The newest additions to FIIG’s USD DirectBond list are two high yield (HY) opportunities issued by Peabody Energy Corporation. Since emerging from Chapter 11 in 2017, it issued a shorter dated 2022 and medium-term 2025 maturity bond. We prefer the 2025 bond offering an attractive yield over 6.00%pa.

We update our recommendations on a number of Tier 2 issuances by Australian banks and insurance companies.

In this report, we look at the Australian housing market and how recent events as well as announcements by the RBA and APRA may affect the sector over the near term.

We reiterate our recommendation on Next Gen's 7.90% notes due 2023, with a Stable credit outlook. The Group reported 1Q19 revenue of AUD9.6m and EBITDA of AUD2.5m, which were softer than 1Q18. Membership income from Perth South has led to lower forecasted EBITDA for FY2019, and leverage is forecasted to remain temporarily elevated. The Doncaster project is expected to be completed within the next 12 – 14 months, within management’s guidance

The Australian bond market is faced with an insatiable demand currently, as bonds are maturing or being called, dwindling new issuance is limiting additional supply and there’s a thirst for yield. The liquidity and depth of the large USD high yield (HY) bond market is where savvy investors are looking to for opportunities, and for good reason, as we further explore.

Deloitte, the voluntary administrator of Axsesstoday, provided an update on the current sale process. Indicative offers have been received in late May from parties interested to buy part or all of the company. It is expected that binding offers will be submitted in early July.

On 31 May 2019, independent gas storage operator, Rockpoint Gas Storage, released its fourth quarter and full year 2019 (ending 31 March 2019) results. Overall, the results were very solid, with total realised revenues of USD176.49m for FY19 comparing favourably with USD137.63m in FY18. Adjusted EBITDA improved to USD112.1m, up USD34m from USD78.1m in FY18.

SCT Logistics New Issue Report.

The RBA has cut the overnight cash rate (OCR) to the lowest level in history. With more rate cuts on the way and bond prices likely to rally further, we believe it is time for investors to start adjusting their expectation to a lower yielding environment

The Novacare Solutions Partnership consists of Novacare Solutions Trust and Novacare Health Solutions Trust (Novacare). Novacare, together with Novacare Services Pty Ltd contracted with the NSW Department of Health (NSW Health) to design, build, refurbish and maintain various facilities at the Mater Misericordiae Hospital (Mater Hospital), in Newcastle. NSW Health’s obligations under the PPP contract are guaranteed by the New South Wales State Government (State).

On 30 May 2019, Rackspace Hosting, Inc. reported 1Q19 results for the quarter ended 31 March 2019. Although the Company reported a net loss of USD56.9m, EBITDA has begun to normalise following on from the Datapipe acquisition. Further, the Company recorded its third consecutive quarter of free cash flow growth.

The June 2019 update to our DirectBond List including new additions and our current Trading Restrictions list.

Covenants are a key line of defence for bondholders, especially when investing in unrated or sub investment grade bonds. They act to align the interests of both the issuer and the bondholders and serve as a layer of protection well ahead of any potential payment default. Here we look at the different covenants and how they work.

The newest addition to FIIG’s USD DirectBond list is a high yield (HY) opportunity issued by Hunt Companies Inc., offering an attractive yield above 6.60%pa. The sub investment grade bond is an ideal inclusion in a well-diversified portfolio for wholesale investors.

We provide an update to holders following the issue of USD750m of senior secured debt which was used to fund the cash tender of a number of tranches of Talen’s unsecured debt.

Over FY18, CFAP’s results were negatively impacted by drought in most of the agricultural regions in Eastern Australia (see further below). As a result, operating revenues were down 8.8% on the prior period, falling from AUD64.6m in FY17 to AUD58.9m in F18. EBITDA for FY18 was AUD33.7m, down 11.6% from FY17. Notwithstanding the negative impact of lower locomotive demand, CFAP’s revenue diversification strategy was beneficial in supporting the group while the leasing business has been affected due to the drought. We maintain our recommendation on CFAP’s 8.35% notes due 2020.

The RBA has explicitly stated that it is open to cutting cash rates as early as June 2019, so what does this mean for fixed income investors?