March 2018 – Cincinnati Asset Management

27 Mar 2018

Investment Grade Weekly Kathryn Bailey 0 comment

CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Wells Fargo, IG fund flows for the week of March 15-March 21 were a positive $167 million, though flows have slowed now for four consecutive weeks. The data analyzed by wells shows that longer duration funds are gathering flows at the expense of shorter duration funds. This is in contrast to Lipper data, where IG saw a solid inflow of $3.5bn versus the 4-wk Lipper average of +$1.6bn. HY outflows continue, with Lipper reporting an outflow of $1.17bn taking YTD outflows to nearly $18bn for the HY asset class.

The IG new issue calendar saw $26.875bn price on the week, as Anheuser-Busch InBev led the way with a $10bn print across six tranches. Corporate issuance is down 18% y/y but there are several large M&A related deals waiting in the wings that could narrow this gap substantially in the coming weeks. It is also likely that the market tone and renewed volatility in stocks and rates are keeping some issuers on the sidelines for the time being.

The Bloomberg Barclays US IG Corporate Bond Index opened on Friday with an OAS of 109, which is widest level yet seen in 2018.

(WSJ) ‘Rolldown’ Shows Why the Bond Market Is an Unfriendly Place to Hide

For bond investors, a concept called “rolldown” is like a virtuous form of financial gravity, a force that generates returns without doing much work. A flattening yield curve, however, is threatening the physics that investors rely upon.
The signals sent by the Federal Reserve Wednesday suggests the yield curve could flatten further: Its rate increases will raise short-dated yields, but there is still skepticism that rates in the long term will be materially higher.
When the yield curve is steep, investors benefit from the yield on a long-term bond “rolling down” the curve. As a 10-year bond over time becomes a nine-year bond, all else being equal, its yield falls and its price rises, producing a gain above the initial yield when the bond is purchased. That offers protection for bond investors in a rising-rate environment, notes TwentyFour Asset Management.
The U.S. yield curve still slopes upwards, with 10-year Treasurys yielding 0.57 percentage point more than two-year securities. But the further out you go, the flatter the curve gets. There is now only a 0.07 percentage-point gap between seven- and 10-year Treasury yields, a gap that has more than halved from a year ago. The potential for rolldown gains is small.
A similar phenomenon is showing up in U.S. corporate bond markets too, with the gap between short- and long-maturity bonds shrinking in both yield and spread terms. A number of forces are potentially at play here, as with the rise in Libor rates.
Higher U.S. Treasury bill issuance is competing for investors’ cash. And the pool of funding for short-dated debt may also have shrunk due to corporate cash repatriation, Citigroup suggests: if dollars can be repatriated and spent, they don’t need to be tied up in bond investments.
By contrast, steeper curves in eurozone government and corporate bond markets may make them attractive to investors. The European Central Bank’s negative-rate policy, which it is in no rush to change, is acting as an anchor for yields, reassuring bond investors. Coupled with the cost for foreign investors to hedge dollar-denominated bonds, U.S. bonds lose out despite their higher yields. All of that may lead to tighter U.S. financial conditions.

(Bloomberg) Bayer Hopes to Close $66 Billion Deal With Monsanto in 2Q18

Bayer continues to await antitrust clearance from the U.S. Department of Justice to close its proposed $66 billion purchase of Monsanto after having obtained all other necessary approvals. A DOJ decision is likely in 2Q. While Bayer agreed to sell or license about $7 billion worth of assets to BASF to ease antitrust concerns, additional measures may be needed for approval. Though this is more likely than not to be secured, if antitrust issues prevent it, Bayer will owe Monsanto a $2 billion fee.
Bayer also has ongoing patent suits against generic-drug makers with respect to Xarelto (with J&J), Beyaz/Safyral, Betaferon/Betaseron, Damoctocog alfa pegol, Finacea, Nexavar and Staxyn. It’s involved in product liability litigation with respect to Yasmin, Mirenac and Xarelto. Other legal issues include environmental and tax matters.

(Bloomberg) PG&E Has a Plan to Prevent More Deadly Wildfires

Five months after wildfires ripped through Northern California’s wine country, PG&E Corp. has developed a plan to lower the risk of another outbreak.
PG&E will establish new guidelines for proactively turning off power lines in areas where there’s extreme fire risk — a practice that regulators had asked about after last year’s events. The company will also keep trees and limbs farther away from power lines to meet new standards and expand its practice of disabling some equipment during fire season, according to an emailed statement Thursday.
The announcement comes as state investigators probe whether PG&E power lines played a role in causing fires in Napa and Sonoma counties that destroyed thousands of structures and killed at least 40 people. The San Francisco-based company has lost more than a third of its market value amid investor concern that its equipment may have sparked the deadly blazes. No cause has been determined.

