Positions in Automotive Suppliers - Adient and Antolin

Al,

Please refer to our analysis of Adient here (Antolin to come) and to previous comments on volume expectations, China volumes and rebound to date by OEM segments.

As per previous notes, we have for some time now been looking to take a position in Adient on the basis of the company’s strong liquidity, market position and variable cost structure. Following the placement of the 9% 25 SSNs we are taking a 5% combined position spread across the 9% at 103c/$ and the 3.5% 24 SUNs at 76%. While neither bond has a short term maturity, we believe that with normalisation / increasing predictability of Covid-19 fallout, both the SSNs and SUNs should be contracting. The high Coupon SSNs have a “Corona Clause” which could drop our exposure to that bond by 35% within the next 120 days if Adient accesses facilities under the CARES Act. On the upside, the SSNs could easily move beyond 115c/$ when the dust settles.

As regards Antolin, the company has been reporting strong results today and holds a call at 2.30 this afternoon. The information released paints a similarly survivable picture to Adient. Because we do not currently cover Antolin, it's a matter of shooting first and asking questions later. So we are taking a long position of 3% in the 3.25% 24s today at 69% - to the extent executable / before and after the call. 

We will be releasing an overview of Antolin in the near future to firm up our views or drop the position.

Wolfgang