growing its Enterprise solutions business in the mid single digits and its PC business in the low single digits through fiscal year 2016. Moody's anticipates that free cash flow will be used primarily for debt payments with some modest M&A activity.
Moody's could upgrade Dell's ratings if the company were to show greater revenue and profit contribution from the non-hardware businesses, sustained annual revenue growth of at least mid single digits, high single digit adjusted operating margins, and gross debt to EBITDA below 3 times. In addition, the risk of a significant levering event would have to be considered remote. The rating could be lowered with sustained erosion of market share, reported adjusted operating profit margins lower than 3%, or revenue declines from a contraction of the PC and server markets. Also, any indications of a change in Dell's financial policies, such that gross debt to EBITDA is expected to exceed 4 times beyond fiscal year 2016 could also pressure the rating down.
Ratings upgraded:
Dell Inc.
Corporate Family Rating to Ba2 from Ba3
Probability of Default Rating to Ba2-PD from Ba3-PD
Senior unsecured rating to Ba3 (LGD5) from B1 (LGD5)
Dell International LLC
Term Loans to Ba1 (LGD2) from Ba2 (LGD2)
First lien notes to Ba1 (LGD2) from Ba2 (LGD2)
The rating outlook is stable.
The principal methodology used in these ratings was Global Technology Hardware published in October 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
azetaelle
investitore(s)qualificato
sempre su Bormioli Rocco
riassumendo...non è in un momento bellissimo ma se la situazione migliora un po' varrebbe la pena entrare
Rating Action: Moody's changes outlook on Bormioli's ratings to negative from stable
Global Credit Research - 18 Dec 2014
London, 18 December 2014 -- Moody's Investors Service has today affirmed Bormioli Rocco Holdings S.A.'s B2 corporate family rating (CFR), B2-PD probability of default rating (PDR) and B3 senior notes rating, and revised the rating outlook to negative from stable.
"The negative outlook reflects the decline in Bormioli's profitability in 2014 and the increased uncertainty regarding Bormioli's performance outlook for 2015," says Tobias Wagner, Assistant Vice President -- Analyst at Moody's. "Bormioli is unlikely to recover the EBITDA lost earlier in the year in the last months of 2014."
RATINGS RATIONALE
The outlook change to negative from stable reflects the decline in company-reported EBITDA margins from continuing operations to 10% in the nine months to September 2014 after 12% in the prior year period. The decline was driven, amongst other, by significant refurbishment activities undertaken in the first three quarters of 2014, including planned rebuild works that resulted in some ongoing efficiency issues, for example at one of the three furnaces (F3) at the company's main pharma glass packaging site Bergantino, and some unexpected maintenance needs at one of the furnaces at the Trezzano Food & Beverage site. In Moody's view, it appears unlikely that Bormioli will be able to recover lost EBITDA in the remainder of 2014 and, as a result, Moody's expects Debt/EBITDA (on a Moody's-adjusted basis) to rise towards 5.9x and, including the additional non-recourse factoring undertaken in 2014, to around 6.8x for 2014. While factoring improved the working capital position of Bormioli in 2014, free cash flow excluding these one-off benefits continues to remain negative given meaningful interest payments and ongoing high capex levels.
The change to a negative outlook also reflects the increasing uncertainty regarding Bormioli's operating performance outlook for 2015. Although Moody's understands that Bormioli has identified the causes of operational issues at the F3 Bergantino furnace and the San Vito site, which houses the other two remaining pharma glass furnaces, and has taken steps to mitigate those issues, they are not fully resolved at this stage. Moody's also expects Bormioli to continue to visibly invest in 2015 along its scheduled maintenance plan, which likely continues to weigh on free cash flow generation. Any additional unexpected refurbishment needs would negatively impact the rating and, unless EBITDA levels significantly improve in 2015, Bormioli's ratings are at risk of being downgraded.
