High Yield Highlights - Week 49

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Milo Ryan
5 years ago
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1 High Yield Highlights - Week 49 Kerling - BUY Maintain BUY recommendation We maintain BUY, as we find early redemption unlikely until a clarification of JV Kerling stays on BUY for the 217 issue despite the fact that the call structure enables a redemption of the bond at on 1 February 214. We do not expect the company to make use of this call option since the European competition autorities are still dealing with the application. Frigoglass - BUY Click here to view the full analysis S&P changes outlook to negative The rating change does not affect our BUY recommendation Due to somewhat worse than expected results for Q1-3 (compared with their initial expectations for 213) S&P changes their outlook to negative from stabile. This is also a because S&P estimates a 1/3 probabolity that Frigoglass will not be able to stabilize sales in214. We maintain a BUY recommendation on Frigoglass and recommend investors to entry at current levels. Reynolds - HOLD New debt issue Reynolds issues new debt to redeem the 9.5% 217 Bond Reynolds has issed USD 59 mn. Senior Subordinated 217 bonds. The company will use the net proceeds to redeem EUR % 217 bond. The bond can be redeemed at with 3 days notification (final date has not yet been published). The redemption was expected. In November Reynolds announced that they will redeem the EUR 8% 216 bond 15 December. The company will not have any EUR bonds outstanding after redeeming these 2 bonds. Wind - HOLD Rating upgrade S&P upgrades their rating on Wind after methodology change Long Term rating is increased from B+ to BB-. Senior secured bonds are raised from BB- to BB, while Senior Unsecured bonds are raised from B to B+. Reseach team: Jens Houe Thomsen Bo Andersen Disclaimer & Disclosure: Please see the last page jht@jyskebank.dk boandersen@jyskebank.dk

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) 396 bp. -1 bp. -2 bp. -57 bp. -86 bp. US High Yield non. Fin (HNF) 428 bp. -8 bp. -16 bp. -39 bp bp. EUR High Yield (HE) 38 bp. -42 bp. -54 bp. -11 bp bp. US High Yield (HA) 416 bp. -11 bp. -19 bp. -43 bp bp. itraxx Xover (Generic) 331 bp. 11 bp. -12 bp. -81 bp bp. CDX High Yield 17 bp. -1 bp. bp. 2 bp. 6 bp. EUR Invest. Grade non. Fin. (EN) 112 bp. -3 bp. -6 bp. -1 bp. -4 bp. US Invest. Grade non. Fin. (CFX) 142 bp. -1 bp. -5 bp. -11 bp. -2 bp. EUR Invest. Grade (ER) 123 bp. -4 bp. -7 bp. -17 bp. -22 bp. US Invest. Grade (CA) 14 bp. -1 bp. -6 bp. -15 bp. -13 bp. itraxx Europe Invest. Grade 83 bp. 4 bp. -1 bp. -21 bp. -34 bp. CDX Invest. Grade 72 bp. 3 bp. bp. -1 bp. -22 bp. itraxx Sr Financial 12 bp. 5 bp. -11 bp. -44 bp. -39 bp. US 1Y 2.87% 13 bp. 23 bp. -6 bp. 111 bp. itraxx Sub Financial 152 bp. 6 bp. -19 bp. -69 bp. -83 bp. German 1Y 1.86%. 17 bp. 12 bp. -9 bp. 55 bp. bp 2,5 2, 1,5 1, 5 EUR HY vs. US HY Spread development Difference (rhs) EUR HY (HEAD) US HY (HNF) bp bp EUR IG vs. US IG Spread development Difference (rhs) EUR HG (EN) US HG (CFX) bp Source: Bloomberg & Merrill Lynch & Jyske Bank

3 High Yield Bond Outperformers and Underperformers - Spread to Worst 1 Week Outperformers 1 Month Outperformers Ticker Coupon Maturity Rating Price STW Change Ticker Coupon Maturity Rating Price STW Change CODERE CC 58. 5, KERLIN CCC ARGID CCC KPERST CCC COMHSS CCC YIOULA CC 81. 2, YIOULA CC 81. 2, CODERE CC 58. 5, CODERE CC , TNETBB BB SIEMNS CCC CODERE CC , EIRCMF B REYNOL CCC PIAGIM BB EOFP B TITKGA BB COFP BB JAH BB EDCON B GYCGR BB SIEMNS CCC WINDIM B , PIAGIM BB Week Underperformers 1 Month Underperformers Ticker Coupon Maturity Rating Price STW Change Ticker Coupon Maturity Rating Price STW Change ARGID B ICECR B REYNOL CCC PAJFP B , AGROK B WINDIM B KPERST CCC IDEABB CC 68. 2, TNETBB BB NSINO CCC , NWORLD CCC , NOVASP CC 48. 4, FRIGOG B BORMIO B PAJFP B , LECTA B SUNCOM BB SISTP B LECTA B FRIGOG B EDCON B SUNCOM BB ICECR B CEMEX B Source: Merrill Lynch & Jyske Bank

