Category: High Yield Weekly

29 Nov 2019

CAM High Yield Weekly Insights

CAM High Yield Market Note



This is an abbreviated Note due to the Thanksgiving holiday. Happy Thanksgiving!


Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were $0.2 billion and year to date flows stand at $23.5 billion. New issuance for the week was $12.8 billion and year to date HY is at $251.1 billion, which is +55% over the same period last year.



(Bloomberg) Single and Double B Junk Bond Returns Hit 2019 Peak Amid Rally


  • Junk bond returns are creeping back to record highs after three consecutive days of gains.
  • Junk bond year-to-date returns rose to 11.928%, inching closer to the highs of just over 12% reached earlier this month. Index yields were unchanged, closing at a two-week low of 5.64%
  • BB returns hit a year-to-date peak of 13.944%, while single B returns set a new high at 12.553%
  • CCCs are also catching a bid, boosted by a lift in energy bonds, after posting gains for three straight sessions to take year-to-date returns to 4.101%. That comes less than a week after CCC spreads jumped above 1,000bps over U.S. Treasuries for the first time in more than three years 
08 Nov 2019

CAM High Yield Weekly Insights

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were $1.6 billion and year to date flows stand at $24.4 billion.  New issuance for the week was $3.8 billion and year to date HY is at $219.3 billion, which is +37% over the same period last year.


(Bloomberg)  High Yield Market Highlights 

  • S. junk bonds rebounded as equities rallied to a record high and the 10Y UST yield jumped. The debt may open on a softer note as stock futures declined and oil prices dropped amid uncertainty over supply cuts.
  • The debt’s returns turned positive on Thursday after a two-day losing streak as equities climbed to a new high. Year-to-date returns were 12.01%, just 9bps off the 2019 peak
  • Gains were across ratings, with single-Bs posting the most at 0.1% and YTD at 12.39%
  • Junk bond yields were little changed. Single-Bs dropped 6bps to close at 5.68% and BBs closed at 3.88%, down 2bps
  • Spreads held firm across ratings moving in tandem with UST yields
  • There was lull in the primary market with just two drive-by deals for $1.1b pricing yesterday
  • Yesterday’s deals took the November volume to $4.98b
  • As investors turned cautious of weaker credits, Wesco’s $2.18b bond offering faced some resistance and its pricing was delayed


(Reuters)  U.S. may not need to impose auto tariffs this month 

  • The United States may not need to impose tariffs on imported vehicles later this month after holding “good conversations” with automakers in the European Union, Japan and Korea, U.S. Commerce Secretary Wilbur Ross said in an interview published on Sunday.
  • The United States must decide by Nov. 14 whether to impose threatened U.S. national security tariffs of as much as 25% on vehicles and parts. The tariffs have already been delayed once by six months, and trade experts say that could happen again.
  • “We have had very good conversations with our European friends, with our Japanese friends, with our Korean friends, and those are the major auto producing sectors,” Ross said.
  • “Our hope is that the negotiations we have been having with individual companies about their capital investment plans will bear enough fruit that it may not be necessary to put the 232 (tariffs) fully into effect, may not even be necessary to put it partly in effect,” he added.


(Business Wire)  The GEO Group Reports Third Quarter 2019 Results

  • GEO reported third quarter 2019 net income attributable to GEO of $45.9 million, compared to $39.3 million, for the third quarter 2018. GEO reported total revenues for the third quarter 2019 of $631.6 million up from $583.5 million for the third quarter 2018.
  • GEO reported third quarter 2019 Normalized Funds From Operations (“Normalized FFO”) of $70.3 million, compared to $62.9 million, for the third quarter 2018. GEO reported third quarter 2019 Adjusted Funds From Operations (“AFFO”) of $85.6 million, compared to $77.9 million, for the third quarter 2018.
  • George C. Zoley, Chairman and Chief Executive Officer of GEO, said, “We are pleased with our strong quarterly financial performance, which reflect strong fundamentals and growing earnings. During the quarter, we reactivated 4,600 previously idle beds, which are expected to drive future cash flow growth. We are proud to have published our first-ever Human Rights and ESG report in September, highlighting our long-standing commitment to respecting the human rights of all those in our care, as well as, the continued success of our GEO Continuum of Care enhanced rehabilitation and post-release programs. We believe that our current dividend payment is supported by stable and predictable cash flows, and we expect to continue to apply our growing excess cash flow towards paying down debt.”
  • During the third quarter 2019, GEO repurchased approximately $34 million of senior unsecured notes due 2022. GEO also closed on a $44 million, 15-year real estate loan bearing interest at 4.22 percent annually. At the end of the third quarter, GEO had approximately $395 million in available borrowing capacity under its $900 million revolving credit facility, which matures in May 2024.


