High Yield Highlights - week 3. Rexam announces acquisition of can producer. 1 of 11. Click here to access the full analysis

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Lauren Berenice Long
5 years ago
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1 High Yield Highlights - week 3 Bombardier - SELL Abengoa - STRONG BUY Best Buy - STRONG BUY Rexam - BUY Bombardier from Buy to SELL We change our recommendation from Buy to SELL after announcement of new impairment charges and profit warning. Bombardier announces that the company is seeing less demand for Learjets, prompting the management to lower market forecasts and to pause the production of Learjet 85. In addition, Bombardier revises down expectations of the 214 EBIT margins in both business divisions and expectations of its cash flow. On this background, we changed the recommendation on the issue to SELL from Buy. Click here to access the full analysis Positive news from Abengoa We maintain our positive view of the company's issues after the recent price increase. Abengoa's issues had a strong start to the year, driven by the expected positive news flow. Abengoa has set the price of 9.2m shares in Abengoa Yield to USD 31 per share. The sale will give Abengoa proceeds of USD 285m. We expect the banks to exercise a right to increase the share issue by 15%, which would bring the proceeds to around USD 325m. We restate our STRONG BUY recommendation for EUR 8.875% 218 and EUR 6% 221 and our BUY recommendation for EUR 8.5% 216. Click here to access the full analysis Best Buy releases Christmas sales figures Christmas sales up 2.6% on last year Figures for the domestic Christmas sales show that Best Buy had sales of USD 11.4bn, which is an increase of 2.6% relative to Christmas sales of the previous year. We restate our STRONG BUY recommendation on the background of a Quant score of 7.7. Click here to access the full analysis Rexam announces acquisition of can producer Rexam has announced acquisition of minor can producer in Panama The acquisition is made together with the Mexican company EUM. It is a minor producer with one production line. Delivery agreements have been signed with among others SAB Miller. No details about the price have been disclosed. We restate our BUY recommendation for the issue Sunrise - HOLD Sunrise plans IPO On 14 January 215, Sunrise announced IPO plans at the SIX Swiss stock exchange. In connection with the announcement of the IPO plans, Sunrise announced that the company's bond issues - as expected - will be redeemed early in connection with the completion of the IPO. The early redemption is in line with our expectations and we restate our HOLD recommendation for the issue. Research team: Jens Houe Thomsen Bo Andersen Rasmus Justesen Disclaimer & Disclosure: Please see the last page jht@jyskebank.dk boandersen@jyskebank.dk rasmus.justesen@jyskebank.dk Seinor Analyst Seinor Analyst Analyst 1 of 11

2 Spread Developments Change Change Spread/Rate 1 Week 1 Month 3 Month Ytd Spread/Rate 1 Week 1 Month 3 Month Ytd EUR High Yield non. Fin (HEAD) 42 bp. -4 bp. -13 bp. -42 bp. 51 bp. US High Yield non. Fin (HNF) 561 bp. 23 bp. -32 bp. 49 bp. 15 bp. EUR High Yield (HE) 47 bp. -3 bp. -3 bp. -37 bp. 51 bp. US High Yield (HA) 542 bp. 22 bp. -29 bp. 44 bp. 142 bp. itraxx Xover (Generic) 335 bp. -12 bp. -4 bp. -69 bp. 47 bp. CDX High Yield 386 bp. 17 bp. -21 bp. -2 bp. 73 bp. EUR Invest. Grade non. Fin. (EN) 96 bp. bp. -1 bp. 2 bp. -1 bp. US Invest. Grade non. Fin. (CFX) 16 bp. 5 bp. 2 bp. 28 bp. 3 bp. EUR Invest. Grade (ER) 1 bp. 1 bp. bp. bp. -16 bp. US Invest. Grade (CA) 153 bp. 5 bp. 2 bp. 24 bp. 26 bp. itraxx Europe Invest. Grade 6 bp. -3 bp. -9 bp. -17 bp. -11 bp. CDX Invest. Grade 73 bp. 4 bp. -3 bp. -1 bp. 1 bp. itraxx Sr Financial 67 bp. -4 bp. -5 bp. -11 bp. -18 bp. US 1Y 1.71% -23 bp. -34 bp. -44 bp bp. itraxx Sub Financial 15 bp. -7 bp. -15 bp. -36 bp. 22 bp. German 1Y.47%. -2 bp. -12 bp. -35 bp bp. bp 2,5 EUR HY vs. US HY Spread development bp 4 bp 7 EUR IG vs. US IG Spread development bp 5 2, 1,5 1, Difference (rhs) EUR HY (HEAD) US HY (HNF) Difference (rhs) EUR HG (EN) US HG (CFX) -3 Source: Bloomberg & Merrill Lynch & Jyske Bank 2 of 11

