Month: August 2017

25 Aug 2017

CAM High Yield Weekly Insights

Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were -$1.8 billion and year to date flows stand at -$9.2 billion. New issuance for the week was $1.0 billion and year to date HY is at $172 billion.

(Business Wire) Zayo Group Holdings, Inc. Reports Financial Results for the Fourth Fiscal Quarter Ended June 30, 2017

  • $638.0 million of consolidated revenue, including $509.1 million from the Communications Infrastructure segments and $128.9 million from the Allstream segment
  • Bookings of $7.5 million, gross installs of $7.3 million, churn of 1.2% and net installs of $1.4 million, all on a monthly recurring revenue (MRR) and monthly amortized revenue (MAR) basis, excluding the Allstream segment
  • Adjusted unlevered free cash flow of $117.2 million
  • The Company completed the acquisition of Castle Access, Inc.’s San Diego data centers. The two data centers, located at 12270 World Trade Drive and 9606 Aero Drive, total more than 100,000 square feet of space and 2 megawatts of critical, IT power, with additional power available. The acquisition was funded with cash on hand and was considered a stock purchase for tax purpose.

(NJB Magazine) B&G Foods to Acquire Back to Nature Foods Company

  • B&G Foods, Inc. announced that it has entered into a definitive agreement to acquire Back to Nature Foods Company, LLC, from Brynwood Partners VI L.P., Mondel─ôz International and certain other entities and individuals for approximately $162.5 million in cash, subject to customary closing and post-closing working capital adjustments. B&G Foods expects the acquisition to close during the third quarter of 2017, subject to customary closing conditions, including the receipt of regulatory approvals.
  • “We are very pleased to add Back to Nature® to the B&G Foods family of brands. Consistent with our acquisition strategy and our recent Green Giant®, spices & seasonings and Victoria® acquisitions, we are continuing to diversify our portfolio of brands and invest in brands and products that we believe are most relevant to today’s consumer,” stated Robert C. Cantwell, President and Chief Executive Officer of B&G Foods.
  • B&G Foods expects the acquisition to be immediately accretive to its earnings per share and free cash flow and projects that following the completion of a six-month integration period, the acquired business will generate on an annualized basis net sales of approximately $80 million and adjusted EBITDA of approximately $17 million. Based upon the foregoing adjusted EBITDA guidance, the acquisition represents a purchase price multiple of approximately 9.6 times adjusted EBITDA (or 8.4 times adjusted EBITDA net of the present value of expected tax benefits).

(Reuters) United Rentals to buy equipment rental chain Neff for about $1.3 billion

  • United Rentals Inc, the world’s largest construction equipment rental company, will buy Neff Corp for about $1.3 billion, the companies said, topping H&E Equipment Services Inc’s about $1.2 billion offer last month.
  • “United Rentals is an industry leader in equipment rentals, and as a result of this transaction, our employees and customers will benefit from the combined company’s expanded geographic footprint and diversified offering,” Neff’s Chief Executive Graham Hood said.
  • Neff is expected to generate $419 million of total revenue for the full year, the companies said.

(Reuters) Western Digital group to offer $17.4 billion for Toshiba chip unit

  • A consortium that includes Western Digital is offering 1.9 trillion yen ($17.4 billion) for Toshiba Corp’s memory chip business, which the Japanese conglomerate is trying to sell to cover losses from its U.S. nuclear business, sources said on Thursday.
  • Western Digital is set to offer 150 billion yen through convertible bonds and will not seek voting rights in the business, the sources who were familiar with the deal said.
  • The consortium also includes U.S. private equity firm KKR & Co as well as the state-backed Innovation Network Corp of Japan and Development Bank of Japan, all of which will offer 300 billion yen each for the chip business, the sources said.
  • Under the proposal, Toshiba’s lenders including Sumitomo Mitsui Banking Corp and Mizuho Bank would also extend around 700 billion yen in loans, they said.
  • Other Japanese companies will also invest around 50 billion yen to ensure domestic firms hold a combined 60 percent stake, the sources said, adding that Toshiba itself would keep a 100 billion yen stake in the business.
  • Sources have said that Toshiba wants to reach a deal by the end of the month and close the sale by the end of the fiscal year in March to ensure it does not report negative net worth, or liabilities exceeding assets, for a second year running. This could result in a delisting from the Tokyo Stock Exchange.
  • Given regulatory approvals could take more than six months, the company has been hoping to reach a deal by the end of the month to ensure it can close the sale in time.
25 Aug 2017

CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Wells Fargo, IG fund flows for the week were $2.6nln. This brings the YTD total to +$213bln in total inflows. According to Bloomberg, investment grade corporate issuance for the week was just shy of $4bln, as issuers have decided to wait until after Labor Day before coming to market. Through the week, YTD total corporate bond issuance was $932.88bn. Investment grade issuance thus far in 2017 is down 2% y/y when compared to 2016.