Also adding to the uncertainty regarding Bormioli's outlook in 2015 is the company's ongoing analysis to better define its medium-term industrial strategy and the changes to the management structure with the resignation of the Executive Chairman in November 2014. Further changes included the addition of two new General Managers for its two largest divisions Pharmaceutical Glass & Plastics and Tableware. Those divisions continue to face different challenges and business dynamics. In addition, the CEO of Bormioli's private equity owner Vision Capital assumed the role of non-Executive Vice-Chairman.
Nevertheless, the B2 corporate family rating (CFR) continues to reflect Bormioli's established market position and long-standing customer relationships, particularly in its pharmaceuticals packaging operations, with meaningful switching costs for customers as well as some barriers to entry from products that require customer validation processes and regulatory approval. The Tableware division has also maintained a relatively stable performance at company-reported EBITDA level, despite some exposure to lower growth countries in Europe. However, the B2 rating also incorporates the persistent challenge to contain and offset cost inflation. It also reflects the high interest cost and significant investments that result in continued negative free cash flow generation, which positions the company weakly at the current rating.
LIQUIDITY PROFILE
As of September 2014, Bormioli had €24 million of cash and €55 million of undrawn liquidity available under a number of mainly 1-2 year committed local financing arrangements. Bormioli also substantially increased the use of non-recourse factoring to €48 million factored receivables (or €39.5 million of cash advanced) as of September 2014 under its GE Capital (€50 million) and Ifitalia (€20 million) factoring lines. Moody's notes that, while Bormioli extended a range of local facilities in 2014, additional facilities that are due for annual renewal are the undrawn, committed €5 million Cariparma facility and €14.5 million asset-based Banco Popolare facility which expire in May and June 2015 respectively. In addition, the undrawn €15 million BNP facility carries a financial maintenance leverage covenant at 4x, which may be challenging to comply with for Bormioli by June 2015. Moody's would expect Bormioli to address these upcoming maturities well ahead of time, as it has done in the past, and extend liquidity arrangements as and when needed on a timely basis.
STRUCTURAL CONSIDERATIONS
Bormioli's PDR of B2-PD is aligned with the CFR, reflecting an assumed recovery rate of 50%. The B3 rating and loss given default assessment (LGD) of LGD5 assigned to the group's EUR 250 million senior secured notes issued by Bormioli Rocco Holdings S.A. is one notch below the CFR and reflects the structural subordination with regards to local facilities and operating liabilities at operating subsidiary levels (ie Bormioli Rocco S.p.A).
WHAT COULD CHANGE THE RATING - UP
While Moody's does not expect any ratings upgrade in the next 12 months, positive rating pressure could gradually build if Bormioli achieves visible and sustainable EBITDA growth with EBITDA margins improving towards the mid teens, displays visible deleveraging so that debt/EBITDA (excluding factoring) falls below 4x on a sustainable basis and returns back to (at-least) neutral free cash flow generation (all as adjusted by Moody's).
WHAT COULD CHANGE THE RATING - DOWN
Bormioli's ratings are likely to be downgraded if Moody's believes that the company will be unable to significantly recover and increase EBITDA in 2015, for example from continued operational issues or an inability to pass on cost inflation. Similarly, continued negative free cash flow generation, a debt/EBITDA ratio (excluding factoring) that remains above 5.5x in 2015 or a weakening in the company's liquidity profile would likely result in a downgrade.
PRINCIPAL METHODOLOGIES
The principal methodology used in these ratings was Global Packaging Manufacturers: Metal, Glass, and Plastic Containers published in June 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
Headquartered in Fidenza, Italy, Bormioli Rocco Holdings S.A. (Bormioli) is a producer of glass and plastic packaging products used in the pharmaceutical as well as in the food & beverage industry. Bormioli is also a manufacturer of glass tableware for home and professional use, with strong brand recognition in Italy.
riassumendo...non è in un momento bellissimo ma se la situazione migliora un po' varrebbe la pena entrare
Rating Action: Moody's changes outlook on Bormioli's ratings to negative from stable
Global Credit Research - 18 Dec 2014
London, 18 December 2014 -- Moody's Investors Service has today affirmed Bormioli Rocco Holdings S.A.'s B2 corporate family rating (CFR), B2-PD probability of default rating (PDR) and B3 senior notes rating, and revised the rating outlook to negative from stable.
