StoneX Leveraged Finance Commentary - 242nd Edition - 5/17/2025

May 17^th 2025

StoneX Trading Highlights and the Week Ahead – LSTA Tier 1/LMA Member

TRADING DESK COMMENTARY – NOT A RESEARCH PRODUCT

 

TABLE OF CONTENTS

1. Loans: Nutrisystem (KNSACQ), Dynata / Research Now (EREWDS), Loyalty Ventures (LOVEIN), Trimark (TRIMUS)
2. Private Equity, Private Credit, and ReOrg: Tailored Brands (TLRD), Tortoise Investments (TORINV), Wellpath (CCSINT), Elevate Textile (ITXN)
3. U.S. Distressed: Saks Global (SAGLEN), Cox Communications (COXENT), CSC Holdings (CSCHLD), New Fortress Energy (NFE)
4. U.S. High Yield: Footlocker (FL), Dick’s Sporting Goods (DKS), Kohl’s (KSS), PetSmart (PETM)
5. Credits of Note: Emergent BioSolutions (EBS), Lakeshore Learning (LAKINT), All Day AcquisitionCo LLC (HRFITW; d/b/a 24 Hour Fitness)
6. Converts: Luminar (LAZR)
7. EU Credit: Barclays (BACR), Credit Milano (CRDEM), Erste Group Bank (ERTBK), Aggreko (AGKLN)
8. Emerging Markets: Argentina, The Bahamas, Colombia, Ecuador, Venezuela
9. Asia Credit:  Alibaba (BABA), Xiaomi (XIAMOI), Lenovo (LENOVO), Korea National Oil (KOROIL), Hyundai (HYNMTR)
10. Commodities: Aluminum

ATTACHMENTS

1. Cooper-Standard Automotive (CPS) from Strategist Ben Briggs (212-692-5123 – ben.briggs@stonex.com)
2. Emergent BioSolutions (EBS) from Strategist Ken Smalley (212-485-3570 – kenneth.smalley@stonex.com)
3. Qurate Retail (QVCGA/LINTA/QVCN) from Strategist Ken Smalley (212-485-3570 – kenneth.smalley@stonex.com)
4. Urban One (UONE) from Strategist Ben Briggs (212-692-5123 – ben.briggs@stonex.com)
5. Famous Last Words: “I Like Energy” from Global Macro Strategist Vincent Deluard (415-713-5205 – vincent.deluard@stonex.com)

Data Releases	Date / Time (EST)	Survey	Actual
CPI MoM	Tues (5/13) 8:30am	0.3%	0.2%
CPI YoY	Tues (5/13) 8:30am	2.8%	2.8%
Retail Sales Advance MoM	Thurs (5/15) 8:30am	0.0%	0.1%
PPI Final Demand MoM	Thurs (5/15) 8:30am	0.2%	-0.5%
Industrial Production MoM	Thurs (5/15) 9:15am	0.1%	0.0%
Housing Starts	Fri (5/16) 8:30am	1363k	1361k
U. of Mich. Sentiment	Fri (5/16) 10:00am	53.4	50.8
Leading Index	Mon (5/19) 10:00am	-1.0%	--
S&P Global US Manufacturing PMI	Thurs (5/22) 9:45am	49.8	--
Existing Home Sales	Thurs (5/22) 10:00am	4.10m	--
New Home Sales	Fri (5/23) 10:00am	693k	--

Source: StoneX Financial Inc., Bloomberg

LevFin Gainers				LevFin Decliners				Converts Gainers				Converts Decliners
Credit	Move	Current Px		Credit	Move	Current Px		Credit	Move	Current Px		Credit	Move	Current Px
MIK 7.875 29	14.50	49.25		NFE 12 29	(33.00)	31.75		AAOI 2.75 30	7.13	84.38		REAL 4 31	(13.13)	81.00
FL 4 29	14.00	95.00		NFE 8.75 29	(22.00)	27.25		INDI 3.5 29	6.88	74.13		WOLF 1.75 26	(13.13)	32.00
LSEA 8.875 29	9.88	104.38		NFE 6.5 26	(18.00)	49.50		WULF 2.75 30	5.50	73.63		CHGG 0 26	(3.75)	77.50
TRAILR 7.625 30	6.88	92.50		SAGLEN 11 29	(12.00)	47.50		FLNC 2.25 30	5.38	53.75		KPTI 3 25	(3.38)	74.50
IHRT 10.875 30	6.50	48.25		AMGENE 9.5 28	(8.00)	60.25		PCT 7.25 30	5.38	91.38		WOLF 0.25 28	(3.25)	24.88

Source: StoneX Financial Inc., Bloomberg

HY OAS – WoW	Current OAS (bps) - As of Prev. Close	Prev. Week OAS (bps)	WoW ∆ (bps)	YTW - As of Prev. Close	Prev. Week YTW	WoW ∆
HY Index {LF98TRUU Index}	309	343	(34)	7.48	7.74	(0.26)
BB {I00182US Index}	190	216	(26)	6.29	6.47	(0.18)
B {I00185US Index}	294	340	(46)	7.38	7.74	(0.37)
CCC {I00188US Index}	683	710	(28)	11.11	11.30	(0.19)