(WSJ) Wal-Mart and Google Partner to Challenge Amazon

  • Google and Wal-Mart Stores Inc. are joining forces in a partnership that includes enabling voice-ordered purchases from the retail giant on Google’s virtual assistant, challenging rival Amazon.com Inc.’s grip on the next wave of e-commerce.
  • Wal-Mart said Wednesday that next month it will join Google’s online-shopping marketplace, Google Express.
  • While the deal will add hundreds of thousands of Wal-Mart items to Google Express, it will also give Wal-Mart access to voice ordering. The deal won’t alter how consumers receive their orders, because Wal-Mart will fulfill purchases made through Google Express.
  • Wal-Mart said it will share consumers’ purchase history with Google to enable users to quickly reorder items, a primary function of voice-controlled orders for commodity shopping.
  • “How do you help people who are going to be interacting more and more with devices get their weekly shopping tasks taken care of?” Google Express chief Brian Elliott said in an interview, citing a key reason for the partnership.

(Bloomberg) Bayer Faces In-Depth EU Review of $66 Billion Monsanto Deal

  • EU sets Jan. 8 deadline for last in trio of mega-mergers
  • EU flags concerns over higher prices and reduced innovation
    • The European Commission flagged worries that the deal to create the world’s largest pesticides and seeds company risked raising prices for farmers, lowering quality and reducing choice and innovation. It set a Jan. 8 deadline for its merger investigation.
    • Bayer said it had expected an extended review “due to the size and scope of the transaction.” The company said the deal “will be highly beneficial for farmers and consumers” and it will work constructively with the EU.
    • Monsanto said it was committed to working with regulators globally “with a view to receiving approval of the proposed transaction by the end of 2017.” It said it looked forward to supporting growers’ efforts to be more productive, profitable and sustainable.
    • The combined firm will have the largest portfolio of pesticides products and the strongest global market positions in seeds and traits. The EU said it will check if rivals’ access to distributors and farmers could worsen if the company were to link sales of pesticides or seeds to digital services that provide tailored advice or aggregated data to farmers.
    • Regulators’ concerns over innovation for agricultural chemicals saw DuPont Co. offer to sell part of its pesticides business and related research and development operations before it won EU approval to merge with Dow Chemical Co. earlier this year. China National Chemical Corp. also had to make concessions before the EU would clear its $43 billion takeover of Swiss pesticide maker Syngenta AG.

(Business Journal) Airbus to deliver first US-built A320 to Spirit Airlines this week

  • The Miramar-based, low-cost airline touts its fleet as being the “youngest of any major U.S. airline,” operating more than 420 flights to destinations in the United States, Caribbean and Latin America. As of March 31, the airline had 100 aircraft. Orders placed in late December 2016 and renegotiated in the first quarter of 2017 will add 73 aircraft to Spirit’s fleet by the end of 2021, according to documents the company filed with the U.S. Securities and Exchange Commission.

(WSJ) Chevron CEO John Watson to Step Down

  • The transition is expected to be announced next month, although Mr. Watson’s successor hasn’t yet been finalized by the board and plans could change, the people said. Mr. Watson isn’t expected to depart immediately and is likely to remain after the announcement for an orderly transition, the people said.
  • His likely departure underscores the dramatic shift under way at big oil companies as they adapt to a prolonged period of lower prices brought about by the U.S. shale boom. While the companies once favored swashbuckling leaders who bet billions on megamergers and pricey projects in far-flung regions, many are now turning to executives adept at squeezing every last dollar from a barrel through refining, and shorter-term investments that turn a profit faster.
  • The leading candidate to succeed Mr. Watson, 60, is Michael Wirth, 56, a refining specialist who earlier this year was elevated to the position of vice chairman at the oil company, the second largest in the U.S. behind Exxon Mobil Corp. , the people said.
  • Chevron directors see Mr. Wirth’s years of experience wringing costs out of big plants that process fuel and chemicals as a critical need in a new era for oil markets defined by $50-a-barrel crude, the people said.
  • “Big oil is turning toward very disciplined, returns-centric leaders who can manage razor-thin margins in disruptive, volatile markets,” said Les Csorba, who advises energy companies on CEO succession at executive search firm Heidrick & Struggles International , and wasn’t involved in Mr. Watson’s succession. “This is the answer for these companies as low prices continue.”
18 Aug 2017