27 Mar 2018

High Yield Weekly Kathryn Bailey 0 comment

CAM High Yield Weekly Insights

Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were -$1.0 billion and year to date flows stand at -$22.7 billion. New issuance for the week was $3.3 billion and year to date HY is at $53.1 billion, which is -27% over the same period last year.

(Bloomberg) High Yield Market Highlights

Junk bonds have been impervious to tumbling stocks and rising VIX amid threats of potential trade war, as the new issue market priced Cequel Communications, a CCC-credit, in a drive-by offering yesterday.
Yields were resilient as they rose by just 0.6% across ratings, while stocks plunged more than 2.5%, the biggest drop in six weeks; VIX rose more than 30%, also the biggest jump in six weeks
Investors, though cautious, also seem to shrug off another outflow from retail funds
There was no evidence of any panic selloff as yields were on a holding pattern and investors on watch mode
Oil was still near a 6-week high and has been rising in 6 of the last 10 sessions
BofAML strategist Oleg Melentyev wrote in note earlier in the week that technicals are still constructive, and pressure would build up to put cash to work amid light supply; April would see coupon generation of about $7.4b in cash
CCC credits continued to outperform BBs and single-Bs with positive YTD returns of 0.47%, as additional evidence of the strength of junk bond market
BBs were the worst, with negative YTD returns of 1.55%, followed by single-Bs negative 0.36%
Junk bond market was now stronger qualitatively, with issuers rated B3 and lower declining in numbers; Moody’s notes that issuers rated B3 and lower dropped to 13%, below the long-term average of 15% for the 6th straight month

(CNBC) Fed hikes rates and raises GDP forecast again

Interest rates are going up again, thanks to a well-telegraphed Federal Reserve move Wednesday.
Central bankers, led by Jerome Powell in his first meeting as chairman, approved the widely expected quarter-point hike that puts the new benchmark funds rate at a target of 1.5 percent to 1.75 percent. It was the sixth rate hike since the policymaking Federal Open Market Committee began raising rates off near-zero in December 2015.
Along with the increase came another upgrade in the Fed’s economic forecast, and a hint that the path of rate hikes could be more aggressive. The market currently expects three hikes for 2018, and that remained the baseline forecast, but at least one more increase was added in the following two years.
“The economic outlook has strengthened in recent months,” the committee said in its post-meeting statement, a sentence that had not been in previous releases. The language came even though the committee said earlier in the statement that “economic activity has been rising at a moderate rate,” a seeming downgrade from January’s characterization of a “solid” rate.
Fed officials raised their forecast for 2018 GDP growth from 2.5 percent in December to 2.7 percent, and increased the 2019 expectation from 2.1 percent to 2.4 percent.
However, growth is likely to cool after, with the 2020 forecast holding at 2 percent and the longer-run measure still at 1.8 percent.
Inflation expectations, on which the market has been laser-focused lately, changed little. The 2018 forecast remains just 1.9 percent for both core and headline inflation — core excludes food and energy prices. For 2019, the forecast for core personal consumption expenditures edged higher to 2.1 percent from 2 percent, while headline remained at 2 percent. The committee nudged the 2020 level up from 2 percent to 2.1 percent for both core and headline.
The benign inflation expectations are particularly remarkable considering that Fed officials now see unemployment running even lower than before. Currently at 4.1 percent, officials now see the rate for 2018 at 3.8 percent, down from the 3.9 percent December forecast, and 2019 falling all the way to 3.6 percent from the original 3.9 percent outlook. The 2020 forecast also fell, from 4 percent to 3.6 percent.
The so-called dot plot, which indicates individual members’ rate expectations, took a hawkish tilt. While a three-hike policy remains the baseline for 2018, the committee pushed 2019 from 2½ to three increases and 2020 from 1½ to two. The funds rate for 2020 is now expected to be 3.4 percent from the initial 3.1 percent, though the longer-run forecast rose just a bit, from 2.8 percent to 2.9 percent.