Source: StoneX Financial Inc., Bloomberg

1. Loans:

AXED: Allen Media (ALNMED), Anastasia (ANABEV), Aventiv (SECRUS), Auction.com /Ten-X (AUCLLC), Audacy (CBSR), CBL and Associates (CBL), Correct Care (CCSINT), CIBT Global (CIBHOL), Crash Champions (CRASHC), Elevate Textile (ITXN), Envision Healthcare (EVHC), ETC Group/Netceed (EOSUSF), Fogo de Chao (FOGO), Lakeshore Learning (LAKSHI), Loyalty Ventures (LOVEIN), Leslie Pools (LESL), Nutrisystem (KNSACQ), Parts Authority (PAIHOL), PREIT Associates (PEI), Resource Label (RESLAB), The Container Store (TCS), Tosca Services (TOSCSE), Trimark (TRIMUS), and TruGreen (SVMSTR)

US loan funds saw an inflow of $1.22bb vs. $119mm of inflows the previous week.  The new issue market was active, and we are starting to see deals that were pulled during the tariff tornado re-launched. Nutrisystem (KNSACQ) was a top name, and we closed axed. Call the desk for color. Dynata / Research Now Second Out TL (EREWDS) traded higher before posting less than impressive Q125 numbers.  The numbers were not a great print, but they are still in turnaround. There were new documents filed in the Loyalty Ventures (LOVEIN) case that we view as an expected response from the defendant.   We remain a buyer – please show in an offer. The desk closed as a seller of Trimark (TRIMUS). Ken Smalley covers EREWDS, LOVEIN, and TRIMUS if you want to compare notes. Lakeshore Learning (LAKINT) is a new name for us, and we are doing work on the credit.  Please reach out if you are involved. 24 Hour Fitness (HRFITW) closed on a new $305mm senior loan deal to give the company new capital and runway.  Ben Briggs covers LAKINT and HRFITW.

Doug Gervolino – Loan & ReOrg Equity Trader

2. Private Equity, Private Credit, and ReOrg:

AXED: American Consolidated (ANCR), Altisource (ASPS),  American Tire (ATD), Audacy (CBSR), Avaya (AVYA), Cirque Du Soleil (CIRQUE), Endo (ENDP), J Crew/Chinos (JCG), Mallinckrodt (MNK), Neiman Marcus Group (NMG), Elevate Textile (ITXN), Full Beauty (FBB), Lehman (LBHI), Men’s Warehouse (TLRD), Patagonia Holdco (PATAGO), Resolute Investments (AMEBEA), Research Now (EREWDS), and Serta Simmons (SERSIM)

We have noticed that the best time to sell reorg/private equity is in a market like this.  Please let us know what line items you want off. Tailored Brands (TLRD) was active again, and we closed as a buyer of common and preferred.  If you can help, we are looking for Tortoise Investments (TORINV.) We had accounts asking about Wellpath (CCSINT) Corrections and Recovery Solutions.  Smalley covers for us. Lastly, the desk closed axed in Elevate Textile (ITXN).

Doug Gervolino – Loan & ReOrg Equity Trader

3. U.S. Distressed:

AXED: Akumin (AKUCN), AMC Entertainment (AMC), Brightline East (BRIEAS), CEC Entertainment (CEC), Chesapeake (CHK), CommScope (COMM),  Cooper Standard (CPS), Eagle International (EAGRUY), Emergent BioSolutions (EBS), Endo (ENDP), Evergrande (EVERRE), Exela (EXLINT), First Republic (FRCB), Franchise Group (FRG), Graftech Global (EAF), Guitar Center (GTRC), Hertz (HTZ), H-Foods (HEFOSO), Intelsat (INTEL), Level 3 (LVLT), Lumen (LUMN), LEH, Ligado (NEWLSQ), Mallinckrodt (MNK), McDermott (MDR), Modivcare (MODV), New Fortress Energy (NFE), Office Property (OPI), Pyxus (PYXHLD), RealReal (REAL), Scripps(SSP), Serta (SERSIM), Signature Bank (SBNY), Spirit Airlines (SAVE), Staples (SPLS),  Telesat (TELSAT),  Unifrax (FRAX), Uniti (UNIT), Urban One (UONE), Vericast (VERCST), Veritas (VERITS), WeWork (WEWORK), WW International (WW), Zayo (ZAYO)

 