CAM High Yield Weekly Insights

Fund Flows & Issuance: According to a JP Morgan report, flows week to date were -$2.1 billion and year to date flows stand at -$12.5 billion. New issuance for the week was $7.2 billion and year to date HY is at $171 billion.

(Food Business News) B&G Foods names head of corporate strategy

  • Bruce C. Wacha has been appointed to the newly created position of executive vice-president of corporate strategy and business development for B&G Foods, Inc., effective Aug. 21. In this role, Mr. Wacha will oversee the company’s corporate strategy and business development, including mergers and acquisitions, capital markets transactions and investor relations. Additionally, he will serve on B&G Foods’ executive management team.
  • “We are very pleased to have Bruce Wacha join our team,” said Robert C. Cantwell, chief executive officer of B&G Foods. “M.&A. and capital markets transactions are vital to our growth strategy, and Bruce is an experienced and talented executive who will be a valuable addition as we continue to execute that strategy.”
  • Mr. Wacha joins B&G Foods from Amira Nature Foods Ltd., where he spent three years as the chief financial officer and executive director on the board of directors. Previously, he spent more than 15 years in the financial services industry advising corporate clients across the food, beverage and consumer products landscape at Deutsche Bank Securities, Merrill Lynch and Prudential Securities.

(Business Wire) AES Announces Pricing of $500 Million of Senior Notes in Public Offering

  • The AES Corporation announced that it has priced $500 million aggregate principal amount of 5.125% senior notes due 2027. AES intends to use the net proceeds from the offering of the Notes to fund the concurrent tender offer to purchase AES’ outstanding 8.00% senior notes due 2020 and to pay certain related fees and expenses. AES intends to use any remaining net proceeds from this offering after completion of the tender offer to retire certain of its outstanding indebtedness. The closing of the offering of the Notes is expected to occur, subject to certain customary conditions, on August 28, 2017.

(CNBC) Tesla’s first junk bond offering is a hit

  • Tesla raised $1.8 billion, $300 million more than expected, in its first high-yield junk bond offering.
  • The yield of 5.30 percent was slightly higher than the original guidance of 5.25 percent.
  • Goldman Sachs was the lead underwriter of the eight-year bonds. S&P rated the bonds negative B and Moody’s B3.
  • “It was well-received,” said Efraim Levy of CFRA. “In a large extent it does show that people are interested in the bonds of the company because they believe in the long-term growth … story.”
  • It “speaks to the sheer insanity found in the high-yield market to have a deal like this upsized with terms so unappealing to investors,” said Larry McDonald, author of The Bear Traps Report newsletter. “The deck is stacked for Tesla in bond deal terms, congrats to Elon Musk.”

Meanwhile, away from CNBC, a daily high yield publication ran the headline “Tesla Trades Terribly.”

  • The article had many quotes from bond traders on Wall Street. One trader commented that the Tesla deal “was one that a lot of high-yield money managers basically avoided.”
  • Another trader said that there was some demand overseas but that “among your regular on-the-run high-yield guys, we couldn’t find anybody that played in it.”
  • Finally, a trader went on to say that the “deal was away from the normal high-yield universe” and the order book “was hyped.”

