Virgin Australia Holdings Limited (Virgin) is Australia’s second largest airline, providing access to over 480 destinations worldwide. Virgin also provides services together within airline partners and operates flights domestically and internationally; carrying around 24 million passengers annually and currently operates 3,400 average weekly scheduled flights to 46 destinations in Australia and 16 internationally. Virgin is listed on the Australian Securities Exchange (ASX) with a market capitalisation of AUD1.69bn as at 4 March 2019.

Since we last released a strategy note on Dean Foods, the credit has underperformed, surprising markets and analysts alike. Here we look at what the challenges are, and options for bond holders.

CenturyLink Inc. (CLINK) reported its 4Q18 results. Total pro forma revenue was slightly weaker at USD5.8bn (4Q17: USD6.0bn), however due to improved margins and realised synergies, adjusted EBITDA increased to USD2.2bn from USD2.0bn. EBITDA margins increased to 37.9% from 33.2%.

Hertz Global Holdings (Hertz) reported sound 4Q18 results supported by a strong pricing and residual environment. Total revenues were USD2.3bn, compared to USD2.1bn in 4Q17. Adjusted EBITDA was USD49m, compared to USD21m in the same period last year.

Frontier Communications (Frontier) released its 4Q18 results. Consolidated revenue totalled USD2.1bn in 4Q18 (down 4.2% YoY). While weak subscriber results continue to drag on the top line, 4Q18 marked the slowest YoY decline in quarterly revenues since the acquisition of the CTF assets.

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

The yield on the Next Generation Clubs Australia (NextGen) 2023 bonds has improved considerably since initial issuance in mid-2018, while credit quality has remained stable. This presents clients with an opportunity to invest in the notes to take advantage of this market anomaly.

The recent rally in iron ore prices and strong earnings results have moved FMG bond prices higher. We believe this presents an opportunity for actively traded portfolios to take profit from this price appreciation..

Pioneer Credit (PNC) reported 1H19 results, with net profit after tax down 33% on prior corresponding period due to increased employee and borrowing costs. EBITDA was unchanged. We believe PNC's credit quality remains solid, despite a weaker half-on-half performance, with the Company reaffirming guidance for FY19.

We believe the 7.90% 2023 Notes offer good relative value and have the potential for near term price appreciation at the current indicative mid-price AUD99.10 and a yield to worst of 8.23%. The outlook is Stable. Next Gen has provided management figures for the year to 31 December which were broadly in-line or stronger than expectations.

We downgrade our recommendation on Elanor’s 7.10% notes due 2022 Underperform due to price appreciation. Our credit outlook remains Stable. The Group however continues to perform strongly, in line with expectations. Core earnings in 1H19 increased 42% to AUD7.31m compared to the prior period. This was primarily driven by the continued growth in funds under management from AUD1.082bn to AUD1.149bn over the half.

On 21 February 2019, diversified mining services company Ausdrill Limited reported strong financial results for the six months ended 31 December 2018, following the transformational acquisition of Barminco.

While impacted by a non-cash write-down, the results were broadly in-line with expectations. We reiterate our Underperform recommendation on the 7.55% 2020 notes. Our credit outlook is Negative. While Sunland’s credit profile has improved significantly over the last 12 months, gearing will begin to increase as the next multistory projects are developed. Further the sector is facing headwinds evidenced by a reduction in the volume of property sales.

On 21 February 2019, Sydney Airport released its FY18 results which were in line with our expectations. Our recommendations on SYD’s 2020 notes and 2030 notes are unchanged.

Axsesstoday (AXL) announced its proposed capital raising has been placed on hold. If AXL does not resolve its total indebtedness breach by 28 February 2019, the previous waiver will no longer be valid and AXL will again be in breach of its indebtedness covenant. Unless AXL enters into voluntary administration, any outstanding default not waived would not, in and of itself, prevent it from paying interest when due.

Incitec Pivot is road showing ahead of a potential AUD deal. It is likely to be met with strong demand as there are only a limited number of IG bonds issued by non-bank corporates available in AUD.

Eric Insurance reported a YTD 1H19 (31 December 2018) unaudited net profit after tax of AUD1.09m, up from a net loss of AUD0.90m in the prior corresponding period, and ahead of our expectations. While the underlying credit quality continues to improve, Eric Insurance (and the general insurance industry) remains heavily exposed to regulatory uncertainty.

On 19 February 2019, global offshore contract drilling service provider Transocean Ltd, reported its 4Q18 and full year results.