Activity in distressed was dominated by news flow this week. Starting off, Saks Global (SAGLEN) paper continues to move lower as the retail sector continues to feel the pressure from the April sell off. Over the course of the week the SAGLEN 11 29 (46.5, 35.42%, B3/B) traded down ~12pts to close the week in the mid to high 40s context. In the cable satellite sector, Charter Communications (CHTR) announced that they are combining with Cox Communications (COXENT) in a $34.5b deal. Sending names like CSC Holdings (CSCHLD) lower due to valuation concerns. The worst performer in the cap stack was the CSCHLD 4.625 30 (45.00, 22.21%, Ca/CCC-) which traded down ~5pts to 45. Our strategist Ken Smalley follows the credit and is available to discuss. New Fortress Energy (NFE) released a delayed earnings announcement on Weds after the close. Reporting a 32% decline in revenue y/y, and a ~76% decline in Adj. EBITDA y/y. Both the equity and bonds retreated sharply following the announcement, with the NFE 12 29 (31.25, 54.09%, B3/B) trading down ~34pts. Another credit related to NFE, Brightline East (BRIEAS) traded down in tandem as both companies have mutual owners. The BRIEAS 11 30 (73.5. 19.93%, B-/CCC+), closed lower by ~5pts. Finally, Urban One (UONE) reported earnings on Tuesday; our Strategist Ben Briggs follows the credit closely and is available to discuss. The UONE 7.375 28 (48.75, 40.08%, Caa2/CCC+) continue to trade in the high 40s on low volume.

Doug Gervolino – Loan & ReOrg Equity Trader

Andrew Baigorria – Trading Associate

4. U.S. High Yield:

AXED: CoreCivic (CXW), Geo Group (GEO), Jane Street Group (JANEST), Nordstrom (JWN), Kohl’s (KSS), Manitowoc (MTW), NGL Energy (NGL), EnPro Industries (NPO), Newell Brands (NWL), Organon (OGN), Oceaneering International (OII), StoneX (SNEX), W&T Offshore (WTI), C&S Group (CSWHOL), Land O' Lakes (LLAKES), MGM China Holdings (MGMCHI), Saks Global (SAKSGL), Telford Finco (TELFIN), Universal Entertainment (UETMF)

 

High Yield has seen positive momentum for the five straight weeks.  HY spreads tightened 33bp to +309; YTW fell to +7.48%, a new six week low.  Lipper reported a $2.6B inflow for the week ending Wednesday, up from the $1.6B inflow of the previous week. Energy spreads continued to tighten (+423 vs +457) despite a midweek blip over the possibility of the removal of sanctions on Iran.  WTI closed the week above $62. Primary issuance was in the forefront with over $11B in new deals.  The retail sector was topical this week with the announced acquisition of Footlocker (FL)  4’ 29 (95, 5.35%, B1/BB-) by IG-rated Dick’s Sporting Goods (DKS).  After the 10+ point rise in the FL sr unsecured notes and no trigger of a CoC they are now fully priced at +124.  It makes sense to trim positions here with limited upside and redeploy capital.  Kohl’s (KSS) came to market with $360mm 10 ’30 @ 99.04 to yield 10.25% to address their 2025 maturity.  Currently trading at 103, they still offer an outsized yield of 9.09% (+400bp) for their Ba3/BB+ rating.  The desk was axed and traded PetSmart (PETM) 1^st lien 4.75 ’28 (96.75, 6.05%, B2/BB).  Perceived as recession-proof, this is a stable sleep-safe name maturing in under 3 years. In TMT, the desk traded and can provide liquidity in Scripps (SSP) 5.375 ’31 (68.25, 13.60%, Caa3/CCC).  Strategist Ken Smalley is available to discuss the credit in detail.  The big sector-related news of the week was the announced mega-combination of Charter Communications (CHTR) and IG-rated Cox Communications (COXENT) as the cable sector continues to consolidate. Post-announcement the massive CHTR capital structure tightened 25-35bp to trade inside +200. Friday afternoon, the FCC approved the previously announced merger of Verizon (VZ) and Frontier Communications (FYBR).  Echostar (SATS) 1^st lien 10.75 ’29 (102.375, 9.93%, Caa1/B) received an inquiry from the FCC over their failure to complete their 5G broadband network, spurring speculation of a sale or lease of their spectrum.  Call the desk for current axes.  In the gaming space, Universal Entertainment (UETMF) 9.875 ’29 (97, 11.94%, S&P: B)  released their full Q125 results.  UETMF faced tougher competition, resulting in a 21% drop in revenue YoY. Strategist Ben Briggs can provide his latest detailed commentary on the earnings, and his latest tearsheet.

 

Adam Rosenblum – High Yield Trader

Andrew Baigorria – Trading Associate

5. Credits of Note:

Emergent BioSolutions (EBS): develops, markets, and manufactures drugs (NARCAN®), Medical CounterMeasures (MCM -to counteract Smallpox, Anthrax, Ebola virus, etc.) and provides contract development and manufacturing ("CDMO") services for drug/vaccine development & manufacturing.

5/7/25: Q1 25 results above expectations and management reiterated FY25 guidance despite weak NARCAN® sales (driven primarily by a distributor liquidating short date naloxone product)

Considerations:

• Realigned cost structure significantly reducing operating expenses ($130mm annually)
• Executed multiple asset divestitures with proceeds to reduce debt
• Reiterated FY 25 guidance despite weak NARCAN® Nasal Spray sales

• Management highlighted weak NARCAN® sales were driven by a distributor liquidating short-dated naloxone product and by States’ uncertainty regarding funding prompting some purchasing delays
• Management stated NARCAN® sales trends were improving exiting the quarter and reiterated FY 25 NARCAN® sales guidance

Concerns:

• Weak Q1 25 revenue guidance of $95mm to $120mm driven by lumpy MCM sales

• Management stated FY 25 revenue will be back half of the year weighted

EBS management has executed well on their initiatives right sizing both their operations and balance sheet.  We also do not anticipate any major impacts from the DC administration’s change on EBS’ operations. Noting weak Q2 revenue guidance, we reiterate our constructive view and highlight NARCAN® Nasal Spray’s commanding market share and strong industry fundamentals.