(Bloomberg) Junk-Debt Wrecking Ball Swings Toward Telecom

  • Buried in last week’s debt sell-off was an important message to credit investors: Not all bonds are the same, and those of telecommunications companies appear worse off than others.
  • While U.S. high-yield bonds lost 0.8 percent last week, debt of companies such as Frontier, CenturyLink and Intelsat were hit even harder. Speculative-grade bonds of telecom companies lost 1.3 percent on average, more than those in any other industry.
  • The pronounced industry weakness was due in part to some company-specific issues, such as some disappointing second-quarter earnings and merger speculation. But the disproportionate declines highlight broader investor concern about an increasingly challenging backdrop for these companies.
  • While a collapse is hardly imminent for these companies, it’s worthwhile questioning what their futures look like in three, five or 10 years. And from debt investors’ perspective, it’s worth taking note of this, especially in light of current trends in the $1.3 trillion U.S. junk-bond market. Instead of a broad-based sell-off, weakness has cycled through specific sectors, one or two at a time. (Remember when energy bonds were the focus, back in 2014 and 2015, or retail debt of late?)

(Bloomberg) Energy Capital, Investors to Buy Calpine for $5.6 Billion

  • Private equity firm Energy Capital Partners and a consortium of investors have struck a deal to buy U.S. power generator Calpine Corp. for $5.6 billion in cash.
  • Tyler Reeder, a partner at Energy Capital, said the firm doesn’t expect to make any changes to the way Calpine operates or to the company’s financial policy and previously announced $2.7 billion debt reduction plan.
11 Aug 2017

CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Lipper, for the week ended August 9, investment grade funds posted a net inflow of $2.464bn. This marks 34 straight weeks of inflows and inflows in 70 of the last 75 weeks. Per Lipper data, the year-to-date net inflow into investment grade funds was $81.490bn. According to Bloomberg, investment grade corporate issuance for the week was $43.55bn, as 26 issuers tapped the market across 48 tranches. Through the week, YTD total corporate bond issuance was $899.475bn. Investment grade issuance thus far in 2017 is down 4.5% y/y when compared to 2016.

(Bloomberg) IG NIC ANALYSIS: Softer Backdrop Prompts New Issue Concessions

  • High-grade bond issuers shrugged off a soft broader market tone for the second day running, pricing $4.25b Thursday.
  • Given the geopolitical tensions between the U.S. and North Korea, the recent deluge of primary supply, and wider credit spreads, many investment-grade bond deals are requiring new issue concessions. Thursday’s three corporate bond sellers, all rated BBB, provided no exceptions.
  • Deals priced with low-mid single digit concessions as issuers look to navigate the more uncertain primary market terrain.
    • Thermo Fisher Scientific Inc. (TMO) Baa2/BBB/BBB Mkt Cap $69.1b Healthcare/Medical Equipment
      • New Issue Concession: 10y: 8bps, 30y: 10bps
    • The Priceline Group Inc. (PCLN) Baa1/BBB+ Mkt Cap $91.1b Communications/Media
      •  New Issue Concession: 5bps
    • O’Reilly Automotive Inc (ORLY) Baa1/BBB+ Mkt Cap $17.6b Consumer/Auto Retailer
      • New Issue Concession: 5bps

(Bloomberg) Cimarex Reports Second Quarter 2017 Results

  • Second Quarter Production up 9% sequentially; Oil Production up 11% sequentially
  • Successful Wolfcamp Downspacing test in the Delaware Basin
    • 16 wells per section in Reeves County Upper Wolfcamp
  • E&D Capital unchanged for 2017; Production guidance raised slightly
  • Cimarex invested $296 million in exploration and development during the second quarter, 53 percent in the Permian Basin and 45 percent in the Mid-Continent. Cimarex completed 51 gross (18 net) wells during the quarter. At June 30, 2017, 98 gross (29 net) wells were waiting on completion. Cimarex is currently operating 14 drilling rigs.
  • Of note, Cimarex completed a successful four-well downspacing project testing 16 wells per section in the Upper Wolfcamp. Located in Reeves County, the Pagoda State project was brought on production in late April. The four 10,000-foot lateral wells had an average peak 30-day initial production of 1,922 BOE per day of which 956 barrels per day (50 percent) is oil. Please see our latest presentation (posted at www.cimarex.com) for more detail.

