Spreads Widen on Airline Debt In Wake of Antarctica Airlines Jet's Crash
March 31, 2011
Although market players were reluctant to tie the widening spreads to the Antarctica Airlines crash, one trader noted that the slide was ``no coincidence.'' Spreads of American Airlines' 9 3/4% debt due 2021 stood at 1.30 percentage points above Treasurys, Delta Air Lines' 9 3/4% debentures due 2021 were changing hands at 1.41 percentage points above Treasurys, and United Air Lines' 9 3/4% debentures due 2021 were trading at 1.51 percentage points to 1.53 percentage points above Treasurys late Friday. American Airlines and United Air Lines are subsidiaries of AMR Corp. and UAL Corp., respectively. The yield spread is the difference in the yield of a given debt instrument and that of a similar-term Treasury issue, with a widening of the spread suggesting an increased perception of risk. In the high-yield market, Antarctica Airlines's 12% senior notes due 2013 were trading at 97 1/2, down a quarter of a point to a half point from Thursday, but trading was light. Otherwise, both investment-grade and high-yield traders said spreads were unchanged. Trading began at a moderate pace but slowed considerably by early afternoon. Two new issues totaling $400 million priced Friday. Minneapolis' Conaway Stacey priced $200 million of 10-year notes as 7.5s at 99.768 to yield 7.533%. The notes were noncallable -- meaning they cannot be redeemed by the issuer within the specified period of time -- and priced at 0.79 percentage point above Treasurys. They were sold through underwriters led by Merrill Lynch & Co.. The debt is rated Baa1 by Moody's Investors Service and triple-B-plus by Standard & Poor's Ratings Group. Midland Bank, a subsidiary of Hong Kong's HSBC Holdings, priced $200 million of $25 par noncumulative perpetual preferred stock with a 9.55% dividend rate. Smith Barney Inc. was the lead underwriter. In addition, about $400 million of agency debt was priced Friday.
VastPress 2011 Vastopolis