Please see attached tear sheet reach out to strategist Ken Smalley for to discuss (212-485-3570 – kenneth.smalley@stonex.com)

 

Lakeshore Learning (LAKINT): S+11.45+350 1L TL due 9/29/2028 – $710MM o/s – B3/B-

Developer, distributor, and retailer of educational products & classroom furniture, primarily serving early childhood & elementary markets, and targeting expansion into middle & high school markets. Customers include schools, teachers, and parents through both brick & mortar stores and online. As of 12/31/2024 LAKINT had 60 retail stores in 30 states throughout the U.S. and three distribution facilities located in California, Kentucky, and Utah.

55% of the company was acquired  by Leonard Green & Partners (LGP) in 2021 for a mid-teens multiple. The founding Kaplan family retains the remaining 45% of the equity.

FY24 Highlights:

• Revenue was down slightly driven by lower demand as certain COVID-era funding programs expired
• Adj EBITDA was down driven by the lower revenue and higher operating expenses, partially offset by gross margin expansion
• FCF generative
• In its 5/14/2025 downgrade to B-minus, S&P estimated leverage of ~4.4x, but noted that it may rise in FY25 due to pull forward of while COVID-era federal funds were available in FY24 and tighter state and local budgets – Click here for report (free registration required)

Positives:

• Expanding gross margins
• Teachers like the tactile nature of in-person shopping for classroom supplies, and stores allow teachers to bring in students to mock-classroom set-ups to see how products perform in a real-world environment
• Consistently FCF generative
• Capital expenditures were inflated in FY24 driven by investments in a new Utah distribution center. These investments are now complete, and the company expects capex to decrease significantly in FY25
• Manageable mid-single digits leverage

Negatives:

• Some manufacturing facilities in China – however U.S. and Vietnam are also major countries of origin, and are South Korea, Thailand, Indonesia, Philippines, and Taiwan
• Federal government provides some education funding and federal cost cutting is a risk – however most education funding comes from state & local governments
• Certain federal COVID-era funding programs have permanently expired including the Elementary and Secondary School Emergency Relief (ESSER) program - additionally, this program could have resulted in some demand pull forward which may negatively impact FY25 results (the program expired in Sept 2024)
• The company’s planned expansion into middle & high school markets carries with it execution risks

 

Please reach out to strategist Ben Briggs to discuss (212-692-5123 – ben.briggs@stonex.com)

All Day AcquisitionCo LLC (HRFITW; d/b/a 24 Hour Fitness

As of 12/31/2024 HRFITW operated 267 fitness clubs in 11 states & 18 markets, mostly in suburban areas. In FY24 the company did not open any new clubs & closed 7. Generates revenue through sale of memberships, in addition to personal training, retail sales, and other related services. Gyms run from the relatively basic to facilities with saunas, lap pools, cold plunges, basketball & pickleball courts, and other amenities.

FY24 & recent event highlights:

• Revenue was up slightly driven by growth in comp club revenue & slightly higher membership count, partially offset by the closure of 7 clubs
• Adj EBITDA was up significantly driven by the higher revenue, gross margin expansion due in part to higher fees, and lower G&A expenses
• Generated FCF, the company’s  first FCF generative year in some time as the company has closed underperforming clubs (had 450 clubs open at the end of 2019 vs. 267 open at the end of 2024)
• We estimate leverage to be in the mid single digits
• The company noted in its most recent filing that it is “actively engaged in debt refinancing efforts” relating to the current portion of its debt obligations, and “anticipates  completion of such efforts prior to any related debt maturities”
• On 5/13/2025, the company announced that it had closed on a $305MM senior secured facility comprised of “new capital and secured commitments”, although further details were not provided
• Details are private but please reach out to discuss the credit

 

Please reach out to strategist Ben Briggs to discuss (212-692-5123 – ben.briggs@stonex.com)

 

6. Converts:

Bonds traded this week: AKAM 0 ⅜ 09/01/27, AKAM 0 ¼ 05/15/33, AXON 0 ½ 12/15/27, CABO 0 03/15/26, DXCM 0 ¼ 11/15/25, ENPH 0 03/01/26, GRPN 6 ¼ 03/15/27, IRWD 1 ½ 06/15/26, LCID 1 ¼ 12/15/26, LNT 3 ¼ 05/30/28, MCHP 0 ¾ 06/01/30, NRG 2 ¾ 06/01/48, LCID 1 ¼ 12/15/26, SEDG 0 09/15/25, and STWD 6 ¾ 07/15/27.

 

Luminar (LAZR) 1Q Results Beat overshadowed by unexplained CEO resignation
Distressed Lidar (laser radar) developer with $524mm in debt and high cash burn as they ramp shipments on their first production car (Volvo EX90), posted a better than expected Q but announced their founder and CEO would resign with no explanation; the uncertainty of the situation is a major negative, but we believe their established, differentiated, IP / technology stack provides downside protection for the credit.