(Bloomberg) American Water Capital $1.35b Debt Offering in Two Parts

  • American Water Works Co., Inc. provides drinking water, wastewater, and other water-related services in multiple states and Ontario, Canada. The Company’s primary business involves the ownership of regulated water and wastewater utilities that provide water and wastewater services to residential, commercial, and industrial customers.
  • Tranches
    • $600m 10Y (09/01/2027) at +73
    • $750m 30Y (09/01/2047) at +93
  • UOP: To lend funds to American Water and its regulated operating subsidiaries and to (1) repay $524m principal of the issuer’s 6.085% notes due 2017 upon maturity on Oct. 15, 2017, (2) redeem up to $327m aggregate principal amount of the issuer’s outstanding long-term debt securities due 2018 and 2021 and which have a weighted-average interest rate of 5.71% and (3) repay commercial paper obligations
11 Aug 2017

CAM High Yield Weekly Insights

Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were -$0.1 billion and year to date flows stand at -$5.7 billion. New issuance for the week was $8.1 billion and year to date HY is at $164 billion.

(Oil & Gas Journal) US rig count drops for third time in 6 weeks

  • The overall US rig count has recorded its largest decline since before the drilling rebound commenced in late May-early June of 2016.
  • Baker Hughes’ tally of active rigs in the US dropped 4 units to 954. However, this week’s downward movement was primarily supplied by gas-directed rigs. The overall count is still up 550 units since the bottom of the drilling dive on the weeks ended May 20-27, 2016.
  • US oil-directed rigs edged down a unit to 765, also their third drop of the past 6 weeks, during which time they’ve added just 7 units. They’re still up 449 units since May 27, 2016.
  • Gas-directed rigs fell 3 units to 189, mostly stagnant since May but still up 108 units since last Aug. 26.
  • US crude oil production, meanwhile, continues to rise according to preliminary estimates from the US Energy Information Administration. In EIA’s more-accurate monthly report based on its EIA-914 survey of producers, the agency indicated that May production averaged 9.17 million b/d, up 60,000 b/d from April. Weekly preliminary data for the month, however, put average May output above 9.3 million b/d, indicating that, for a second straight month, more-accurate survey data lagged behind preliminary weekly data.

(Fierce Cable) Altice’s Charter bid could be as high as $185B

  • Hungry European telecom conglomerate Altice could be prepping a bid as high as $185 billion for Charter Communications.
  • According to Reuters, the No. 2 U.S. cable company is worth $180 billion including debt—but excluding any takeover premium.
  • However, analysts have serious doubts as to whether Altice—which has a market cap of around $23 billion to go along with $22.6 billion in debt—has the balance sheet needed to entice Charter shareholders, notably the cable company’s biggest investor, Liberty Broadband and its chief, John Malone.
  • “On the most positive view of synergies, we don’t think there is enough value for Malone and other Charter investors to accept a deal where they cede control, despite holding the majority of the pro forma equity, while taking on the risk associated with a deal,” said a New Street Research investor memo spearheaded by analyst Jonathan Chaplin.

(Business Wire) AES Reports Second Quarter 2017 Financial Results; Reaffirms 2017 Guidance and Long-Term Expectations

  • AES reported financial results for the three months ended June 30, 2017. Compared with last year, the Company benefited from higher margins, primarily driven by higher availability at certain generation businesses, and lower Parent interest expense.
  • Consolidated Net Cash Provided by Operating Activities for the second quarter of 2017 was $251 million, a decrease of $472 million compared to the second quarter of 2016. The decrease was primarily driven by the receipt of overdue receivables at Maritza in Bulgaria in 2016, and the impact from the recovery of high purchased power costs at Eletropaulo in Brazil in 2016. Second quarter 2017 Consolidated Free Cash Flow (a non-GAAP financial measure) decreased $448 million to $106 million compared to the second quarter of 2016, primarily due to the same drivers as Consolidated Net Cash Provided by Operating Activities.
  • “In the last few months, we completed the acquisition of sPower, the largest independent solar developer and operator in U.S., brought on-line an additional 122 MW in the Dominican Republic by closing the cycle at DPP and closed on $2 billion in non-recourse financing for the 1.4 GW Southland CCGT and energy storage project in California,” said Andrés Gluski, AES President and Chief Executive Officer. “These are concrete steps towards achieving our growth objectives, based on long-term, U.S. Dollar-denominated contracts, with decreased carbon intensity. Overall, we are making good progress on our 5 GW of projects under construction, with the exception of our 531 MW Alto Maipo hydroelectric project in Chile, where we are disappointed with the project’s current status and continued cost overruns.”
  • “Our second quarter results reflect our efforts to improve the efficiency of our portfolio through higher availability and our capital allocation decisions that resulted in lower Parent interest,” said Tom O’Flynn, AES Executive Vice President and Chief Financial Officer. “Based on our performance year-to-date, we are reaffirming our 2017 guidance and expectations through 2020.”

