An initial climb of US stocks yesterday, based on expectations of the small business relief package, recovering oil and slowdown in weekly jobless claims, was erased after news came out of a failed viral drug trial by Gilead Sciences. IHS Markit flash April US Composite Output Index hit a record low of 27.4, down from 40.7 in March, indicating the state of corporate America. This measurement is based on data from the firm’s PMI surveys for manufacturing and services. S&P, DJI and Nasdaq all ended the day slightly in the red. European markets fared better with FTSE 100, DAX, CAC 40 and FTSE Milan closing 0.97%, 0.95%, 0.89% and 1.47% higher respectively. Markets are opening weaker this morning with Asian markets and US index futures down around 0.75%.

Europe’s main and crossover CDS spreads were last at 82bp and 488bp. The US IG CDS spread was at 93.5bp. Asia ex-Japan IG CDS spreads were up 1bp at 124bp.

Initial weekly job claims slowed down slightly from 5.24mn to a still staggering 4.43mn, taking the total over the five weeks since the lockdowns began to a record 26mn and easily passing the number of jobs created since the global financial crisis. Early surveys of the Non Farm Payrolls for April expected on 8 May indicate a whopping 19mn decrease. If overall unemployment climbs by a total of 20m in April, that would push the unemployment rate to about 16 per cent, and an additional 10m unemployed in May would push the rate up to 22 per cent, according to James Knightley, economist at ING.


New Bond Issues

Singapore state-owned port operator PSA International, rated AA, raised $650mn via 10-year bonds at a yield of 2.27% or 165bp over Treasuries, 45bp inside initial guidance of 210bp area. The bonds received orders of $4.2bn or 6.5x the issue size.

Korean lender Kookmin Bank, rated A+, raised $500mn via 5-year sustainable bonds at a yield of 1.872% or 150bp over Treasuries, 45bp tighter than initial guidance of 195bp area. Orderbook stood at $4.4bn or 8.8x issue size. 90% of the proceeds are to be used for Covid-19 relief while the balance will be used for sustainable projects.


Moody’s Puts Mapletree, Ascott Residence, GLP, Las Vegas Sands Corp on Review

Mapletree North Asia Commercial Trust received a provisional Baa3 rating with a negative outlook, down from Baa2 negative. This is based on the likelihood that the trust’s credit metrics will weaken. Ascott Residence Trust’s outlook was changed to negative from stable and ratings were kept unchanged at Baa3, given the risk that the operating performance of the REIT’s hospitality properties could weaken as international travel is being curtailed to varying degrees around the world. GLP’s Baa3 rating was put under review for possible downgrade amid concerns the investment management firm’s recent acquisitions will hinder its ability to reduce its financial leverage amid volatile economic and capital market conditions. Moody’s has also put under review for possible downgrade the Baa3 rating of United States-based Las Vegas Sands Corporation (LVSC) that operates Singapore’s Marina Bay Sands Casino.

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Netflix to Issue High Yield EUR/USD Bonds at 3%/3.625% After Reporting Strong 1Q Earnings

A day after Netflix reported strong earnings with nearly 16 million new subscribers in the first quarter of the year, the video streaming giant said it wants to take on more debt so it can acquire and produce more content. Netflix is set to issue $1bn-equivalent of debt split equally between euros and dollars. The streaming service, rated BB-, fixed the coupon on the euro bond at 3 per cent on Thursday afternoon and said that the dollar deal was “likely” to price at 3.625 per cent. The California-based company has turned to the junk bond market to fuel a spending spree on content that has seen it dominate the so-called “streaming wars”, despite the entrance of heavyweight rivals such as Disney and Amazon More than 34mn Americans tuned in to watch the recently launched docuseries Tiger King in its first 10 days. The series chronicles the exotic life of a zoo operator named Joe Exotic.

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Binhai Investment Enters Into Subscription Agreement With Great Wall Gas, Bond Holders To Vote

Binhai Investment has entered into a subscription agreement with Great Wall Gas to allot and issue an aggregate of 177.7mn shares where gross proceeds are estimated to be HKD236.2mn at a price of HKD1.33 per share. Bondholders of Binhai Investment’s $300mn 4.45% Bonds due 2020 will have to vote to decide if they allow Binhai Investment to change a condition “Redemption for Change of Control” with 2$ per 1000$ consent fees on the offer. As it stands, the condition currently requires that the primary shareholder TEDA Investment maintains a 40% shareholding failing which the bond holders can exercise a put option at 101%. The proposal is to change the limit to 30% to allow for the subscription agreement with Great Wall Gas without triggering the put option.

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Indian Dollar Bond Returns Beat Asian Peers

India is leading returns this month in Asia’s dollar bond market, after the country’s central bank ramped up steps to help borrowers stung by the coronavirus pandemic. Local firms’ dollar-denominated bonds have returned 5.2% in April, the most among major economies in Asia and exceeding an average of 1.7% for the region’s emerging markets, according to Bloomberg Barclays indexes.

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Franklin Templeton Shuts Down Six Bond Funds in India

In an unprecedented decision, Franklin Templeton Mutual Fund has shut six of its open-ended debt funds citing illiquidity on the back of the pandemic, effective April 23. All these schemes followed the high-risk, high-return credit risk strategy. The fund house will now sell the underlying securities of all these funds over time and pay off their investors in a staggered manner. These six schemes are:

– Franklin India Low Duration Fund (FILDF),
– Franklin India Dynamic Accrual Fund,
– Franklin India Credit Risk Fund,
– Franklin India Short Term Income Plan,
– Franklin India Ultra Short Bond Fund, and
– Franklin India Income Opportunities Fund (FIIOF).

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S&P Cuts Commerzbank, Revises Outlook to Negative for Deutsche Bank and BNP

The credit agency S&P said on Thursday that it had cut Commerzbank’s credit rating by a notch and lowered its outlook for Deutsche Bank to negative from stable, as prospects for the lenders grow increasingly bleak amid the coronavirus outbreak. Both German banks are now rated BBB+ with a negative outlook. S&P also changed the outlook to negative for BNP Paribas.

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Blackstone Suffers Performance Fee Blow

Blackstone has suffered severe mark-to-market losses on investment funds that focus on energy and distressed debt, as the coronavirus pandemic and a global oil rout wiped out 92 per cent of the performance fees previously booked by its $140bn credit business. “The current crisis is much more formidable than the global financial crisis,” acknowledged Stephen Schwarzman, Blackstone’s billionaire founder, adding that “a return to work and normal life…may be a long and gradual process.”

The world’s largest alternative asset manager recorded investment losses of 22 per cent in its private equity business, which manages $175bn of capital, denting the incomes of executives whose pay is tied to the profits on their deals. The setback wiped $1bn off the pot of “accrued performance revenues” that Blackstone had booked based on its valuation in December.

For the full story, click here


Top Gainers & Losers – 24-Apr-20*

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