1Q Results:

Revs of  $18.9mm beats $16.3 consensus. Shipments up 50% from 4Q. Non-Gaap gross profit loss $6.4mm.  $138.2M of end cash down $44.4mm qq, the higher rate of cash burn from 4Q was due to lack of ATM proceeds on a late filing of 10K.

Guide:

Q2 revenue will be lower QQ. Total 2025 revenue guide unchanged at 10% to 20% growth yy.  Shipments up >3x offset by non-series production contract negotiated in Q3 24. Gross Profit Loss of $5 to $10mm per Q. Opex spend guide was lowered to “low” $30mmm range per Q from “mid to high” $30mm per Q.

CEO (and a board member) Resignation:

Founder and CEO Austin Russell resigned “effective immediately”, “following a Code of Business Conduct and Ethics inquiry by the Audit Committee of the Board of Directors.” “This matter does not impact any of the Company’s financial results.” “Russell will remain on the Board and be available to the incoming Chief Executive Officer on transition and technology matters.” The Founder was considered to be key to the technology development and industry relationships of the company. New CEO Paul Ricci was CEO of Nuance for nearly two decades. Nuance was a tech company specializing in voice recognition acquired by MSFT in 2022. No questions on the subject were taken on the conference call which was delayed an hour. A Director of the company also resigned.

Company will delay filing 10Q by 5 days.

Balance Sheet @ 1Q:

Cash:                                              $138.2 (down $44.4mm qq)

Debt:

$50mm Revolver                          Undrawn

1L S+9% 2028                                 $100.0   Rate S+900. New money straight.

Cvt 2L 9.0% 2030 S1                          55.3

Cvt 2L 11.5% 2030 S2                     183.5

Cvt 1.25% 12/26                               184.9   See Aug 24 exchange below.

  Total Debt                                       $523.7

Mkt Cap:                                           $169.5

LAZR 1 ¼ 12/15/26 closed 59-60
LAZR 11 ½ 01/15/30 closed 44.0-45
LAZR 9 01/15/30 43.5-44.5

Debt Notes:                                                                          

• New secured bonds (1L+2L) have a 9/15/26 springing maturity if > $100mm of 1.25% 26 Cvts out.
• Revolver is non-recourse, collateralized by LAZR shares or other equity the company holds. Borrowings require 1.5% fee and have 8% rate.
• Aug 24 Cvt exchange: $422mm out of $625mm 2026 converts exchanged for $274mm of 2L secured converts due 2030. Exchanging holders also invested $100mm in new 1L secured straight bonds due 2028.

Cash Flows:

               1Q25    2024     2023

CFO       (44)        ($276)   ($247)

Invest.  (0.1)      (9)          (35)

  FCF      (44)        ($285)   ($282)

Please reach out to Strategist Rob Weaver to discuss (332-227-5435 – rob.weaver@stonex.com)

7. EU Credit:

European Credit markets continue to remain firmer following the easing of global trade tensions and overall market stability.  Spreads on the iTraxx Crossover currently sit around 300bps at the close today and have tightened around 14bps over the week.  Primary has been the center of attention this week with over €90bn of deals being placed, making it the third busiest week of the year.  A lot of Fins issuance this week and of note, Barclays (BACR) sold a £1bn PerpNC7 AT1, Credit Milano (CRDEM) came with a €200m 12NC7 LT2 and Erste Group Bank (ERTBK) came with a €1bn PerpNC7.4 ; all of which the desk were active in across the week.  In LevFin issuance of note, Aggreko (AGKLN) priced a deal ($/€) worth $2.265bn equivalent deal, Centrient (DSPPHA) sold a deal worth €600m consisting of a 5NC2 Fixed to yield 6.75% and a 5NC1 FRN at €+450.0bps and today Air France (AFFP) priced their €500m PerpNC5.25 Hybrid at 5.875% (IPTs at 6.375%-6.5%).   A topical name we have had cares in this week has been TalkTalk (TALKLN) where the bonds continue to struggle; contact the desk if involved.  Additionally, Cerba  Healthcare (CERBA) have results on Monday, 19-Apr, and are getting a lot of focus as bonds still look to find their level.  Credits which have been performing well, and we have been active in include Eutelsat (ETLFP) and Atos (ATOFP), which we continue to have cares in; contact the desk if involved.  In distressed news, Macquarie, Southern Water’s (SWSFIN) owner and holders of debt are close to a deal that would give creditors a minority stake in the company. Also, BayWa’s (BYWGR) restructuring plan received approval from the required majorities at a court discussion and voting meeting.  Finally,  Colisee Group (COLPAG) had its credit rating downgraded to ‘SD’ from ‘CCC-‘ by S&P after company missed and deferred and interest payment due.