(Bloomberg) Junk Bonds Slump as Morgan Stanley Sees a Bigger Unwind Ahead

  • A high-yield bond fund run by BlackRock Inc. slumped on Thursday to its lowest level since March, a day after Morgan Stanley warned a correction may already be underway. The cost of protecting speculative-grade bonds against default in the credit-default swap market climbed to its highest level since July 6. Investors demanded the most extra yield in almost a month to buy junk debt, according to a Bloomberg Barclays index fixed late Wednesday.
  • Investors haven’t abandoned the junk market altogether — Tesla Inc. will probably pay lower-than-average yields on $1.5 billion of bonds it’s selling now. But that kind of enthusiasm for speculative-grade securities may get increasingly rare, Morgan Stanley analysts said.
04 Aug 2017

CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Lipper, for the week ended August 2, investment grade funds posted a net inflow of $1.485m. This marks 33 straight weeks of inflows and inflows in 69 of the last 74 weeks. Per Lipper data, the year-to-date net inflow into investment grade funds was $79.026bn. According to Bloomberg, investment grade corporate issuance for the week was $25.49bn. Through the week, YTD total corporate bond issuance was $855.925bn. Investment grade issuance thus far in 2017 is nearly identical to the total seen through this period in 2016.

(Bloomberg) Teva 10Y, 30Y Bond Spreads Again Get Crushed

  • Teva Pharmaceutical bonds are seeing high volume for the second day amid reports that bond covenants may be breached. Its 3.15 percent coupon bond due 2026 tops the most active list, according to Trace data.
  • Client and affiliate flows account for 85 percent of the volume. Client buying is near 2.3 times selling. Its spread has widened to +190 area compared with +170 around close of business Thursday and +140 area last Friday. The wider spreads may have enticed clients to be better buyers than sellers today.
  • Teva was cut to BBB- by Fitch, outlook negative, this morning. Yesterday Moody’s cut Teva to Baa3 from Baa2 while S&P said its ratings on the company are not affected by the report of lower-than-expected second-quarter results and reduced 2017 guidance.
  • The dramatic repricing has brought the investment-grade name closer to junk comparables.

(Bloomberg) SoftBank Default Risks Jump as Son Mulls Charter Takeover

  • The possibility that SoftBank Group Corp. will pile on even more debt if founder Masayoshi Son goes ahead with a bid for Charter Communications Inc. is starting to spook the bond market.
  • The cost to insure SoftBank’s debt against nonpayment has jumped 17.2 basis points this week to 156.7 basis points on Wednesday, the highest level since Jan. 9, after people familiar with the matter said the company has as much as $65 billion in financing lined up as Son weighs whether to make an offer. Theyield premium on the firm’s 6 percent dollar perpetual bonds has surged 31 basis points in the period, Bloomberg-compiled prices show.
  • Going through with an acquisition of Charter would cause SoftBank’s already bloated debt burden to balloon even further. The ratio of debt to earnings before interest, taxes, depreciation and amortization at billionaire Son’s company is about 5.67, more than double the median of its telecom peers, according to data compiled by Bloomberg. Charter on Sunday rebuffed Son’s initial proposal to combine the company with Sprint Corp., which SoftBank controls.

(Bloomberg) IG NEW ISSUE SECONDARY: TMT Issues Trading Wider Despite NICs

  • This week’s Technology Media and Telecommunications bonds were among the new issues that widened the most in secondary trading, according to Trace.
  • Comcast Corp’s bonds last traded 7-8bps, Verizon Communications’ new 16y is off 2bps and last week’s AT&T jumbo $22.5b transaction is also trading 5-11bps back of issue levels.
  • Comcast & AT&T’s bonds are trading wider despite many of their tranches pricing with double-digit new issue concessions. These issuers have a plethora of debt outstanding suggesting healthy new issue concessions would be required to sell the bonds. Concessions, however, are beginning to creep back into the market across sectors as Kinder Morgan (20bps), Capital One NA (10bps) paid up to price their deals. We have been in a low yield, tight credit spread environment for an extended period and these recent prints could be signaling a degree of investor pushback.
04 Aug 2017

CAM High Yield Weekly Insights

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $0.4 billion and year to date flows stand at -$5.6 billion. New issuance for the week was $6.8 billion and year to date HY is at $157 billion.