"The negative outlook reflects the decline in Bormioli's profitability in 2014 and the increased uncertainty regarding Bormioli's performance outlook for 2015," says Tobias Wagner, Assistant Vice President -- Analyst at Moody's. "Bormioli is unlikely to recover the EBITDA lost earlier in the year in the last months of 2014."
RATINGS RATIONALE
The outlook change to negative from stable reflects the decline in company-reported EBITDA margins from continuing operations to 10% in the nine months to September 2014 after 12% in the prior year period. The decline was driven, amongst other, by significant refurbishment activities undertaken in the first three quarters of 2014, including planned rebuild works that resulted in some ongoing efficiency issues, for example at one of the three furnaces (F3) at the company's main pharma glass packaging site Bergantino, and some unexpected maintenance needs at one of the furnaces at the Trezzano Food & Beverage site. In Moody's view, it appears unlikely that Bormioli will be able to recover lost EBITDA in the remainder of 2014 and, as a result, Moody's expects Debt/EBITDA (on a Moody's-adjusted basis) to rise towards 5.9x and, including the additional non-recourse factoring undertaken in 2014, to around 6.8x for 2014. While factoring improved the working capital position of Bormioli in 2014, free cash flow excluding these one-off benefits continues to remain negative given meaningful interest payments and ongoing high capex levels.
The change to a negative outlook also reflects the increasing uncertainty regarding Bormioli's operating performance outlook for 2015. Although Moody's understands that Bormioli has identified the causes of operational issues at the F3 Bergantino furnace and the San Vito site, which houses the other two remaining pharma glass furnaces, and has taken steps to mitigate those issues, they are not fully resolved at this stage. Moody's also expects Bormioli to continue to visibly invest in 2015 along its scheduled maintenance plan, which likely continues to weigh on free cash flow generation. Any additional unexpected refurbishment needs would negatively impact the rating and, unless EBITDA levels significantly improve in 2015, Bormioli's ratings are at risk of being downgraded.
Also adding to the uncertainty regarding Bormioli's outlook in 2015 is the company's ongoing analysis to better define its medium-term industrial strategy and the changes to the management structure with the resignation of the Executive Chairman in November 2014. Further changes included the addition of two new General Managers for its two largest divisions Pharmaceutical Glass & Plastics and Tableware. Those divisions continue to face different challenges and business dynamics. In addition, the CEO of Bormioli's private equity owner Vision Capital assumed the role of non-Executive Vice-Chairman.
Nevertheless, the B2 corporate family rating (CFR) continues to reflect Bormioli's established market position and long-standing customer relationships, particularly in its pharmaceuticals packaging operations, with meaningful switching costs for customers as well as some barriers to entry from products that require customer validation processes and regulatory approval. The Tableware division has also maintained a relatively stable performance at company-reported EBITDA level, despite some exposure to lower growth countries in Europe. However, the B2 rating also incorporates the persistent challenge to contain and offset cost inflation. It also reflects the high interest cost and significant investments that result in continued negative free cash flow generation, which positions the company weakly at the current rating.