4 High Yield Bond Outperformers and Underperformers - Price 1 Week Outperformers 1 Month Outperformers Ticker Coupon Maturity Rating STW Price Change Ticker Coupon Maturity Rating STW Price Change YIOULA CC 2, YIOULA CC 2, CODERE CC 5, NWORLD B3 1, BBDBCN BB WINDIM B3 1, EIRCMF B EDCON B GEF BB CODERE CC 5, WINDIM B3 1, MANTEN B GYCGR BB HTOGA B CODERE CC 5, POLKOM B ATALIA B CODERE CC 5, TITKGA BB UNILAB CCC2 1, FIAT BB HDDGR CCC CGMFP B EDCON B Week Underperformers 1 Month Underperformers Ticker Coupon Maturity Rating STW Price Change Ticker Coupon Maturity Rating STW Price Change FRIGOG B PAJFP B2 1, PAJFP B2 1, IDEABB CC 2, LECTA B KPERST CCC NWORLD CCC3 2, LECTA B AVAN B FRIGOG B AVAN B TITIM BB TKAGR BB BBAOLX CCC2 1, ALBALN B ARGID CCC TKAGR BB AVAN B MDMFP B COMHSS CCC EDCON B SISTP B KPERST CCC AVAN B Source: Merrill Lynch & Jyske Bank

5 Issuance - EUR bn. 6 Issuance EUR High Yield ex. fin. No. 14 No. Issues EUR High Yield ex. Fin Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec bn. Issuance EUR High Yield incl. fin % 2% 15% 1% 5% EUR High Yield Rating distribution Issuance Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % BB1 BB2 BB3 B1 B2 B3 CCC1 CCC Source: Merrill Lynch & Jyske Bank

6 European Issuance - EUR, USD & GBP bn. 9 EUR issuances excl. fin. No. 18 No. of EUR issuances excl. fin Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec bn. LTM Issuances in EUR, GBP & USD excl. fin USD GBP EUR No No. of issuances on rating excl. fin. BB1 BB2 BB3 B1 B2 B3 CCC1 CCC2 CC D Source: Merrill Lynch & Jyske Bank

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 -.1x R² =.3442 bp. 2,5 2, High Yield vs. GDP Growth next Quarter (since 25) y = e -.176x R² =.473 1, 1,5 1, % 8 % 6 % 4 % 2 % % 2 % 4 % 6 % 8 % US GDP YoY Q4'13E GDP Growth Q2'13 GDP Growth 6 % 4 % 2 % % 2 % 4 % 6 % Euro GDP YoY Q4'13E GDP growth Q3'13 GDP Growth Source: Bloomberg, Merrill Lynch & Jyske Bank

8 Rating Drift High Yield Rating Drift US & EUR 6% 4% 2% % -2% -4% -6% -8% -1% Europe US EUR High Yield and High Grade Rating Drift 4% 2% % -2% -4% -6% -8% -1% High Grade High Yield EUR High Yield Rating Drift vs. Default Rate 4% -1% -6% -11% -16% % 5% 1% 15% 2% Moody's High Yield Rating Drift (lhs) European Default Rate High Yield Rating Drift vs. PMI PMI Output Index (lhs) EUR HY RATING DRIFT 5M Lag (rhs) 15% -5% -25% -45% -65% -85% Source: Moodys & Jyske Bank

9 Disclaimer & Disclosure Jyske Bank s corporate bond recommendations current breakdown Breakdown of recommendations, Corporate Bonds (number) STRONG BUY BUY HOLD SELL

6-12-213 6-12-213 Contacts for Institutional Customers Morten Storgaard Andersen +45 89 89 76 78 MSA@jyskebank.

10 Contacts for Institutional Customers Morten Storgaard Andersen Vice President, Head of Corporate Bonds Sales Nicolaj Brask Christiansen Senior Sales Manager, Corporate Bonds Sales René Søndergaard Vinther Sales Manager, Corporate Bonds Sales

Weekly Highlights - Week 48. Disappointing results from Frigoglass

Weekly Highlights - Week 48. Disappointing results from Frigoglass 29-11-213 Weekly Highlights - Week 48 Frigoglass - BUY Numericable - HOLD Verisure - BUY Eco-bat - HOLD Ardagh - SELL Disappointing results from Frigoglass We maintain our BUY recommendation after the