(Business Wire)  Arconic Reports Third Quarter 2019 Results

  • The Company continues to target the completion of the separation in the second quarter 2020. We expect the Form 10 filing to be available in the fourth quarter 2019. The Engineered Products and Forgings businesses (engine products, fastening systems, engineered structures and forged wheels) will remain in the existing company (Remain Co.), which will be renamed Howmet Aerospace Inc. at separation. The Global Rolled Products businesses (global rolled products, aluminum extrusions and building and construction systems) will comprise Spin Co. and will be named Arconic Corporation at separation.
  • Arconic Inc. reported third quarter 2019 results, for which the Company reported revenues of $3.6 billion, up 1% year over year. Organic revenue was up 6% year over year on strong volumes across all key markets and favorable pricing in the Engineered Products and Forgings segment, and volume growth in packaging, industrial, and aerospace markets as well as favorable pricing in the Global Rolled Products segment.
  • Third quarter 2019 operating income was $326 million, versus operating income of $345 million in the third quarter 2018. Operating income excluding special items was $475 million, up 36% year over year, as favorable product pricing, higher volume, favorable aluminum prices, and net cost reductions more than offset operational challenges in the aluminum extrusions business and unfavorable product mix.
  • Arconic Chairman and Chief Executive Officer John Plant said, “In the third quarter 2019, the Arconic team delivered improved quarterly revenue, adjusted operating income, adjusted operating income margin, adjusted free cash flow and adjusted earnings per share on a year-over-year basis. Arconic’s third quarter 2019 return on net assets improved by 550 basis points year over year. We expect this positive year-over-year trend to continue in the fourth quarter. Based on our performance through the first nine months of 2019 and our outlook for the remainder of 2019, we are increasing our full-year adjusted earnings per share guidance for the third time in 2019.”
  • Arconic ended the third quarter 2019 with cash on hand of $1.3 billion. Cash provided from operations was $52 million; cash used for financing activities totaled $202 million, reflecting the impact of the accelerated share repurchase program of $200 million; and cash provided from investing activities was $117 million. Adjusted Free Cash Flow for the quarter was $154 million.
01 Nov 2019

CAM High Yield Weekly Insights

CAM High Yield Market Note



Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were $1.1 billion and year to date flows stand at $22.9 billion. New issuance for the week was $5.9 billion and year to date HY is at $215.4 billion, which is +36% over the same period last year.



(Bloomberg) High Yield Market Highlights


  • U.S. junk bonds are set to rebound from a three-day decline to open higher this morning as stock futures advance on the heels of better-than-expected manufacturing data from China and as oil prices rise after a four-day losing streak.
  • Junk bonds fell for the third straight session and reported a loss of 0.15%, the longest losing streak in almost five weeks. Spreads are 38bps wider in the past four days at 392bps over U.S. Treasuries
  • CCCs posted a loss of 0.29%, the most across high yield yesterday, taking year-to-date returns down to 5.38%. CCC yields surged to a nine-month high of 11.25% and spreads widened the most in 10 months to 969bps
  • Investors, though cautious, continued to allocate cash to high-yield for the week
  • Supply has ground to a halt with no new deals announced or priced in the past two days but there are some in the pipeline that could emerge soon.  


  • (Bloomberg) Extended Junk Rally Squeezes Spread Between BBB and BB to Record 
  • The difference between BBB and BB U.S. corporate bond spreads collapsed further as investors continued chasing yield in the highest-rated junk bonds
    • The differential between the best high yield and worst investment grade hit a fresh post-credit crisis low amid continued inflows to bond funds and negative yielding debt
    • The compression is making it so investors may have to start reaching even further down the ratings spectrum to find value
    • The differential between BBB and BB was 49 basis points Monday morning, a new record


(Business Wire)  Western Digital Announces CEO Succession Plan


  • Western Digital Corp. announced that Steve Milligan, chief executive officer and a member of the Western Digital Board of Directors (“the Board”) since January 2013, has informed the Board that he intends to retire as the Company’s CEO. Milligan will continue to serve as CEO until the Board has identified and appointed a successor, and then will remain with the Company in an advisory role until September 2020 to ensure a smooth transition. He will also remain a director on the Company’s Board for a transition period after his successor is appointed.
  • The Board has initiated a search to identify Western Digital’s next CEO, and has engaged Heidrick & Struggles, a leading executive search firm, to assist in the process. In order to facilitate a comprehensive process, the Board will evaluate both internal and external candidates.
  • “The Board and management team are committed to ensuring a smooth transition, and we are grateful that we’ll continue to benefit from Steve’s experience and perspective throughout this process,” said Matthew Massengill, chairman of the Board. “As the Board conducts its search for Steve’s successor, we are focused on identifying a strong leader with a proven track record of operating successfully at scale while defining and executing a growth strategy driven by innovation, operational excellence, and world-class talent development.”


(PR Newswire)  Tenneco Reports Third Quarter 2019 Results


  • Tenneco Inc. reported third quarter 2019 revenue of $4.3 billion, versus $2.4 billiona year ago, including $1.8 billion from acquisitions.  On a constant currency pro forma basis, total revenue increased 3% versus last year, while light vehicle industry production declined 3% in the quarter.
  • Third quarter EBIT was $148 millionincluding the acquired Federal-Mogul business, versus $112 million last year.  EBIT as a percent of revenue was 3.4% versus 4.7% last year.   Cash generated from operations was $164 million.
  • Light vehicle production in the fourth quarter is expected to be lower year-over-year by 6%, and the commercial truck market is showing signs of softening in the quarter. In this environment, Tenneco expects fourth quarter revenue in the range of $3.95 billionto $4.05 billion.  Further, the company expects its fourth quarter adjusted EBITDA to be in the range of $295 million to $315 million, including year-over-year margin improvement of approximately 50 basis points in the DRiV division. The company expects the GM labor stoppage to have a negative impact on EBITDA of approximately $35 million.
  • The company has made significant progress on the administrative separation of the two business divisions into two independent companies
  • Tenneco remains committed to the separation of the businesses and continues to execute its plan for the spin off. Additionally, the company is evaluating multiple strategic options to deleverage and facilitate the separation.  Certain of these options could help mitigate the impact of challenging market conditions, which, if current trends were to continue, would likely affect the company’s ability to complete a separation in the mid-year 2020 time range.