 

8. Emerging Markets:

ARGENTINA: BCRA RESTRICTS FX ACCESS TO COMPANIES TO BOOST DEMAND FOR NEW BOPREAL ISSUE

The central bank (BCRA) extended from 6 to 18 months the minimum term required for notes issued by corporates (ONs) paid abroad for the issuer to access the foreign exchange market (MULC) at the time of amortization. The aim of this measure is to prevent new debt issuance that could allow corporations to circumvent the “MULC/CCL cross restriction.” This regulation (Communication “A” 8244) was published six days after Banco Supervielle declared a 6-month ON issuance void—reportedly at the request of the BCRA, according to Bloomberg. That ON was set to be paid offshore.

Very short-term instruments enable companies to bypass the MULC/CCL restriction by receiving freely available U.S. dollars at maturity. In the lead-up to the launch of Bopreal Series 4, these types of auctions could undermine demand for the BCRA’s new debt securities, which have a term of over three years. If these Bopreal bonds were to trade in the secondary market at around a 10% yield to maturity (YTM), it would effectively validate an exchange rate gap (between official and parallel markets) of approximately 25%.

 

VIEW: Given the low level of the FX gap, some companies may choose to switch to the Blue-Chip Swap market to gain flexibility (this move implies losing access to the MULC for a 90-day period). While the FX gap is unlikely to increase -as agents would seek to profit from arbitrage opportunities- this could effectively mean more pressure on dollar demand. At par, the implicit cost of dollarizing through the new Bopreal would be too high given the current level of the FX gap, potentially undermining demand for this instrument.

 

BA CITY ELECTIONS PREVIEW: ADORNI GAINS TRACTION; IMPLICATIONS FOR PBA BONDS

Next Sunday voters in Buenos Aires City will go to the polls to renew half of the local legislature. Though a local election, it has taken on national importance as President Javier Milei has become personally involved in the race. Milei views the contest as a chance to secure a symbolic victory in a city governed by PRO since 2007. Buenos Aires City is Argentina’s fourth-largest electoral district, accounting for 7.5% of the national electorate.

To mount a challenge in PRO’s traditional stronghold, Milei has nominated one of his most trusted advisors—Presidential Spokesperson Manuel Adorni—to lead the ticket for his La Libertad Avanza (LLA) party. Adorni is competing against Silvia Lospennato of PRO, who enjoys strong backing from former President Mauricio Macri, and Kirchnerist candidate Leandro Santoro. Meanwhile, former Buenos Aires Mayor Horacio Rodríguez Larreta, at odds with Macri’s leadership, has broken away from PRO to run as an independent. Ramiro Marra, a co-founder of LLA, is also running separately following a fallout with Karina Milei, the President’s influential sister and advisor.

Polling data compiled by La Nación from nine surveys shows Santoro in the lead with 25.4% of the vote, followed by Adorni with 20.5%. Lospennato ranks third with 16.9%, while Larreta and Marra trail with 8.1% and 5.9%, respectively. Compared to the 2023 general elections, LLA is projected to gain 6.6 percentage points, while support for Peronism and PRO is expected to fall by 6.9 and 32.8 points, respectively. A notable portion of former PRO voters appears to be shifting allegiance toward LLA or Larreta.

VIEW: Some political analysts suggest Adorni’s true level of support may be underestimated, arguing that certain undecided voters—while not publicly backing him—are likely to support him at the ballot box. This theory aligns with recent polling trends, which show Adorni gaining traction, as the pool of undecided voters narrows. A robust LLA performance should not only benefit Sovereign bonds, but it could actually lead to a narrowing of the spread between the Sovereign and PBA bonds. This is because it may push PRO leaders in the Buenos Aires Province (PBA) —the country’s largest electoral district and a Peronist stronghold— to get into an alliance with LLA, despite the reluctance of former President Macri. In our view, this united front would have a real chance of securing the first place in the October election and of unseating Kirchnerism in 2027.

THE BAHAMAS: PM DAVIS ANNOUNCES AGREEMENT FOR GRAND LUCAYAN SALE

Prime Minister Philip Davis has announced that the Bahamian government has signed a Head of Agreement (HoA) with U.S.-based developer Concord Wilshire for the redevelopment of the Grand Lucayan resort on Grand Bahama. While the specific sale price was not disclosed, Davis revealed that the redevelopment will involve a significant investment of USD827mn. The project is set to include the construction of new hotels, a cruise ship terminal, a casino, a golf course, and other amenities. Davis emphasized the initiative’s potential to transform the island’s economy and create lasting opportunities for Bahamians. This agreement follows multiple failed attempts to sell the resort, which has remained closed since 2016.

 

VIEW: We estimate that the sale of the Grand Lucayan resort could buttress reserves and public finances, with proceeds to the tune of USD150mn. We have recently outlined our preference on BAHAMAS 32 vs EL SALV 32 due to its higher coupon (8.95% vs 8.25%) and higher YTM (8.20% vs 8.05%), with more balanced macro risks for Bahamas. The Bahamian government has shown steady willingness to consolidate fiscal accounts -also underpinned by the approval of the CIT framework for multinationals- in tandem with a more supportive global backdrop. Instead, we are still cautious about a potential disappointment on the overhaul of fiscal accounts in El Salvador, which we think could have a negative fallout on spreads in the belly and long-end of the curve.