LIQUIDITY PROFILE
As of September 2014, Bormioli had €24 million of cash and €55 million of undrawn liquidity available under a number of mainly 1-2 year committed local financing arrangements. Bormioli also substantially increased the use of non-recourse factoring to €48 million factored receivables (or €39.5 million of cash advanced) as of September 2014 under its GE Capital (€50 million) and Ifitalia (€20 million) factoring lines. Moody's notes that, while Bormioli extended a range of local facilities in 2014, additional facilities that are due for annual renewal are the undrawn, committed €5 million Cariparma facility and €14.5 million asset-based Banco Popolare facility which expire in May and June 2015 respectively. In addition, the undrawn €15 million BNP facility carries a financial maintenance leverage covenant at 4x, which may be challenging to comply with for Bormioli by June 2015. Moody's would expect Bormioli to address these upcoming maturities well ahead of time, as it has done in the past, and extend liquidity arrangements as and when needed on a timely basis.
STRUCTURAL CONSIDERATIONS
Bormioli's PDR of B2-PD is aligned with the CFR, reflecting an assumed recovery rate of 50%. The B3 rating and loss given default assessment (LGD) of LGD5 assigned to the group's EUR 250 million senior secured notes issued by Bormioli Rocco Holdings S.A. is one notch below the CFR and reflects the structural subordination with regards to local facilities and operating liabilities at operating subsidiary levels (ie Bormioli Rocco S.p.A).
WHAT COULD CHANGE THE RATING - UP
While Moody's does not expect any ratings upgrade in the next 12 months, positive rating pressure could gradually build if Bormioli achieves visible and sustainable EBITDA growth with EBITDA margins improving towards the mid teens, displays visible deleveraging so that debt/EBITDA (excluding factoring) falls below 4x on a sustainable basis and returns back to (at-least) neutral free cash flow generation (all as adjusted by Moody's).
WHAT COULD CHANGE THE RATING - DOWN
Bormioli's ratings are likely to be downgraded if Moody's believes that the company will be unable to significantly recover and increase EBITDA in 2015, for example from continued operational issues or an inability to pass on cost inflation. Similarly, continued negative free cash flow generation, a debt/EBITDA ratio (excluding factoring) that remains above 5.5x in 2015 or a weakening in the company's liquidity profile would likely result in a downgrade.
PRINCIPAL METHODOLOGIES
The principal methodology used in these ratings was Global Packaging Manufacturers: Metal, Glass, and Plastic Containers published in June 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
Headquartered in Fidenza, Italy, Bormioli Rocco Holdings S.A. (Bormioli) is a producer of glass and plastic packaging products used in the pharmaceutical as well as in the food & beverage industry. Bormioli is also a manufacturer of glass tableware for home and professional use, with strong brand recognition in Italy.
CEDOLONE
Forumer storico
thanks , questa mi mancava : ecco il motivo della sofferenza del prezzo sotto la pari ...whitesoul9
Forumer storico
Norske Skog overcomes first debt hurdle but "poker game" continues
Fri Feb 6, 2015 9:06am EST
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* Risky bond flies but exchange struggles
* CDS exposures muddy the waters
By Robert Smith
LONDON, Feb 6 (IFR) - The ease with which Norske Skog sold new bonds may have stunned many in the market this week, but the paper company is still locked in a game of brinkmanship with its bondholders.
The highly leveraged Norwegian outfit is battling structural decline in the newsprint industry, and began the year with dismal Caa2/CCC+ corporate credit ratings from Moody's and Standard & Poor's.
But the slide in the oil price has given it an unexpected boost, due to the resultant depreciation of the Norwegian krone.
Norske Skog saw this as a rare opportunity to tackle its distressed capital structure, launching a new EUR250m December 2019 senior secured bond to fund the cash portion of an exchange offer to existing bondholders.
Goldman Sachs and Citigroup were appointed as joint global coordinators.
Several investors said that they had never expected to see Norske Skog in the primary debt markets again, but selling the new paper proved easy given high-yield bond buyers' renewed confidence and appetite for risky paper.
The deal was pre-marketed extensively, with price whispers at a punchy 12% coupon with a 97 original issue discount, according to one investor.
Runaway demand allowed the company to increase the deal size to EUR290m, enabling it to sweeten terms on the exchange. The deal priced tight to the reported whispers on Monday, with an 11.75% coupon at a 97.50 OID to yield 12.462%.