Reuters)  U.S. Fed cuts interest rates, signals it is on hold


  • The Federal Reserve on Wednesday cut interest rates for the third time this year to help sustain U.S. growth despite a slowdown in other parts of the world, but signaled there would be no further reductions unless the economy takes a turn for the worse.
  • “We believe that monetary policy is in a good place,” Fed Chair Jerome Powell said in a news conference after the U.S. central bank announced its decision to cut its key overnight lending rate by a quarter of a percentage point to a target range of between 1.50% and 1.75%.
  • “We took this step to help keep the economy strong in the face of global developments and to provide some insurance against ongoing risks,” he said. “We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook.”
  • In his news conference, Powell ticked off an extensive list of reasons why he feels the economy is doing well, and likely to continue to do so under the current stance of monetary policy – from robust consumer spending, strengthening home sales, and asset prices he considered healthy but not to a level of excess.
  • The outlook for the U.S. economy continues to be for “moderate” growth, a strong labor market and inflation rising back to the Fed’s 2% annual goal, he said, and only “a material reassessment” of that outlook could drive the central bank to cut rates further from here.


25 Oct 2019

CAM High Yield Weekly Insights

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were $1.7 billion and year to date flows stand at $21.7 billion.  New issuance for the week was $5.6 billion and year to date HY is at $209.4 billion, which is +33% over the same period last year.


(Bloomberg)  High Yield Market Highlights

  • S. junk bond returns hit a new peak of 11.853% this year, the highest since 2016, amid a hunt for yield by investors. Junk bonds have rallied for 11 straight days, the longest winning streak since April, according to Bloomberg Barclays index data.
  • BB bond returns also rose to a high of 13.433%
  • Junk bond yields also fell to 5.56%, approaching a 20-month low of 5.55% hit on Sept. 23
  • BB yields are 3.85%, near the record low of 3.82% reached on Oct. 21
  • Spreads were largely unchanged moving in tandem with 5Y UST
  • Investors are pouring cash into the asset class.
  • The rally may run out of steam Friday as oil prices are lower and stock futures mixed


(Bloomberg)  Cracks in Leveraged Credit Are Widening

  • S. leveraged credit markets are coming under increasing pressure amid price swings, ratings downgrades and selling by CLOs, according to a report from Morgan Stanley.
  • Strategists led by Srikanth Sankaran identified the increased frequency of big price moves in loans and bonds even outside stressed credits, amid a number of pockets of weakness
  • In loans, about $48b of notional debt representing 4.2% of the leveraged loan index now trades below 80 cents, compared to $14b and 1.3% a year ago
  • The sub-90 cash price bucket also increased to 9.8% from 3.2% in the same period, according to the report
  • “Beneath the veneer of relative spread resilience and muted realized defaults, the weak links in the leveraged credit markets are coming under pressure,” the strategists wrote in the report
  • Selling pressure from CLOs has exacerbated the loan price swings, and willingness to sell is particularly high in CCCs
  • “CLO managers are net sellers of large price moves, especially in lower-rated names,” the strategists wrote


(Wall Street Journal)  Wave of Financial Stress Hits Low-Rated Companies

  • An array of business challenges are hitting low-rated companies across the U.S. economy, driving selling in the bottom tier of the corporate-debt market that contrasts with gains in stocks and other riskier assets.
  • In recent months, consumer demands for wireless phones and high-speed internet have helped push one landline telecom company, Windstream Holdings Inc., into bankruptcy protection and another, Frontier Communications Corp., into restructuring talks with its creditors.
  • Meanwhile, competition from cheap natural gas and renewable-energy sources has caused at least seven coal producers to file for chapter 11 protection over the past year. Opioid lawsuits and the threat of legislation that would curb surprise medical bills have exposed vulnerabilities at some highly leveraged health-care companies. Retailers continue to be pressured by the shift to online shopping. And a wave of financial distress has again hit the oil patch due in part to persistently low commodity prices.
  • Taken together, these developments have caused yields, which rise when bond prices fall, to climb for months on the lowest-rated group of corporate bonds. Unusually, that has happened even as yields have fallen on higher-rated junk bonds.
  • Investors and analysts closely watch junk bonds because companies with subpar credit ratings tend to be affected by economic problems sooner than others. Right now, many remain confident that the problems befalling certain companies aren’t symptomatic of broader economic challenges. Still, others worry that cracks at the very bottom of the market shouldn’t be taken lightly and could ultimately spread to a larger group of assets.
  • “There are specific names and specific subsectors where things are not working,” said Oleg Melentyev, a credit strategist at Bank of America Corp.
  • Melentyev doesn’t think the problems facing the lowest-rated businesses will spill over into the broader market. Still, he said, it is difficult to know for sure because “you have too many yellow signs, warning signs, around.”
18 Oct 2019

CAM High Yield Weekly Insights

CAM High Yield Market Note



Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were $1.9 billion and year to date flows stand at $20.0 billion. New issuance for the week was $4.1 billion and year to date HY is at $203.8 billion, which is +33% over the same period last year.