COLOMBIA: GROWTH SURPRISES TO THE UPSIDE IN 1Q ON THE BACK OF FISCAL PUSH

Colombia’s economy grew by 2.7% y-o-y in 1Q, marking the fastest expansion in two years and surpassing analysts’ expectations of 2.5% (Bloomberg consensus). The growth was primarily driven by a 7.1% increase in agricultural output, largely due to record-high global coffee prices. These prices surged in response to droughts in major coffee-producing countries like Brazil and Vietnam, significantly benefiting Colombia’s coffee sector. However, the positive momentum in agriculture was partially offset by a 5% contraction in the oil and mining sectors, highlighting uneven growth across industries.

On a seasonally adjusted basis, GDP grew 0.8% compared to 4Q, with the central bank’s 400 basis points of interest rate cuts since late 2023 playing a supportive role. At its April 2025 meeting, the Banco de la República (BanRep) lowered the policy rate by 25bps to 9.25%, citing uncertainty in the global economic outlook and concerns about Colombia’s high fiscal deficit as reasons for a cautious monetary policy stance. Price pressures persist, though. April’s inflation rate rose unexpectedly to 5.16% y-o-y, pushing it further above the BanRep’s 3% target (±1pp range) and making 2025 the fifth consecutive year inflation is expected to exceed the official goal.

VIEW: The pick-up in growth is to a large extent leveraged on the continuity of an expansive fiscal policy. The failure of President Petro to make progress in his reform agenda makes us believe that he will sustain the expansive fiscal bias and the pressure on the central bank to cut rates. We think that in the next meeting BanRep will hold rates at the current 9.25% level due to the upward inflation surprise in April. We prefer Panama over Colombia in the near-term due to the potential of further fiscal slippage in Colombia, while political conditions in Panama seem to be more conducive to a fiscal adjustment following the news of former President Martinelli’s departure from the country, which could have been negotiated in exchange for support to strengthen the shallow political base of the Mulino administration.

ECUADOR: GOVERNMENT DROPS CONSTITUTIONAL REFORM IN AN ATTEMPT TO SIDELINE LAWMAKERS

Minister of Government Jose De La Gasca announced that President Daniel Noboa’s proposal to overhaul the Constitution through a constituent assembly (CA) has been placed on hold. According to De La Gasca, the government now intends to pursue its policy agenda using existing institutional tools, viewing the CA as a measure of last resort for only the most critical circumstances. The shift comes as the administration gains confidence in its strengthened position within the National Assembly (NA). During the inaugural session of the 2025–2030 legislature, Noboa’s government successfully secured support from minor parties and independents, securing a majority sufficient to take control of key congressional leadership roles—effectively sidelining the Correista opposition.

 

VIEW: De La Gasca’s statements and the outspoken intentions to bypass the NA underscore the lack of confidence from the Noboa administration on his newly found allies. Nevertheless, without legislative approval, Noboa cannot make changes to the tax framework, which could imply that the government is getting ready for a negotiation to soften fiscal targets with the IMF, amidst a major negative terms of trade shock. This could generate some short-term selling pressure on bonds -and spread widening- but if the U.S. uses its influence to grant Ecuador a larger bailout package, it could result in a buying opportunity. Longer-term, Ecuador needs to engineer a competitiveness overhaul to avoid a new restructuring and jumpstart growth, as low trend growth remains the main drag on debt sustainability.

VENEZUELA: FOREIGN COMPANIES LOBBY TO KEEP THEIR STAKES IN OIL VENTURES

According to a story on Reuters, Chevron and several European oil firms, including Spain's Repsol, are actively lobbying the U.S. government to retain their stakes in joint ventures with Venezuela's state oil company, PDVSA. This follows the Trump administration's revocation of licenses in March 2025 that had previously allowed these companies to operate in Venezuela despite U.S. sanctions. Companies have been given until 27 May to wind down operations, but the U.S. Treasury has not provided detailed directives, leading to uncertainty. Reuters reported that Chevron and European firms are seeking a return to limited authorizations like those from 2020 to 2022, which allowed them to maintain assets and a minimal presence without expanding operations. They argue that maintaining a presence in Venezuela is strategically important for U.S. energy interests and warn that withdrawal would cede ground to competitors like China and Russia. Meanwhile, Chevron, the last major U.S. oil firm in Venezuela and a minority stakeholder in four joint ventures, has begun scaling back operations amid export disruptions. PDVSA has started managing operations independently, which may increase its debt to foreign partners.

VIEW: The most supportive recent news flow suggesting some chance to a thaw in the relationship between the U.S. and Caracas increase the odds that the licenses can be extended on 27 May and that, in a worst-case scenario, the companies are allowed to retain their presence in Venezuela. However, we do not rule out that while the U.S. budget discussions remain unresolved, the Trump administration faces political constraints to soften its stance towards Maduro. In this regard, we could see the outcome of the 25 May elections driving the non-renewal of the oil licenses as retaliation, with Trump yielding to the pressures of Rubio and the Florida clique. This could imply a blow on bond prices and that recent gains are wiped out. 

