TransDigm bonds fell as much as three points in active trading after a negative mention by shortseller Citron Research sent its stock price tumbling.
The company this morning extended commitment deadlines for its TLE repricing and new $2.029 billion, seven-year covenant-lite first-lien term loan to a date yet to be determined, sources said.
TransDigm’s $950 million of 6.375% subordinated notes due 2026 saw the majority of activity, falling to 99.75, versus 102.75 previously. The CCC+/B3 bonds priced in May at par, with proceeds used to fund the acquisition of Data Device Corporation (DDC).
TransDigm’s TLE is at 100/100.5 today, down about a half point from yesterday. The company’s TLD and TLC were both quoted at 99.75/100.5 today, down about a quarter point from the last session.
In the report, Citron’s activist short seller Andrew Left likens TransDigm’s business model in aerospace to Valeant’s in the pharmaceutical industry, to which he says investors are “riding the gravy train of highly leveraged profits based on a ‘price jacking’ strategy”.
TransDigm’s single largest customer is the Department of Defense, followed by Boeing and Airbus, according to the report, which argues that U.S. Government pressure will expose their business to gross revenue contraction and a devastating cut in EPS, adding that its business model has made them a dominant supplier of airplane parts to the aerospace industry while burdening its balance sheet with sky-high debt load.
The report cites then President-elect Donald Trump’s meeting with Boeing and Lockheed Martin and subsequent promises to lower prices for Air Force One and other military equipment, which Left says “will likely trickle down to subcontractors.”
The company’s stock, which trades on the NYSE under the ticker TDG, fell 11%, to $220. TransDigm’s market capitalization is approximately $13.4 billion.
TransDigm has been looking to reprice its $1.514 billion E term loan due May 2022, with price talk at L+275, with a 0% LIBOR floor, and offered at par. Existing pricing is L+300, with a 0.75% floor.
Credit Suisse today launched a repricing of the TLE, setting a Tuesday commitment deadline. The deadline was later accelerated to 5 p.m. EST on Monday before being put on hold.
TransDigm is also in the market with a new $2.029 billion first-lien term loan that will be used to refinance the existing C and D term loans. Pricing is L+275, with a 0% floor and an OID of 99.75. The deadline for this deal was previously today at 5 p.m. EST.
TransDigm Group Incorporated designs, produces, and supplies aircraft components in the United States. TransDigm is rated B/B1. Existing issue ratings are B/Ba2, with a 3H recovery rating from S&P Global Ratings. Total debt at the company is approximately $10.3 billion. — Rachelle Kakouris /Kelsey Butler
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