3 High Yield Bond Outperformers and Underperformers - Spread to Worst 1 Week Outperformers 1 Month Outperformers Issue Rating Price STW Change Issue Rating Price STW Change NORSKE SKOGINDUSTRIER 7% 217 CCC , NORSKE SKOGINDUSTRIER 7% 217 CCC , NORSKE SKOGINDUSTRIER 11.75% 216 CCC , NORSKE SKOGINDUSTRIER 11.75% 216 CCC , TAKKO LUX 2 SCA 9.875% 219 CCC , ABENGOA SA 8.5% 216 B MBL CHLGR INTER GRP SA 8.75% 219 B MBL CHLGR INTER GRP SA 8.75% 219 B SUNRISE COMMUNICATIONS H 8.5% 218 B ABENGOA FINANCE SAU 8.875% 218 B ABENGOA SA 8.5% 216 B SUNRISE COMMUNICATIONS H 8.5% 218 B UPC HOLDING BV 8.375% 22 B ABENGOA GREENFIELD SA 5.5% 219 B UNILABS MIDHOLDING AB 12% 219 CCC , UPC HOLDING BV 8.375% 22 B GAMENET SPA 7.25% 218 B , ABENGOA FINANCE SAU 6% 221 B FRIGOGLASS FINANCE BV 8.25% 218 B , HAPAG-LLOYD AG 7.75% 218 CCC INTRALOT FINANCE LUXEMBU 9.75% 218 B BOARDRIDERS SA 8.875% 217 B , SNAI SPA 12% 218 CCC ,13-12 SERVUS LUX HDG SCA 7.75% 218 B Week Underperformers 1 Month Underperformers Issue Rating Price STW Change Issue Rating Price STW Change EDCON HOLDINGS LTD % 219 CCC , TAKKO LUX 2 SCA 9.875% 219 CCC ,536 1,781 THREEAB OPTIQUE DV 5.625% 219 B ,63 88 EDCON HOLDINGS LTD % 219 CCC ,72 1,21 EDCON LTD 9.5% 218 B , EDCON LTD 9.5% 218 B , CONVATEC HEALTHCARE 7.375% 217 B FRIGOGLASS FINANCE BV 8.25% 218 B , PORTUGAL TELECOM INT FIN 5.875% 218 BB EDCON LTD 9.5% 218 B , KERLING PLC 1.625% 217 CCC ,35 66 GLASSTANK BV 8.5% 219 CCC , EDCON LTD 9.5% 218 B , CONVATEC HEALTHCARE 7.375% 217 B PORTUGAL TELECOM INT FIN 5.625% 216 BB PPC FINANCE PLC 4.75% 217 B , SERVUS LUX HDG SCA 7.75% 218 B THREEAB OPTIQUE DV 5.625% 219 B , HOLDIKKS SAS 6.75% 221 B , PICARD BONDCO 9% 218 B HECKLER & KOCH GMBH 9.5% 218 CCC ,27 59 SCHMOLZ + BICKENBACH LUX 9.875% 219 B BOMBARDIER INC 6.125% 221 BB CONVATEC HEALTHCARE 1.875% 218 B Source: Merrill Lynch & Jyske Bank 3 of 11