(Bloomberg) High Yield Market Highlights


  • A six-day rally in U.S. junk bonds is poised to run out of steam as investors digest more corporate earnings and as stock futures drift on data showing slowing growth in China.
  • Returns on BB junk bonds hit a new high of 13.189% as investors continue to scramble for higher-quality junk debt
  • BBs are the second best performing asset class in fixed income after BBBs, which have returned 14.31%
  • The overall junk bond index extended gains for the sixth straight session to 11.635%. The year-to- date high was 11.809% on September 23
  • Issuance has slowed this week as the earnings season keeps companies in blackout
  • Junk bond index yields rose 2bps to close at 5.67%, while spreads held steady at 380bps over U.S. Treasuries
  • BB yields eased to 3.96% after reaching a six-year low
  • CCC yields rose 4bps to 10.97%  


  • (Bloomberg) Aecom Reaches $2.4 Billion Deal for Management Services Unit


  • Aecom, targeted by activist investor Starboard Value, agreed to sell its management services division to a consortium of private equity firms including Lindsay Goldberg and American Securities for $2.4 billion.
  • The Los Angeles-based firm, one of the world’s top engineering and design groups, plans to use the proceeds from the sale to reduce debt and to repurchase stock, it said in a statement Monday, confirming an earlier report in Bloomberg News. The transaction is expected to close in the first half of fiscal year 2020, it said.
  • “We are extremely pleased with today’s transformative and value-enhancing announcement, which significantly accelerates our planned debt reduction and commitment to repurchase stock,” Michael Burke, AECOM’s chairman and chief executive officer, said in a statement.
  • Aecom announced plans to spin off its management services unit in June. It argued at the time that the move would create a leading government services company for its clients, including the U.S. Departments of Defense and Energy, by leveraging its expertise in areas such as intelligence, cyber-security and information technology.


Business Wire) AMC Entertainment Selects Sean Goodman as Its New CFO


  • AMC Entertainment announced the hiring of Sean Goodman, currently CFO of Fortune 500 company Asbury Automotive Group (NYSE: ABG), who will commence working with AMC as Executive Vice President – Finance on December 2, 2019. Current AMC CFO Craig Ramsey will retire on February 28, 2020, in a long-envisioned move.
  • During the overlap, the two executives will work closely together, and Goodman will assume the Chief Financial Officer title upon Ramsey’s retirement. The Company expects an orderly, easy and seamless transition.
  • After an extensive and comprehensive national search, AMC has tapped Goodman, 54, to be Ramsey’s successor. Goodman has more than 30 years of finance experience including leading Financial Planning and Analysis as well as Business Development at Home Depot in Atlanta, was an investment banker at Morgan Stanley in London and worked for Deloitte & Touche in South Africa and New York. He has U.S. public company CFO experience at Asbury Automotive Group. In addition to his almost 20 years working in the United States, Goodman has extensive international work experience in Europe, Asia and Africa.
  • In early February, Craig Ramsey will achieve a milestone 25th anniversary in leadership roles at AMC, including having become its CFO in the year 2000. His eventual retirement has long been in the executive succession planning process for AMC.
  • Adam Aron, AMC CEO and President said, “I cannot thank Craig Ramsey enough for his longstanding service to AMC, and the many vital contributions he has made as one of our most key executives. Our company has greatly benefited from his distinguished career, which has been marked by integrity, ability and common sense. At the same time, I am absolutely thrilled that we have been able to attract to AMC Sean Goodman who surely will help us to propel AMC forward in the years ahead. As we recruited him to join AMC, the sharpness of his mind, his strategic clarity, his extensive international experience and authentic leadership style were all quite evident. It is a terrific outcome that we have added such a superb top tier talent to AMC’s executive team.”


(Business Wire) Geysers Power Company, LLC Announces Senior Secured Notes Offerings


  • Geysers Power Company, LLC (“GPC”), an indirect wholly owned subsidiary of Calpine Corporation and the owner of 13 Geysers geothermal power plants and related assets, announced that it intends to offer Senior Secured Notes, Series A, due 2039 and Senior Secured Notes, Series B, due 2039 in a private placement to qualified institutional buyers. Prior to consummating the notes offerings, GPC and certain other Calpine Corporation subsidiaries (collectively, the “Geysers Entities”) involved in the geothermal power generation business will each be released from current guarantee obligations in respect of Calpine Corporation’s indebtedness and the related liens encumbering the Geysers Assets will be released and no longer available to satisfy creditors of Calpine Corporation. The notes will be guaranteed by the Geysers Entities. The notes and related guarantees will be secured equally and ratably with the indebtedness under a new seven-year senior secured revolving credit facility and a new ten-year senior secured term loan facility in an estimated aggregate principal amount of up to $320.0 million and $400.0 million, respectively (which GPC intends to enter into concurrently with the consummation of this offering) and other indebtedness that is permitted to be secured by such assets, by a first-priority lien on substantially all of GPC’s and the guarantors’ existing and future assets, subject to certain exceptions and permitted liens.
  • GPC intends to use the proceeds from the offerings, together with borrowings under the new term loan facility and letters of credit issued under the new revolving credit facility, to (i) fund a debt service reserve account and a major maintenance reserve account, (ii) pay costs associated with the offerings and entry into the new revolving credit facility and the new term loan facility, (iii) pay a dividend to Calpine Corporation (the majority of which Calpine Corporation intends to use to repay a portion of its existing indebtedness, and any excess funds from such dividend may be used by Calpine Corporation for general corporate purposes) and (iv) fund working capital, ongoing capital requirements and general corporate purposes of the Geysers Entities.




11 Oct 2019

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 $17.0 billion.  New issuance for the week was $1.1 billion and year to date HY is at $199.5 billion, which is +30% over the same period last year.