(Bloomberg) As Commodities Roar, Africa Wants Bigger Slice of Mining Pie

The collapse in commodities through 2015 hobbled some of Africa’s biggest resource economies, stunting growth and leaving budgets short. Since then a recovery in prices has sent the continent’s biggest miners soaring, boosted profits and rewarded shareholders with bumper payouts. But a lack of returns to governments is drawing a backlash from Mali in the Sahara to Tanzania on the Indian Ocean.
Zambia is the latest flash point. Africa’s second-biggest copper producer slapped a $7.9 billion tax assessment on First Quantum Minerals Ltd. and said it’s planning an audit of other miners in the country. Companies operating in Zambia include units of Glencore Plc and Vedanta Resources Plc.
Next door in the Democratic Republic of Congo, Glencore, the world’s biggest commodity trader, is dealing with a dispute over a new mining code that dramatically boosts taxes, while major gold producer Mali has reportedly saidit might follow Congo’s example. Tanzania has all but crippled its biggest gold miner Acacia Mining Plc, a unit of Barrick Gold Corp., with export bans and a whopping $190 billion tax bill.

16 Mar 2018

High Yield Weekly, Insight, Weekly Insights CAM Team 0 comment

High Yield Weekly 03/16/2018

Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were -$0.2 billion and year to date flows stand at -$17.4 billion. New issuance for the week was $8.9 billion and year to date HY is at $49.2 billion, which is -25% over the same period last year.

(Bloomberg) High Yield Market Highlights

Junk bonds showed some signs of exhaustion as yields rose for several consecutive sessions, with CCC yields rising to a 12-mo. high; as stocks tumbled and the VIX rose for three consecutive sessions. CCC yields have been rising steadily in 7 of last 10 sessions.
Junk investors, though weary and wary, embraced CCC credits and made a beeline for them in the primary market, with two deals for ~$1b pricing
NVA Holdings, CCC credit, got orders more than 3x the size of the offering and priced through talk, suggesting risk appetite was robust
Guitar Center, CCC-rated and a distressed issuer, was welcomed by investors and priced at the middle of talk
CCCs still beat BBs and single-Bs with positive YTD returns of about 0.8%, showing investor appetite for risk was still alive
BBs continued to be the worst performer with negative YTD returns of about 1.3%
Junk bond market was also stronger qualitatively, with issuers rated B3 and lower declining in numbers; Moody’s notes that issuers rated B3 and lower dropped to 13%, below the long-term average of 15% for the 6th straight month

(International Financing Review) Sprint launches near US$4bn spectrum bond

Telecom carrier Sprint raised almost US$4bn from a financing backed by its spectrum, a deal some analysts say will further boost its liquidity and help better prepare for a potentially tough year ahead.
The deal launched roughly in line with price talk
“Spectrum is its most viable assets, and that’s why it is borrowing against it,” an investor said.
The cost of financing for Sprint, rated junk itself, was also cheaper than available in the high-yield market. Sprint’s US$1.5bn junk bond sale last month – the company’s first in three years – came with yields of 7.625% for eight-year debt.
“We are encouraged by Sprint’s efforts to diversify its financing sources and use its under-utilized spectrum to secure more attractive pricing,” CreditSights analysts said.
They predict a bumpy year ahead for the company, earning that Sprint could burn through cash as it ramps up network capex and focuses on moving customers to leasing plans. That comes as the company faces some significant debt maturities.
The analysts note the company has amended its outstanding spectrum-backed note indenture to allow for the issuance of spectrum-backed notes in excess of the US$7bn that will be reached after its latest ABS.
“We would not be surprised to see the carrier explore new secured financing alternatives to bolster its cash position,” said CreditSights.

(Fierce Cable) Is SoftBank back on the Charter hunt? Reportedly buys 5% of cable operator’s stock

Japan’s SoftBank has laid the groundwork for a $100 billion takeover of Charter Communications by its U.S. mobile operator Sprint Communications, the London Times reported over the weekend.
The Times said that led by billionaire Masayoshi Son, SoftBank has quietly purchased 5% of Charter stock in recent weeks.
Neither Charter nor Sprint has commented on this report.
Last summer, Charter rebuffed a SoftBank merger offer of $540 a share at a time when the cable operator’s stock was trading in the low $400 range. Liberty Media kingpin John Malone, Charter’s biggest shareholder, was reported to be in favor of the deal. Also enthusiastic was the Newhouse family, who became influential Charter shareholders when the cable company bought Bright House Networks.
Charter’s management team, led by Chairman and CEO Tom Rutledge, has been resistant of a takeover, while still keen on actualizing the value of fully digested integrations of 2016 acquisitions Bright House and Time Warner Cable.

