CAM Investment Grade Weekly Insights

CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Lipper, for the week ended June 28, investment grade funds posted a net inflow of $724.337m down from $1.55bn the prior week. Per Lipper data, the year-to-date net inflow into investment grade funds was $66.571bn. According to Bloomberg, investment grade corporate issuance for the week remained muted, weighing in at $14.8bn. Through the week, YTD total corporate bond issuance was $714.145bn. Per Bloomberg data, U.S. investment grade credit spreads are at the tightest level since 2014:

  • Bloomberg Barclays US IG Corporate Bond Index OAS at 109, a new tight YTD and the tightest level since Sept. 2014, vs 110
    • 2017 wide/tight: 122/109
    • 2016 wide/tight: 215 (a new wide since Jan. 2012)/122
    • 2015 wide/tight: 171/122
    • 2014 wide/tight: 137/97
    • All time wide/tight back to 1989: 555 (Dec. 2008)/54 (March 1997)

(Bloomberg) Martin Marietta Will Buy Bluegrass Materials for $1.625b in Cash

  • Martin Marietta sees deal closing in 4Q, is expected to add to EPS and cash flow in first full year.
    • MLM sees annual run-rate cost savings of ~$15m.
    • Bluegrass Materials is largest closely held, pure-play aggregates company in U.S.; MLM says Bluegrass has leading positions in some of nation’s highest growth markets.
    • Bluegrass CEO says co. “ran a thorough, competitive process.”

(Bloomberg) Bayer Seeks EU Blessing for $66 Billion Monsanto Takeover

  • Bayer AG asked the European Union to approve its $66 billion combination with Monsanto Co., the last of a trio of mega-deals reshaping the global agrochemicals industry.
  • The German chemical giant’s filing kickstarts an initial review with an Aug. 7 deadline. Bayer said it’s still seeking to close the deal “before the end of 2017,” a sign that it’s hoping to sidestep a lengthy second phase probe that could add a further four months to the process.
  • Bayer has already filed for approval in the U.S. and the Justice Department could require additional asset sales to resolve competition concerns. BASF SE and Syngenta are among companies that have submitted preliminary bids for assets that Bayer plans to sell in order to get regulatory approval for its takeover, according to people familiar with the matter.
  • Agricultural businesses have been dogged by falling crop prices globally. Falling crop prices and a quest for greater efficiency triggered a cascade of deals in the industry.

(Forbes) Oracle’s Q4 Cloudburst: Why Larry Ellison’s All-In Cloud Strategy Is Paying Off

  • After a few years of lofty talk but lackluster performance, Oracle’s blowout Q4 results prove beyond a doubt that Larry Ellison’s 10-year-old decision to rewrite all of Oracle’s IP for the cloud is giving the company a unique competitive advantage in being fully vested across all three layers of the cloud: SaaS, PaaS and IaaS.
  • Ellison, who in recent quarters has called out Workday as Oracle’s primary SaaS competitor, did not mention Workday in his prepared remarks but focused instead on how Oracle is now ahead of on the cloud metric of Annual Recurring Revenue, or ARR. “Last fiscal year we sold more than $2 billion in cloud annually recurring revenue. This is the second year in a row that we sold more cloud ARR than,” Ellison said. “We are now well on our way to passing them and becoming number one in the enterprise SaaS market.”
  • Ellison based that prediction on the breadth of Oracle’s suite of SaaS applications versus those offered by Salesforce, noting that Oracle offers cloud apps for financials, procurement, supply chain, manufacturing, human resources, payroll, marketing, sales and service, whereas “Salesforce in contrast only competes in three of these nine market areas.”
  • With regard to IaaS market leader Amazon, Ellison didn’t speak specifically about the IaaS layer, but positioned Oracle’s combination of world leadership in databases (PaaS) with its next-gen technology for IaaS as the way Oracle will cut into the huge lead AWS currently enjoys. “During this new fiscal year, we expect both our PaaS and IaaS businesses to accelerate into hyper-growth, the same kind of growth we are seeing with SaaS. As our customers begin to migrate their millions of Oracle databases to Generation 2 of the Oracle Public Cloud…we expect that our Oracle PaaS and IaaS businesses will grow so fast that they will be even bigger than our SaaS business.”
  • Ellison’s linkage of Oracle’s emerging IaaS business with its PaaS business is significant because, as he says in the comment above, Oracle is the world’s leading database vendor by a wide margin—so if Oracle can pull lots of those on-premise customers into the Oracle Cloud and away from the aggressive marketing of Amazon and Microsoft, that would be a huge win.

(Bloomberg) Pfizer’s Glasdegib Gets FDA Orphan Status in Leukemia

  • FDA designated Pfizer’s drug as orphan treatment for acute myeloid leukemia.
    • FDA awarded designation to the treatment, which has generic name glasdegib, on June 28.
    • Orphan drugs are entitled to 7 years market exclusivity if approved by FDA for rare disease.