(Bloomberg)  High Yield Market Highlights

  • The U.S. high-yield bond market is set to extend its first weekly gain in three weeks as trade-talk optimism boosts stock futures and after reports of a missile attack on an Iranian tanker pushed the price of Brent crude to $60 per barrel.
  • Junk bonds posted gains for the second straight session on Thursday, with the Bloomberg Barclays U.S. high-yield index up 0.08% this week and 10.97% YTD; yields have dropped one basis point this week to 5.89%
  • BBs gained 0.03% to take YTD returns to 12.615% and yields dropped to close at 4.20%
  • Single-B yields saw the biggest drop in more than three weeks on Thursday to close at 5.98%, with YTD climbing to 11.294%
  • CCC yields jumped to a more than eight-month high of 11.17% while returns rose by 0.05% to take the YTD to 4.51%
  • Sentiment remains cautious as investors pulled cash from U.S. high-yield funds
  • The primary market activity gained pace yesterday after a sluggish start to the week, pricing three deals


(The Philadelphia Inquirer)  Aramark has a new CEO, activist investor becomes vice chair of the board

  • Aramark Corp. on Monday named John J. Zillmer, an executive associated with an activist investor who controls 20% of the Philadelphia company, chief executive, replacing Eric Foss.
  • The food- and uniform-services giant also announced a revamped board of directors, with the appointment of five new independent directors, all with consumer goods and food industry experience.
  • Zillmer had previously spent 18 years at Aramark, rising to be president of global food & support services before departing in 2004. After leaving Aramark, Zillmer, 64, served as CEO of Allied Waste Industries and Univar Solutions, a global chemical and ingredients distributor.
  • “I am extremely excited about the opportunity to rejoin Aramark at such a dynamic time in the company’s history,” Zillmer said in a news release. “I look forward to working closely with the board and the Aramark team to drive growth and value for our employees, customers, partners, and shareholders.”
  • Even though Zillmer left Aramark in 2004, he has maintained his residency in Philadelphia. Current and former Aramark employees who know Zillmer from his previous time at the company said they were pleased to have him back and confident that he would take the company in the right direction.
  • Paul C. Hilal, whose Mantle Ridge L.P. is Aramark’s largest shareholder, will be vice chairman. Hilal and Zillmer both serve on the board of CSX Corp., another of Hilal’s targets. Zillmer is non-executive chairman of CSX’s board. Zillmer also joined Aramark’s board, where Steve Sadove remains chairman.
  • The moves come six weeks after Foss abruptly retired from the Philadelphia company, shortly after activist investor Hilal disclosed that Mantle Ridge had acquired 9.8% of Aramark’s shares and additional interest that gives Mantle Ridge 20% of the company.


(Reuters)  Trump says U.S., China have reached substantial phase-1 trade deal

  • S. President Donald Trump on Friday outlined the first phase of a deal to end a trade war with China and suspended a threatened tariff hike, but officials on both sides said much more work needed to be done before an accord could be agreed.
  • The emerging deal, covering agriculture, currency and some aspects of intellectual property protections, would represent the biggest step by the two countries in 15 months to end a tariff tit-for-tat that has whipsawed financial markets and slowed global growth.
  • But Friday’s announcement did not include many details and Trump said it could take up to five weeks to get a pact written.
  • He acknowledged the agreement could fall apart during that period, though he expressed confidence that it would not.
  • “I think we have a fundamental understanding on the key issues. We’ve gone through a significant amount of paper, but there is more work to do,” U.S. Treasury Secretary Steven Mnuchin said as the two sides gathered with Trump at the White House. “We will not sign an agreement unless we get and can tell the president that this is on paper.”
  • With Chinese Vice Premier Liu He sitting across a desk from him in the Oval Office after two days of talks between negotiators, the president told reporters that the two sides were very close to ending their trade dispute.
  • China’s official state-owned news organization Xinhua said that both sides “agreed to make the efforts towards a final agreement.”
  • Trump, who is eager to show farmers in political swing states that he has their backs, lauded China for agreeing to buy as much as $50 billion in agricultural products. But he left tariffs on hundreds of billions of dollars of Chinese products in place.
27 Sep 2019

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 $18.0 billion.  New issuance for the week was $5.9 billion and year to date HY is at $193.9 billion, which is +33% over the same period last year.


(Bloomberg)  High Yield Market Highlights

  • S. junk bonds are headed for their first weekly loss since mid-August after posting negative returns for three straight sessions and seeing fund outflows in the week.
  • The 0.06% decline Thursday was led by the energy sector and extended a weekly loss to 0.21% and pushing yields to 5.67%, Bloomberg Barclays index data show
  • Triple-Cs led the slump with a 0.12% drop, their eighth straight decline; yields on the debt climbed 6bps to 10.64%
  • Single-B yields dropped 1bp to 5.68%
  • BB yields rose 1bp to 4.10%
  • Energy index has recorded losses for four consecutive sessions and seven of the last 10
  • Investor caution spurred demand for higher- quality issuers as was evident in the pricing of AMN Healthcare on Thursday, which priced $300m at a yield of 4.625%, less than the initial talk of a 4.75% area
  • Earlier in the week, Qorvo and Beacon Roofing, both BB credits, priced at the lower end of talk after drawing orders more than 3x the deal size
  • On the other end of the spectrum, B1/B rated Shutterfly bonds are now pricing at a discount of 95 with an 8.5% coupon to fund its buyout by Apollo. The acquisition closed Sept. 25