(PR Newswire) Huntsman Acquires Demilec, a Leading North American Spray Polyurethane Foam Insulation Manufacturer

Demilec has annual revenues of approximately $170 million and two manufacturing facilities located in Arlington, Texas and Boisbriand, Quebec where they produce a full suite of MDI based SPF formulations which they market directly to applicators as well as through distributors. Demilec specializes in both closed cell and open cell formulations, with a focus on products with renewable and recyclable content that are eco-friendly, bio-preferred and reduce energy consumption through highly efficient insulation properties.
Under terms of the agreement, Huntsman will pay $350 million in an all-cash transaction, funded from available liquidity. Based upon full year 2018 EBITDA estimates, this represents a purchase price multiple of approximately 11.5x or 7.5x, pro forma for synergies. The transaction is expected to close by the end of second quarter 2018.
Peter Huntsman, Chairman, President and CEO commented: “This bolt-on acquisition is a great fit to our core strategy to move downstream. The integration of Demilec into our Polyurethanes business offers significant synergies and delivers substantially higher and very stable margins by pulling through large amounts of upstream polymeric MDI into specialized spray foam systems. This integrated business will have greater than 25% EBITDA margins and double digit growth.”

09 Mar 2018

High Yield Weekly, Insight, Weekly Insights CAM Team 0 comment

High Yield Weekly 03/09/2018

Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were -$1.8 billion and year to date flows stand at -$17.1 billion. New issuance for the week was $4.9 billion and year to date HY is at $40.2 billion, which is -23% over the same period last year.

(Bloomberg) High Yield Market Highlights

Junk bonds, though cautious overall, ignored stumbling stocks as issuance continued its steady pace, with Teva Pharmaceuticals pricing through price talk and increasing the size of the offering.
Junk bonds were impervious to wide-spread fears of a possible trade-war as investors saw that as just noise, and that has now become evident in the introduction of new exemptions from the proposed tariff
High yield investors shrug off any talk of rise in rates as the 10 year yield has stayed flat or range bound in the last four weeks
While junk bond yields dropped a tad in sympathy with steadily declining oil prices, there was no material collapse of the market, as was evident in the new issue market, which added a CCC-rated FTR to the calendar after pricing TEVA
CCCs continued to outperform BBs and single-Bs with YTD positive returns of about 0.8%
Goldman Sachs, however, cautioned against CCCs and recommended BBs

(Bloomberg) Sinclair Making Progress Toward FCC Nod on Tribune

Sinclair’s latest FCC filing shows progress on looming issues in the review of its Tribune acquisition. FCC approval is likely in 2Q, after the Justice Department finishes its work. The FCC will now take public comment on Sinclair’s divestiture plan. Sinclair’s bigger risk likely comes after the deal closes, from litigation over the FCC’s UHF discount.
Sinclair’s March 7 update to the FCC indicates that the company is making progress on work needed to get approval of its Tribune M&A. The company now says it seeks to use a recently relaxed FCC rule to own top-four rated stations in only two markets; it abandoned its request for the Harrisburg, Pennsylvania, market. To satisfy a national cap, Sinclair will divest stations in Chicago, New York, and San Diego. The fact that Sinclair will still provide service to some of those stations isn’t likely to dissuade FCC Republicans from backing the deal.
The FCC’s review of the Sinclair-Tribune deal will likely stretch into 2Q, after Sinclair on March 7 amended its application to address divestitures. The FCC will now probably set a brief period to take public comments on the issue. It will then likely take weeks to reach a decision. Sinclair said it plans to sell stations in nine markets where it would otherwise have two top-four stations. It also said it would like to retain two top-four stations in two markets. Justice Department approval will likely come first.

(Bloomberg) Community Health’s Loan Is Said to Fall After Rating Downgrade

Community Health’s outstanding $1.9b term loan H dropped to almost a point, after Moody’s downgraded the hospital operator to Caa1 from B3, according to people familiar with matter.
The Company’s outstanding $1.037b term loan G also fell about a point
The ratings cut “is driven by material erosion in financial performance over the last six months and a lower earnings and cash flow outlook for 2018″: Moody’s
Moody’s now expects adjusted debt/EBITDA to remain above 7.5x over the next 12-18 months
First Lien secured ratings also downgraded to B2 from Ba3

(Business Wire) Frontier Communications Announces $1.6 Billion Second Lien Secured Notes Offering

Frontier intends to use the proceeds from the offering to finance the cash consideration payable in connection with its previously announced offers to purchase for cash certain of its senior notes maturing in 2020, 2021, 2022 and 2023 and to pay related fees and expenses.