4 High Yield Bond Outperformers and Underperformers - Price 1 Week Outperformers 1 Month Outperformers Issue Rating STW Price Change Issue Rating STW Price Change NORSKE SKOGINDUSTRIER 7% 217 CCC3 2, ABENGOA FINANCE SAU 6% 221 B NORSKE SKOGINDUSTRIER 11.75% 216 CCC3 3, ABENGOA GREENFIELD SA 5.5% 219 B INTRALOT CAPITAL LUX 6% 221 B ABENGOA FINANCE SAU 8.875% 218 B EWOS HOLDING AS 6.75% 22 B CGG SA 5.875% 22 B GAMENET SPA 7.25% 218 B1 1, NORSKE SKOGINDUSTRIER 7% 217 CCC3 2, BULGARIAN TELECOM CO EAD 6.625% 218 B INTRALOT CAPITAL LUX 6% 221 B SNAI SPA 12% 218 CCC2 1, NORSKE SKOGINDUSTRIER 11.75% 216 CCC3 3, FRIGOGLASS FINANCE BV 8.25% 218 B2 1, EWOS HOLDING AS 6.75% 22 B INTRALOT FINANCE LUXEMBU 9.75% 218 B ABENGOA SA 8.5% 216 B LGE HOLDCO VI BV 7.125% 224 B BOARDRIDERS SA 8.875% 217 B3 1, SNAI SPA 7.625% 218 B HAPAG-LLOYD AG 7.75% 218 CCC TITAN GLOBAL FINANCE PLC 4.25% 219 BB ASTALDI SPA 7.125% 22 B Week Underperformers 1 Month Underperformers Issue Rating STW Price Change Issue Rating STW Price Change BOMBARDIER INC 6.125% 221 BB TAKKO LUX 2 SCA 9.875% 219 CCC2 4, THREEAB OPTIQUE DV 5.625% 219 B1 1, EDCON LTD 9.5% 218 B3 1, PORTUGAL TELECOM INT FIN 4.5% 225 BB GLASSTANK BV 8.5% 219 CCC2 1, PORTUGAL TELECOM INT FIN 4.625% 22 BB FRIGOGLASS FINANCE BV 8.25% 218 B2 1, HOLDIKKS SAS 6.75% 221 B1 1, EDCON HOLDINGS LTD % 219 CCC3 5, PORTUGAL TELECOM INT FIN 5% 219 BB THREEAB OPTIQUE DV 5.625% 219 B1 1, PORTUGAL TELECOM INT FIN 5.875% 218 BB EDCON LTD 9.5% 218 B3 1, EDCON HOLDINGS LTD % 219 CCC3 5, PORTUGAL TELECOM INT FIN 4.5% 225 BB OVAKO AB 6.5% 219 B PORTUGAL TELECOM INT FIN 4.625% 22 BB EDCON LTD 9.5% 218 B3 1, OFFICINE MACCAFERRI SPA 5.75% 221 B TEREOS FINANCE GROUPE I 4.25% 22 BB PPC FINANCE PLC 4.75% 217 B2 1, PORTUGAL TELECOM INT FIN 5.242% 217 BB PORTUGAL TELECOM INT FIN 5% 219 BB Source: Merrill Lynch & Jyske Bank 4 of 11

5 Issuance - EUR Source: Merrill Lynch & Jyske Bank 5 of 11

6 European Issuance - EUR, USD & GBP Source: Merrill Lynch & Jyske Bank 6 of 11

7 Spread vs. GDP US GDP Growth & High Yield Spread bp. % -1 2,1-8 1, , High Yield Spread (HA) US GDP YoY (rhs, inverted) Bloomberg consensus EUR High Yield Spread vs. GDP Growth bp. % -6 2,1-4 1,6-2 1, High Yield Spread (HEAD) Euro GDP YoY (rhs, inverted) bp. 2, 1,5 GDP Growth & High Yield (since 25) y = e -.93x R² =.3254 bp. 2,5 2, High Yield vs. GDP Growth next Quarter (since 25) y = e -.178x R² = , 1,5 1, % 8 % 6 % 4 % 2 % % 2 % 4 % 6 % 8 % US GDP YoY Q4'14E GDP Growth Q3'14 GDP Growth 8 % 6 % 4 % 2 % % 2 % 4 % 6 % Euro GDP YoY Q4'14E GDP growth Q3'14 GDP Growth Source: Bloomberg, Merrill Lynch & Jyske Bank 7 of 11