(Bloomberg)  New Twist in Red-Hot Junk Debt Market:  Some Deals Are Flopping

  • At a quick glance, everything seems wonderful in the world of risky credit. In September alone, companies have raked in more than $52 billion by tapping the U.S. leveraged-loan and high-yield bond markets.
  • In recent weeks, a slew of companies — typically those considered the riskiest of the risky — have been forced to either ratchet up interest rates or dangle sweeteners to drum up investor demand and complete deals. A few more — including at least four this month — have been yanked from the market entirely.
  • One common refrain coming from investors is that they don’t want to touch companies with excessive debt, especially those from struggling sectors or with businesses that could suffer more in a downturn. Particularly problematic: companies rated B3 by Moody’s Investors Service, one step away from the junk market’s riskiest tier.
  • “If you’re looking to finance an LBO in the wrong sector or a business vulnerable to a slowdown, that’s tougher,” said John Cokinos, co-head of leveraged finance at RBC Capital Markets. “The loan market has limited appetite for new B3 rated deals, and the high-yield market is pushing back on highly levered deals.”
  • September was the busiest month of the year for leveraged-loan launches as well as for speculative-grade bond pricings. And yields on junk bonds reached the lowest in almost two years. That points to a risk-on market for investors looking for greater returns in a world with $15 trillion of negative-yielding debt.
  • But those days may be numbered with a slowdown weighing on investors’ minds.
  • The pushback on recent LBOs is a sharp contrast to a year ago, when multibillion-dollar buyout financings — including those for Refinitiv and Envision Healthcare — were flying off the shelf despite some of the worst investor protections ever seen. Since then, though, there’s been a clear shift toward quality.
  • To be sure, debt perceived as more resilient in a weaker economy has flown off the shelf, reinforcing the flight-to-quality that has dominated the market for the last few weeks. There was a frenzy, for example, for junk bonds issued by chicken chain Popeyes. They sold earlier this month at one of the lowest-ever yields for eight-year securities at just 3.875%.
  • “For repeat and seasoned high-quality issuers in both high yield and leveraged loans, there’s a strong investor bid,” Cokinos said.


(Bloomberg)  The Unusual Debt Maneuver That Inched Peabody Closer to Coal JV 

  • Peabody Energy Corp.’s plan to merge some of its operations with those of Arch Coal Inc. needed help from investors. They’d either have to agree to refinance its debt or amend its credit agreement to allow the deal.
  • It struck out on the first option, scrapping proposed loan and bond refinancings after investors pushed back. In the end, it figured out a way to bypass the syndicated loan market altogether — with an unusual move that’s now angering some of the company’s lenders.
  • The biggest U.S. coal producer increased the size of a revolving credit facility to $565 million, making it the largest slice of the company’s existing loan package and giving those lenders enough clout to approve the loan agreement amendment Peabody needed, according to people with knowledge of the matter. The amendment helps pave the way for Peabody’s planned joint venture with Arch Coal, which it is seeking to help it produce the commodity more competitively amid waning demand from the electricity industry.
  • Investors in its existing term loan were not impressed by the move, which prevented them from potentially being able to extract a higher interest rate or earning a fee for agreeing to the amendment. The loan’s price dropped to around 95 cents after Peabody announced the completed amendment on Sept. 17, the steepest decline since it obtained the $400 million debt in 2018. In an unusual step, Peabody also announced in a separate filing on that day that it had switched the administrative agent on the loan agreement to JPMorgan from Goldman Sachs Group Inc. The administrative agent typically shepherds through any amendments to borrowing accords.
  • Peabody’s credit agreements covering its loans had given it leeway to upsize the company’s $350 million revolving facility due in 2020 by $215 million. Peabody said Sept. 17 it had successfully upsized that borrowing and obtained the loan agreement amendment. By upsizing the revolver, the lenders of that facility held the majority of voting power, which allowed the loan amendment to pass without needing consent from existing term-loan investors, said the people familiar with the matter, who asked not to be identified because the matter is private.
20 Sep 2019

CAM High Yield Weekly Insights

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were $3.2 billion and year to date flows stand at $18.1 billion.  New issuance for the week was $9.9 billion and year to date HY is at $188.0 billion, which is +32% over the same period last year.


(Bloomberg)  High Yield Market Highlights

  • After the biggest week of inflows since February, U.S. junk bonds are poised to edge higher again Friday, capping the fifth straight week of gains. The CDX HY index is up slightly as stock futures gain and oil rallies. Another $1 billion of deals are set to price today.
  • Investors continued to put money into high-yield bond funds with Refinitiv’s Lipper reporting an inflow of $3.2b for the week ended Sept. 18. That’s the most since February.
  • HYG and JNK — the two-biggest high-yield ETFs, posted a combined $340m of inflows for Thursday
  • There has been a steady stream of new supply in the market this week
  • At least three deals are slated to price Friday
  • Bloomberg Barclays index yields continued to head south, dropping to a new 20-month low of 5.57%; spreads are at a 3-month low of +355
  • Single-B yields also hit a new 20-month low of 5.57% after falling by 1bps
  • BB yields dropped 4bps to close at 4.03%
  • CCC yields bucked the trend and rose for the third straight session to close at 10.62%, up 7bps
  • Junk bond returns rebounded yesterday as oil recovered and posted a gain of 0.029%, taking YTD returns to 11.757%
  • BBs were at 12.8% after a gain of 0.05%
  • Single Bs were at a new 2019 high of 12.394% after a gain of 0.06%
  • CCCs posted negative returns for the third straight session at 0.17%, taking the YTD down to 6.58%


(Bloomberg)  Unhinged Money Markets Trigger Fed Action to Alleviate Stress

  • The Federal Reserve took action to calm money markets on Tuesday, injecting billions in cash to quell a surge in short-term rates that was pushing up its policy benchmark rate and threatening to drive up borrowing costs for companies and consumers.
  • While the spike wasn’t evidence of any sort of imminent financial crisis, it highlighted how the Fed was losing control over short-term lending, one of its key tools for implementing monetary policy. It also indicated Wall Street is struggling to absorb record sales of Treasury debt to fund a swelling U.S. budget deficit. What’s more, many dealers have curtailed trading because of safeguards implemented after the 2008 crisis, making these markets more prone to volatility.
  • Money markets saw funding shortages Monday and Tuesday, driving the rate on one-day loans backed by Treasury bonds — known as repurchase agreements, or repos — as high as 10%, about four times greater than last week’s levels, according to ICAP data.
  • More importantly, the turmoil in the repo market caused a key benchmark for policy makers — known as the effective fed funds rate — to jump to 2.25%, an increase that, if left unchecked, could have started impacting broader borrowing costs in the economy. Because that’s at the top of the range where Fed officials want the rate to be, they are likely to make yet another tweak to a key part of their policy tool set to try to get things back on track when they meet Wednesday to set benchmark rates.
  • But the central bank didn’t wait until then to do something, resorting to a money-market operation it hasn’t deployed in a decade. The New York Fed bought $53.2 billion of securities on Tuesday, hoping to quell the liquidity squeeze. It appeared to help. For instance, the cost to borrow dollars for one week while lending euros retreated after almost doubling Monday.