9. Asia Credit:

Ended the week with a better tone compared to earlier this morning in credit; equities still in the red area -0.46%, CDS -1bp, and more buyers coming in to the afternoon session 2:1. China TMT, BABA 10y complex started the day +2bps but traded better as we heading towards the end of the day and lifted -1bp while the longer-dated paper

saw selling interest from regional RM. High beta was more active in the afternoon with sellers in XIAOMI 31 +1bp vs buyer of LENOVO 28. Korea, in quasi new KORWAT started the day weaker +1bp but rebounded in the afternoon -2bps, similar tone in KHFC/KOROIL 3-5y FRNs that were lifted -1/-2bps in the afternoon vs seller of EIBKOR 29 with desk active in EIBKOR 10y. Corps/fins, saw sellers on PKX 30/35 and HYNMTR started to see buyers on the 28s after rather heavy tone in the past couple of days, while fins remained muted but saw buying interests on WOORIB 28. SEA, INDON got busier in the afternoon +0.125pts while PHILIP saw the 10y down -0.125pts vs buyers in the long end. Quasi, new PERHUL trading tightly throughout the day and finished at $100.125/100.25 with FM/RM active.

Overall a quieter Friday for Asia HY; MONGOL sov was subdued broadly unch while in corps/quasi, TDBM remained well-bid all day +0.375pts vs sellers on MONMIN/CITULA and desk active in MGMTGE. Indo HY we saw buyers coming out on the JPFAIJ on news of its parent delisting and also the company mulling loans and USD bonds to refinance its 2026 notes, 98.5/99.5. Other markets remained relatively stable. NWD 6.15 perp also stabilized at 67/70. It was reported that CTF services limited announced approval for panda bonds, but usage of funds is likely for a perp under NWSZF. Distressed we can still be active in EVERRE/SUNAC/COGARD/CIFIHG.

10. Commodities:

ALUMINUM:  Headlines that Emirates Global Aluminum (EGA) planning to invest $4B to build a 600k mtpa Ali plant/smelter in Oklahoma (primary tons).  Construction to start end of 2026….completed by 2030.  From my seat, the headline has SEVERAL interesting implications:

1)  The UAE is the 5th largest global producer (2.7M mtpa) of primary Aluminum, behind Canada (3.3M).  In 2024 Canada exported 3.1M tons to the U.S. compared to the UAE of only 347k tons (given tariffs).

2)  With the UAE making this announcement….is there a possibility Trump will consider trimming or removing US Aluminum import tariffs from the UAE till the plant is built?  (which could in theory replace the Canadian tons). NOT suggesting that this WILL occur (I actually think a low probability)….but if it does would bring a decline to US MWP, and a bid to the EU/Japanese premium.

3) An additional 600k tons of US capacity per year of primary Ali in the U.S. would represent a +85% increase from what the U.S. produced in 2024 (again…talking strictly primary Ali prod). Another bearish headline for the US Ali Mid-West premium (albeit this won’t be an issue till 2030 if the UAE’s Ali export tariffs to the US remain in place).

4) CANADA:  I’ll tell you this for free….Canada DID NOT appreciate seeing this headline this morning.  Canada currently has the U.S. by the (you-know-what) in terms of Aluminum.  The U.S. doesn’t produce nearly enough to meet our demand, and our neighbors to the north represented ~58% of US Ali imports last year.  This announcement only strengthens the U.S. bargaining power with Canada…and in theory REDUCES the chances the U.S. trims and/or removes import tariffs on Canadian Aluminum.  Could also argue has a domino effect for Canadian steel (ie tariffs to the US remain in place).

NET-NET:  Look….we’re 5 years out before the first ton is produced…so this shouldn’t have implications for Aluminum prices/premiums here and now.  The big X-factor is “could” we see Trump ease Aluminum tariffs on the UAE?  Personally…I think that is a long shot, but I wouldn’t say it is completely off the table.

EQUITY READ THRU:   The knee-jerk reaction here is bearish for CENX and AA .  CENX because we’re adding US supply (which would lower the MWP), and AA because of the reasons above where it reduces the likelihood that Canadian Aluminum tariffs are removed (coupled with more US supply).   HOWEVER….I’d consider this headline VERY bullish for CENX over the next 4 years if the UAE tariffs remain place (which is a high probability) and if Canadian tariffs remain in place (which I previously thought was a lower possibility till this morning).  I don’t see a scenario where Trump gets the UAE to invest $4B to build an Ali plant in the U.S., then turn around and give Canada a green light to send their Ali in free of charge.  Same goes for the UAE….maybe they pull the investment if Canada tariffs are dropped?  (I know I would).  Other names this headline negatively impacts:  STLD (just got into secondary Ali production), RIO (given smelters in Canada).  I’ve been pushing AA on the long side of late….partly due to the belief that if the U.S. can come to terms with China, shouldn’t it be easy to come to terms with Canada?  AA is +19% since May 8th and +34% since the April 9th lows…so maybe some look to take profits here if they were in it for a trade?   I’m around all day if you’d like to discuss.  (Apologies again for the long-winded post here)

Michael Lovecchio (347-268-1509 – michael.lovecchio@stonex.com)