8 Rating Drift Source: Moodys & Jyske Bank 8 of 11

9 Disclaimer & Disclosure Jyske Bank s corporate bond recommendations current breakdown Jyske Bank is supervised by the Danish Financial Supervisory Authority. The research report is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility for the correctness of the material nor any liability for transactions made on the basis of the information or the estimates of the report. The estimates and recommendations of the research report may be changed without notice. The report is for the personal use of Jyske Bank's customers and may not be copied. This report is an investment research report. Conflicts of interest Jyske Bank has prepared procedures to prevent and preclude conflicts of interest thus ensuring that research reports are being prepared in an objective manner. These procedures have been incorporated in the business procedures covering the research activities of Jyske Markets, a business unit of Jyske Bank. Jyske Bank's corporate-bond analysts may not hold positions in the instruments for which they prepare research reports. If an analyst takes over for the responsible analyst in connection with illness, business travels, etc. this analyst cannot trade in the relevant corporate bond on the day of publication of the research report and the following day. Jyske Bank may, however, hold positions, have interests in or business relations with the companies that are analysed. The research report has not been presented to the company prior to its release. Analysts receive no payment from persons interested in individual research reports. Read more about Jyske bank's policy on conflicts of interest at Jyske Bank's corporate bond recommendations - current breakdown Breakdown of recomendations, corporate bonds (number) STRONG BUY BUY HOLD SELL 9 of 11

10 Financial models Jyske Bank models the expected development of the analysed company s income statement and balance sheet. A number of key figures for the company is calculated on the basis of these models, and the key figures are compared with those of comparable companies and the company s past performance. From this we infer the spread at which the bonds will trade for the period ahead. The recommendation and the price target are moreover adjusted for the expected news flow and the market sentiment based on knowledge of the industry and company-specific circumstances. Jyske Bank s recommendations take into account the expected development in the corporate-bond market, the various sectors and company-specific circumstances. Risk Investment in this corporate bond is associated with risk. The risk can be measured directly via the spread at which the bond trades relative to a risk free investment with the same maturity. The spread reflects the probability of default, the recovery rate, and the liquidity of the corporate bond. Movements in the credit market, the sector and/or news flows, etc. regarding the company may affect the price of the bond. See the front page of the research report for our view of the risk associated with the corporate bond. The risk on the corporate bond is stated as Very Low, Low, Medium, High or Very High and is relative to the high-yield market for corporate bonds. The risk factors stated and/or calculations of sensitivities in the research report are not to be considered all-encompassing. If the corporate bond is denominated in a currency other than the investor s base currency, the investor accepts an FX risk. Update of the research report The planned update of the report will be prepared immediately upon the release of the company s financial statements. In addition, there may be prepared research reports on special themes specifically for the company or research reports where the company is part of the special theme. These research reports are published on an ad-hoc basis. See the front page for the initial date of publication of the report. The prices stated are the latest prices quoted by Jyske Bank before the publication of the research report, unless otherwise stated. Recommendation concepts Our recommendations are based on market developments and an assessment of the expected return within the next twelve months. A BUY recommendation or a Strong BUY recommendation is based on expectations that investment in the bond will generate a return above that of the general corporate-bond market. On the other hand, a SELL recommendation implies that we expect investment in the bond to generate a return below that of the general corporate-bond market. Since our recommendations are relative and risk-adjusted, it is possible to compare our recommendations across sectors and risk categories. In addition, the potential is stated in absolute terms via our return target. 1 of 11

11 Contacts for Institutional Customers Ulrik Øllegaard Bøg Hansen Head of Corporate Bonds Sales, Vice President Nicolaj Brask Christiansen Senior Sales Manager, Corporate Bonds Sales René Søndergaard Vinther Sales Manager, Corporate Bonds Sales of 11

High Yield Highlights - week 37. Univeg exaggerated Russian risks. Bombardier stepped up sanctions on Russia may cause problems.

High Yield Highlights - week 37 Univeg - BUY Ineos - BUY Univeg exaggerated Russian risks Intact investment case with high YTW - we maintain our BUY recommendation The risk in respect of Russia's sanctions