(CNN)  Coordinated strikes knock out half of Saudi oil capacity, more than 5 million barrels a day

  • Coordinated strikes on key Saudi Arabian oil facilities, among the world’s largest and most important energy production centers, have disrupted about half of the kingdom’s oil capacity, or 5% of the daily global oil supply.
  • Yemen’s Houthi rebels on Saturday took responsibility for the attacks, saying 10 drones targeted state-owned Saudi Aramco oil facilities in Abqaiq and Khurais, according to the Houthi-run Al-Masirah news agency.
  • Yet key questions about the attacks remain unanswered. US Secretary of State Mike Pompeo pinned the strikes directly on Iran, which backs the Houthi rebels. But he said there was “no evidence the attacks came from Yemen.”
  • Preliminary indications are that the attacks likely originated from Iraq, a source with knowledge of the incident told CNN. Iran wields significant influence in southern Iraq, which is situated much closer than Yemen to the affected Saudi sites.
16 Sep 2019

CAM High Yield Weekly Insights

Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were $2.6 billion and year to date flows stand at $16.0 billion. New issuance for the week was $9.3 billion and year to date HY is at $177.1 billion, which is +31% over the same period last year.

 (Bloomberg) High Yield Market Highlights 

  • U.S. high-yield is set for a strong opening with stock futures up after a new round of stimulus from the ECB yesterday, and spreads holding up amid a surge in new issues.
  • U.S. junk bonds have had a blockbuster week pricing over $9 billion in new issuance
  • Bankers have tested investor appetite for lower rated debt and riskier structures this week after double B issuers kicked off the primary market after Labor Day. But investors are being selective
  • Junk bond returns have also rebounded to close at a new peak of 11.58% for the year, after posting a gain of 0.55%
  • CCCs gained the most for the second straight session at 0.22%, taking YTD returns to 6.79%
  • BBs YTD stood at 12.75% after gaining 0.023%
  • Single Bs also hit a 2019 high of 11.9% after gains of 0.05%
  • Yields dipped 1bps to 5.65%, while spreads tightened to near seven-week lows of +365 after tightening 7bps
  • CCC yields dropped the most in three weeks to close at a five-week low of 10.69%, while spreads tightened 15bps to +878

(Reuters) China exempts some U.S. goods from retaliatory tariffs as fresh talks loom

  • China announced its first batch of tariff exemptions for 16 types of U.S. products, days ahead of a planned meeting between trade negotiators from the two countries to try and de-escalate their bruising tariff row.
  • The exemptions will apply to U.S. goods including some anti-cancer drugs and lubricants, as well as the animal feed ingredients whey and fish meal, the Ministry of Finance said in a statement on its website on Wednesday.
  • Beijing said in May that it would start a waiver program, amid growing worries over the cost of the protracted trade war on its already slowing economy.
  • Some analysts view the move as a friendly gesture but don’t see it as a signal that both sides are readying a deal.
  • Indeed, the exempted list pales in comparison to over 5,000 types of U.S. products that are already subject to China’s additional tariffs. Moreover, major U.S. imports, such as soybeans and pork, are still subject to hefty additional duties, as China ramped up imports from Brazil and other supplying countries.
  • Beijing has said it would work on exempting some U.S. products from tariffs if they are not easily substituted from elsewhere.

(PR Newswire) Encompass Health prices offering of senior notes

  • Encompass Health Corporation announced the pricing of its underwritten public offering of $500 million in aggregate principal amount of its 4.500% senior notes due 2028 at a public offering price of 100% of the principal amount and $500 million in aggregate principal amount of its 4.750% senior notes due 2030 at a public offering price of 100% of the principal amount. The Company will pay interest on both series of the notes semi-annually in arrears on February 1 and August 1 of each year, beginning on February 1, 2020. The notes will be jointly and severally guaranteed on a senior unsecured basis by all of its existing and future subsidiaries that guarantee borrowings under the Company’s credit agreement and other capital markets debt.
  • The Company intends to use the net proceeds from this offering to fund the purchase of equity from management investors of its home health and hospice segment, to fund a call of $400 million of its senior notes due 2024 and to repay borrowings under its revolving credit facility.