(CAM Note) Moody’s downgraded Frontier Communications debt one notch to Caa1

09 Mar 2018

Insight, Investment Grade Weekly, Weekly Insights CAM Team 0 comment

Investment Grade Weekly 03/09/2018

Fund Flows & Issuance: According to Wells Fargo, IG fund flows for the week of March 1-March 7 were a positive $577 million. This is in contrast to Lipper data, where IG saw its second outflow YTD with an exodus of $740 million from IG funds. HY outflows continue, and now there have been 8 consecutive weeks of HY outflows for Lipper reporters. Over $16.6 billion has exited HY over that time period, the largest high-yield outflow streak on record.

The IG new issue calendar saw the most active week of the year, with much of the activity driven by CVS’s $40 billion issuance across 9 tranches. The $40bn deal was the third largest corporate bond deal on record behind Anheuser-Busch InBev’s 2016 $46bn deal and Verizon’s 2013 $49bn deal. Appetite was robust for the CVS issuance due to attractive concessions and plenty of portfolio capacity for the issuer –the bonds are currently 10-20 basis points tighter across the curve from where the deal priced. The strong payroll data has brought a couple of IG issuers into the market as we go to print on Friday morning. All-in total corporate issuance should end the week at nearly $50bln. Corporate issuance is down 12% y/y but there are several large M&A related deals waiting in the wings that could narrow this gap substantially in the coming weeks.

The Bloomberg Barclays US IG Corporate Bond Index opened on Friday with an OAS of 100 on par with its YTD wide of 100. The YTD tight on the index in 2018 was 85, the tightest level since 2007, when spreads bottomed at 82. The all-time tight was 54 in March of 1997 and the all-time wide was 555 in December 2008. 2017 wide/tight was 122/93.

(Bloomberg) U.S. Added 313,000 Jobs in February; Wage Gains Cool to 2.6%

Payrolls rose 313,000 in February, compared with the 205,000 median estimate in a survey of economists, and the two prior months were revised higher by 54,000, Labor Department figures showed Friday. The jobless rate held at 4.1 percent, the fifth straight month at that level. Average hourly earningsincreased 2.6 percent from a year earlier following a downwardly revised 2.8 percent gain.
U.S. stock futures and bond yields rose, as the report signaled the labor market remains strong and will keep driving economic growth. The wage figures show a cooling from a pace that spurred financial turbulence last month on concern that the Federal Reserve could raise interest rates faster. While the unemployment rate remains well below Fed estimates of levels sustainable in the long run, the rise in participation suggests the presence of slack that would keep policy makers to a gradual pace of hikes.

(Bloomberg) CVS Builds $120b Book, Pays Palatable Concessions

CVS Health Corp. paid about 18 basis points on average to price the $40 billion bond leg of its proposed acquisition of Aetna Inc. in the third largest U.S. dollar corporate debt offering ever. The company is said to have built orders surpassing $120 billion, or 3 times covered, at the guidance phase.
- New issue concessions ranged from 10-25bps, levels agreeable to the issuer given the size and scope of this deal. Concessions included 25bps on the $9b 10-year and 15bps on the $8b 30-year. Many were looking for this trade to strengthen a credit market that’s softened in recent weeks.
- Relative valuation is challenging for a trade of this size, given the high visibility and larger credit spread widening.
Word that a deal was in the works started circulating around February 21 when the 10-year was trading around +120. Those bonds widened out to +135 by March 1, when the investor meetingswere disseminated to the market suggesting a deal was imminent.
So where is the “pure trade” before the transaction is priced into the market? Sticking to a method of using trades prior to announcement gives us T+132 on the 10-year, suggesting that the new issue concession on the 10-year was 25bp.(Bloomberg) Blackstone’s Goodman Says High Yield Faces Needed Disruption

“Rising rates is going to create volatility, particularly in the high-yield bond market,” Goodman, the co-head of Blackstone Group LP’s $132 billion GSO Capital Partners credit business, said in a Bloomberg Television interview in New York. “We need that dislocation — that disruption — to find new things to invest in.”
Goodman said he expects the average spread on high-yield bonds, currently about 340 basis points over rates on comparable Treasuries, to widen to widen to 700 basis points in the next two to three years. Spreads haven’t been that wide since oil prices reached a bottom in early 2016.
Distressed and mezzanine investors like GSO and rival Oaktree Capital Management have been patiently waiting for rates to rise, as a glut of yield-hungry investors have made slim pickings for credit firms. GSO has $25 billion of dry powder — money sitting on the sidelines, waiting for investment opportunities — while Oaktree has $20 billion, according to a recent filing.
“As spreads widen you’re going to find lots of investors coming back in to that market,” Goodman said.