It traded up massively in the secondary market, and was bid at 101.25 on Tuesday, according to a hedge fund investor.
"I don't think this is throwing good money after bad," he said.
"The company has a very high likelihood of being current on its payments. Where else can you get this kind of yield on what should be a going concern?"
SUBORDINATION THREAT
But while the new bond deal flew, the debt exchange has struggled to get off the ground.
Norske Skog announced on Thursday that it had not received the required level of support by the early exchange and consent deadline.
"There's a lot of moving parts and it's turned into a game of poker," said the first investor.
The exchange is complex but essentially aims to mop up near-term maturities and simplify the company's capital structure. Under the terms of the exchange, holders of 2015, 2016 and 2017 bonds would receive a cash consideration and roll into newly created longer-dated 2021 notes.
Holders of Norske Skog's 2033 notes, meanwhile, can roll into new shorter-dated 2023 notes with no cash consideration, if the 2016 bondholders consent to that happening.
The existing notes were issued by Norske Skogindustrier, but the exchange notes will sit higher up in the capital structure at a new entity called Norske Skog Holding AS. The new secured bonds will be senior to both of these, at Norske Skog AS.
A portfolio manager said the company was using "the threat of subordination" to coax bondholders into the exchange.
The creation of the new entity - Norske Skog Holding AS - has also sown confusion around whether there will be a succession event on the CDS. If a succession event is indeed declared, a high acceptance rate on the exchange could result in a lack of deliverables at Norske Skogindustrier for a CDS auction.
Several sources said the lack of clarity on a succession event could flush out investors running basis trades on the mismatch between cash and CDS, who would be unlikely to take part in the exchange offer.
"The company is trying to clean up the capital structure, so it doesn't want people being long or short the outstanding bonds synthetically," said the hedge fund investor.
STAND-OFF
But uncertainty over the CDS and the threat of subordination was not enough to complete the exchange by the early deadline.
Norske Skog's CEO said on Thursday that the company would consider a "comprehensive review" of its options if there is not sufficient participation by the exchange's February 19 expiration.
"The key question now is: are they going to just sweat out bondholders or will they sweeten terms again," said the first investor.
"The wording of the press release was a bit stand-offish, so there's some game theory going on here. They can't increase the cash offer much, so if they do anything, it'll be around the exchange notes."
If the exchange does not go through, the senior secured deal remains in place but gets scaled back to EUR179m. The first investor and a trader said that this provides an incentive for shorter-term bondholders to hold out.
"I believe there is sufficient liquidity to allow the company to repay the October 2015 bonds and get pretty close to being able to repay the June 2016 bonds," said the trader. "And I would definitely value temporal seniority more highly than structural seniority."
Temporal seniority refers to the nearer-term maturities of the existing bonds.
"I think the main problem is that it's very hard to pressure people into an exchange when they think they're probably going to get their money back by holding out," said the first investor. (Reporting by Robert Smith; Editing by Philip Wright and Matthew Davies.)
Fri Feb 6, 2015 9:06am EST
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RELATED TOPICS
Financials »
* Risky bond flies but exchange struggles
* CDS exposures muddy the waters
By Robert Smith
LONDON, Feb 6 (IFR) - The ease with which Norske Skog sold new bonds may have stunned many in the market this week, but the paper company is still locked in a game of brinkmanship with its bondholders.
The highly leveraged Norwegian outfit is battling structural decline in the newsprint industry, and began the year with dismal Caa2/CCC+ corporate credit ratings from Moody's and Standard & Poor's.
But the slide in the oil price has given it an unexpected boost, due to the resultant depreciation of the Norwegian krone.
Norske Skog saw this as a rare opportunity to tackle its distressed capital structure, launching a new EUR250m December 2019 senior secured bond to fund the cash portion of an exchange offer to existing bondholders.
Goldman Sachs and Citigroup were appointed as joint global coordinators.
