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Morning Commentary: Remington bonds weaken further as Moody's notches rating down to Caa3
By Paul A. Harris
Portland, Ore., Dec. 21 – Amid extremely thin year-end volume, the bonds of Remington Outdoor Co., Inc. traded down on Thursday as Moody's Investors Service notched the company's corporate family credit rating to Caa3 from Caa2, a trader said.
The FGI Operating Co. LLC/FGI Finance, Inc. (Freedom Group Inc.) 7 7/8% senior secured notes due May 2020 traded at 22 on Thursday morning, a couple of points weaker on the day, after having taken a substantial tumble in late November, the trader said.
Moody's expressed concern with Remington's weak operating performance, liquidity pressure from approaching maturities and the view that the company's capital structure is unsustainable.
Ratings are also constrained by the longer-term threat of increased gun regulations, Moody's said.
Ultra-thin volume notwithstanding, the sentiment in the market was unmistakably positive at midmorning.
The iShares iBoxx $ High Yield Corporate Bd (HYG) was 0.5% higher, up 44 cents at $86.90 per share.
The Dow Jones industrial average was up 0.43% at midmorning.
Against this backdrop the recently minted Lonestar Resources US Inc. 11¼% senior notes due Jan. 1, 2023 were 101½ bid, up with the market on Thursday, the trader said.
The $250 million deal, which priced Tuesday at par, is expected to be the final issue to clear the market in 2017.
It crawled to the finish line, whereupon the Fort Worth oil and natural gas company, in the market to refinance its 8¾% senior notes due 2019, made concessions to investors, widening the rate from 10¾%, tweaking covenants and extending call protection, market sources said.
On the heels of those concessions the Lonestar deal ended up being oversubscribed, the trader recounted.
Meanwhile the subdued sound of seasonal bells pervaded the primary market on Thursday.
The new issue bazaar is expected to remain closed until January.
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