02 Mar 2018

High Yield Weekly, Insight, Weekly Insights CAM Team 0 comment

High Yield Weekly 03/02/2018

Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were -$0.5 billion and year to date flows stand at -$15.3 billion. New issuance for the week was $0.8 billion and year to date HY is at $35.0 billion, which is -12% over the same period last year.

(Bloomberg) High Yield Market Highlights

Junk bond investors continued to be wary amid tumbling stocks and rising volatility, with the VIX rising for three consecutive sessions and closing at a two-week high yesterday.
Stocks saw the biggest decline in three weeks and closed at a two-week low as markets could not get a break to consolidate after digesting the Fed chair Powell’s assessment of the economy, following the new tariff proposal of 25% and 10%, respectively, on aluminum and steel
Amid all the hullabaloo over a possible trade war, junk bond yields were resilient

(Modern Healthcare) 20 states sue federal government to abolish Obamacare

Twenty states sued the federal government on Monday to end the Affordable Care Act, claiming the repeal of the individual mandate’s tax penalty rendered the law unconstitutional.
The U.S. Supreme Court upheld the ACA in 2012, determining President Barack Obama’s healthcare reform law was a tax penalty. But the tax cuts signed by President Donald Trump in December zeroed out the penalty, and the rest of the ACA can’t stand as law without it, according to the states.
Health insurance is regulated by the states, but the ACA required states to create or adopt exchanges where individuals could purchase plans. The law also imposed certain requirements on plans, including covering pre-existing conditions.
Since Trump signed the tax cut law, some states have taken action to stabilize their individual markets. In January, Wisconsin’s Republican Governor Scott Walker urged the state legislature to pass a reinsurance program that would help minimize rate increases for residents. Idaho’s GOP Governor Butch Otter has issued an executive order that would allow insurers to sell plans that don’t comply with the ACA, as long as they also have compliant plans for sale in the state.

(Barron’s) Frontier’s Disappearing Dividend Shouldn’t Have Surprised Anyone

Frontier Communicationsannounced it was suspending its dividend following its fourth-quarter earnings report.
Frontier said it lost $13.92 a share in the quarter, which included an impairment charge, on revenue that fell to $2.2 billion but beat forecasts for $2.1 billion. Ebitda came in at $919 million, ahead of the Street consensus for $911 million.

(Bloomberg) AES issues new debt and tenders for existing notes

The AES Corporation issued $1.0 billion aggregate principal amount of senior notes. $500 million senior notes due 2021 priced at 4% while $500 million senior notes due 2023 priced at 4.5%. AES intends to use the net proceeds from the offering of the Notes to fund the concurrent tender offer announced to purchase AES’ outstanding 8.00% senior notes due 2020 and 7.375% senior notes due 2021 (together, the “Outstanding Notes”) 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. In conjunction with the tender offer, the Company is soliciting consents to the adoption of certain proposed amendments to the indenture governing the Outstanding Notes to alter the notice requirements for optional redemption with respect to each series of Outstanding Notes.

(Bloomberg) Teva Selling $3.5 Billion of Junk Bonds to Refinance Debt

Teva Pharmaceutical Industries Ltd., in its first offering as a high-yield issuer, is selling $3.5 billion of bonds to refinance debt.
The drugmaker will have to bear higher interest costs to push out maturities as a massive debt load and weakening sales of a top product have cost it its investment-grade ratings. Teva is selling 1 billion euros ($1.22 billion) and $2.25 billion of debt, it said in a statement. The European offering will include maturities of four and seven years, according to people with knowledge of the matter.
In early discussions with investors, the six-year dollar notes have been marketed at a yield of around 6.5 percent, while the bonds due in 10 years are being offered at about 7.25 percent, said a person familiar with the deal, who asked not to be identified as the details are private. Teva’s outstanding 10-year notes due 2026 currently yield about 5.9 percent, according to Trace bond price data.
“That’s enough of a concession that people are going to look at it,” said John Yovanovic, a high-yield portfolio manager at PineBridge Investments LLC. “This is going to get a lot of attention.”