Several investors said that they had never expected to see Norske Skog in the primary debt markets again, but selling the new paper proved easy given high-yield bond buyers' renewed confidence and appetite for risky paper.
The deal was pre-marketed extensively, with price whispers at a punchy 12% coupon with a 97 original issue discount, according to one investor.
Runaway demand allowed the company to increase the deal size to EUR290m, enabling it to sweeten terms on the exchange. The deal priced tight to the reported whispers on Monday, with an 11.75% coupon at a 97.50 OID to yield 12.462%.
It traded up massively in the secondary market, and was bid at 101.25 on Tuesday, according to a hedge fund investor.
"I don't think this is throwing good money after bad," he said.
"The company has a very high likelihood of being current on its payments. Where else can you get this kind of yield on what should be a going concern?"
SUBORDINATION THREAT
But while the new bond deal flew, the debt exchange has struggled to get off the ground.
Norske Skog announced on Thursday that it had not received the required level of support by the early exchange and consent deadline.
"There's a lot of moving parts and it's turned into a game of poker," said the first investor.
The exchange is complex but essentially aims to mop up near-term maturities and simplify the company's capital structure. Under the terms of the exchange, holders of 2015, 2016 and 2017 bonds would receive a cash consideration and roll into newly created longer-dated 2021 notes.
Holders of Norske Skog's 2033 notes, meanwhile, can roll into new shorter-dated 2023 notes with no cash consideration, if the 2016 bondholders consent to that happening.
The existing notes were issued by Norske Skogindustrier, but the exchange notes will sit higher up in the capital structure at a new entity called Norske Skog Holding AS. The new secured bonds will be senior to both of these, at Norske Skog AS.
A portfolio manager said the company was using "the threat of subordination" to coax bondholders into the exchange.
The creation of the new entity - Norske Skog Holding AS - has also sown confusion around whether there will be a succession event on the CDS. If a succession event is indeed declared, a high acceptance rate on the exchange could result in a lack of deliverables at Norske Skogindustrier for a CDS auction.
Several sources said the lack of clarity on a succession event could flush out investors running basis trades on the mismatch between cash and CDS, who would be unlikely to take part in the exchange offer.
"The company is trying to clean up the capital structure, so it doesn't want people being long or short the outstanding bonds synthetically," said the hedge fund investor.
STAND-OFF
But uncertainty over the CDS and the threat of subordination was not enough to complete the exchange by the early deadline.
Norske Skog's CEO said on Thursday that the company would consider a "comprehensive review" of its options if there is not sufficient participation by the exchange's February 19 expiration.
"The key question now is: are they going to just sweat out bondholders or will they sweeten terms again," said the first investor.
"The wording of the press release was a bit stand-offish, so there's some game theory going on here. They can't increase the cash offer much, so if they do anything, it'll be around the exchange notes."
If the exchange does not go through, the senior secured deal remains in place but gets scaled back to EUR179m. The first investor and a trader said that this provides an incentive for shorter-term bondholders to hold out.
"I believe there is sufficient liquidity to allow the company to repay the October 2015 bonds and get pretty close to being able to repay the June 2016 bonds," said the trader. "And I would definitely value temporal seniority more highly than structural seniority."
Temporal seniority refers to the nearer-term maturities of the existing bonds.
"I think the main problem is that it's very hard to pressure people into an exchange when they think they're probably going to get their money back by holding out," said the first investor. (Reporting by Robert Smith; Editing by Philip Wright and Matthew Davies.)
qquebec
Super Moderator
E' come la Fiesta: "takko ti tenta tre volte tanto". Se lo ripeti 10 volte di fila senza sbagliare, il rischio default è scongiurato
.fabriziof
Forumer storico
E' come la Fiesta: "takko ti tenta tre volte tanto". Se lo ripeti 10 volte di fila senza sbagliare, il rischio default è scongiurato
Fatto,allora compro?
- Stato
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