(MarketWatch) AMC hits record low as unrelentingly poor box office continues to take a toll

  • AMC said on Tuesday that not only would the company swing to a loss in the quarter, but that it would be wider than analysts surveyed by FactSet were expecting.
  • Analysts have, for the most part, stayed positive on the film exhibitor group, as box office revenues have suffered so far this year. While investors clearly don’t like the news, analysts believe that this too will pass.
  • So far in the year, box office revenue is down 2% compared with the same point last year.
  • “[Our] fundamental view is unchanged, but the stock is likely in the penalty box,” RBC analyst Leo Kulp wrote in a note to investors. “The news does not change our fundamental view given our already low expectations around the second quarter. With higher costs and a weaker third-quarter box office outlook now baked in as well as a positive outlook on the 2018 box office, we believe we could be near a bottoming out.”

(DSL Reports) Frontier Communications Loses Another 101,000 Frustrated DSL Users

  • Frontier continues to lose DSL customers frustrated by the company’s high prices and slow broadband speeds. Frontier’s latest earnings report indicates that the company lost another 101,000 DSL customers last quarter, thanks in large part to users fleeing to cable or wireless services that offer dramatically faster connectivity. Customers in Florida, Texas and California are also still fleeing the ISP due to its bungled acquisition of Verizon’s unwanted DSL and FiOS customers in those states.
  • Frontier CEO Dan McCarthy tried to put a positive spin on the company’s problems with the acquisition, its outdated speeds, and the ongoing defections.
  • “We’re back in the market with new offers, slightly higher speeds, and we feel pretty good about that,” McCarthy said. “Those offers launch really this week, and we’re expecting to see continued voluntarily churn reduction, as well as an uptick in gross adds, and the combination of the two is where we see improvements in net as we get into this quarter.”
  • But that statement tries to obfuscate that many Frontier customers are leaving because the company still refuses to upgrade older DSL lines at any real scale, leaving many users on 3-6 Mbps DSL that falls well below the base definition of 25 Mbps. Cable providers have been having a field day in these markets as DOCSIS 3.1 now allows them to offer gigabit speeds for relatively little investment.

(24/7 Wall St.) More Upside Seen for Cell Tower Giants Ahead of 5G Deployments

  • If there is one part of the communications industry that many consumers tend to overlook, it is the cell and communications tower operators. At least until they lose their signal. SBA Communications Corp. reported mixed earnings that looked a bit softer than expected, but analysts by and large call for more upside in SBA and from its two top rivals.
  • Jeffrey Stoops, president and CEO of SBA Communications, talked up the spending climate ahead of spectrum and 5G deployments in the quarters and years ahead.
    “With substantial spectrum and 5G deployments on the horizon in both the U.S. and internationally, we expect customer demand to remain solid for years to come. Against that demand, we intend to continue to execute well and we expect to continue to favor allocating capital to portfolio growth and stock repurchases. We continue to remain on track to achieve our long term goal of $10 or more of AFFO per share in 2020.”

(CNBC) Sprint swings to a profit, helped by cost cuts

  • Sprint on Tuesday swung to a quarterly profit for the first time in three years and its chief executive said an announcement on merger talks should come in the “near future.”
  • Sprint is in the middle of a turnaround plan and has sought to strengthen its balance sheet to compete in a saturated market for wireless service.
  • While Sprint has cut costs, analysts say the company is highly leveraged. And although its customer base has expanded under Chief Executive Marcelo Claure, growth has been driven by heavy discounting.
  • On the company’s post-earnings conference call, Claure said that while Sprint could sustain itself on its own, the synergies that could come with a transaction were significantly better than remaining a standalone entity.
  • “We have plenty of options, and we’ve had discussions with a lot of different parties,” he said.
  • He said he was surprised Charter said it was not interested in acquiring Sprint given Sprint was never offered for Charter to buy. Rather, he said, it was part of the “bigger play that has been reported.”
  • “Everybody has shown a high level of interest in evaluating Sprint as a potential merger partner. We’re very encouraged by the results of our conversations,” Claure later told reporters.