(Business Wire) Spectrum Brands Holdings Announces Management Changes

  • Spectrum Brands Holdings, Inc., a global consumer products company offering a broad portfolio of leading brands and focused on driving innovation and providing exceptional customer service, announced that Jeremy W. Smeltser, 44, will join the Company on October 1 as Executive Vice President. Mr. Smeltser will succeed Doug Martin, 57, as Executive Vice President and Chief Financial Officer on or prior to December 20, 2019. Mr. Smeltser will report to Chairman and Chief Executive Officer David Maura.
  • The Company also announced two executive leadership promotions. Senior Vice President and Chief Operating Officer Randal D. Lewis, 53, has been promoted to Executive Vice President and COO, effective today, and Rebeckah Long, 45, has been named Senior Vice President, Global Human Resources, effective October 1, and will continue to report to Randy Lewis.
  • Mr. Smeltser most recently was Vice President and CFO from 2015-2018 for SPX FLOW, Inc. following its spinoff from SPX Corporation, where he was Vice President and CFO from 2012-2015.
  • “We’re excited to welcome Jeremy to the Spectrum Brands management team as we execute on our strategies to deliver earnings and cash flow growth in 2020 and beyond, and we look forward to his contributions to our Company’s bright future,” said Mr. Maura. “He is a seasoned public company CFO with a well-developed career path over the last 22 years. He has served at several corporations similar in size and global reach to Spectrum Brands. Jeremy shares our passion for servant leadership in building a fully aligned organization, rooted in a culture of ownership and accountability. Jeremy has an impressive track record in delivering major cost and efficiency improvements across the business platform, and brings a wealth of experience in M&A and other capital structure activities.”

(CNN) Ford debt has been downgraded to junk

  • Moody’s downgraded Ford’s credit to junk Monday evening. It said the automaker faces considerable business challenges, and its poor financial performance badly positions Ford to take on its planned $11 billion restructuring.
  • “Ford is undertaking this restructuring from a weak position as measures of cash flow and profit margins are below our expectations, and below the performance of investment-grade rated auto peers,” Moody’s said.
  • During the Great Recession, Ford and other US automakers suffered massive losses and junk bond credit ratings, which can raise the cost of borrowing. But the industry has been profitable for about 10 years.
  • Ford in 2012 was upgraded to investment grade, which is what a credit rating is called when it is not considered a junk bond.
  • The company responded that it is taking the proper steps to improve its business, and that it has the cash necessary to do so.
  • “Ford remains very confident in our plan and progress. Our underlying business is strong, our balance sheet is solid and we have plenty of liquidity to invest in our compelling strategy for the future,” said company in a statement.
06 Sep 2019

CAM High Yield Weekly Insights

CAM High Yield Market Note



Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were -$0.2 billion and year to date flows stand at $13.4 billion. New issuance for the week was $2.8 billion and year to date HY is at $167.8 billion, which is +28% over the same period last year.



(Bloomberg) High Yield Market Highlights


  • U.S. junk bonds are poised to extend their third straight week of gains as stock futures edged higher ahead of the monthly jobs report and remarks by Chair Jerome Powell in Zurich. Yields dropped to an 11-week low on Thursday to 5.7%, and spreads tightened to a five-week low of +388bps.
  • Investor demand for the debt bolstered issuance even as retail funds faced outflows.
  • Supply kept up its steady momentum and five of six deals were BB credits; all were drive-by offerings pricing at the lower end of price talk
  • The primary is expected to maintain momentum this month, with September issuance of about $20-$25b, according to preliminary estimates from three dealers
  • The Bloomberg Barclays High Yield Index saw the biggest drop in yields in two weeks, with bonds posting gains across all ratings. Returns in the index climbed to a fresh year-to-date high of 11.17%
  • CCC yields closed at 10.86%, a drop of 3bps
  • Spreads ended at +913bps, biggest decline in two weeks
  • BB returns rose to 12.625%, a new 2019 high and the best in high yield, after gaining 0.136%
  • Single-B yields also dropped to a 11-week low to 5.84%, the biggest fall in two weeks
  • Single-Bs are at 11.43%, also a YTD high, after +0.18%
  • CCCs were at 5.672% after a gain of 0.057%

Reuters) To cut or not? Dueling Fed views boost pressure on Powell


  • The Federal Reserve should use its meeting in two weeks to aggressively cut interest rates, one U.S. central banker said on Tuesday.
  • Less than an hour later, a second U.S. central banker said he saw no need to use up the Fed’s precious firepower when the economy is growing, inflation looks stable and labor markets are in good shape.
  • The dueling views – from St. Louis Fed President James Bullard, who called for a half-a-percentage-point rate cut, and Boston Fed President Eric Rosengren, who saw no immediate need for any move – show the tight spot Fed Chair Jerome Powell finds himself in as the Fed’s next policy-setting meeting approaches.
  • On one hand, the escalating U.S.-China trade war and a global economic slowdown have begun to pinch U.S. business spending and manufacturing output, posing a threat to the broader U.S. economy.
  • But Americans continue to spend, wages are rising and employers keep adding jobs, suggesting a downturn is not on the horizon.
  • Although Powell has said the Fed will act “as appropriate” to keep the economy growing, there is plenty of disagreement among his fellow rate-setters about what that two-word phrase means in practice.  


  • (Bloomberg) U.S. Junk Bond Market Springs Back to Life With Three New Deals


  • High-yield borrowers are jumping back into the market after a three-week hiatus with at least a trio of issuers expected to price bonds on Wednesday.
  • Restaurant chain operator Yum! Brands, E&P company Murphy Oil and data storage manager Iron Mountain announced new offerings and are each targeting 10-year bonds
  • The deals follow the reopening of the high-yield market on Tuesday by Icahn Enterprises, which was the first junk bond to price in three weeks
  • Borrowers are selling new bonds mostly to refinance and repay existing debt following a recovery in spreads from August’s sell-off. High-yield bond spreads have rallied to two-month lows of 396bps over U.S. Treasuries after widening to 444bps last month, according to Bloomberg Barclays data
  • Icahn’s new $500 million 4.75% 2024 bond edged higher in secondary trading to 100.125, according to Trace pricing. It priced at par.
  • The deal was well received. It saw investor orders of more than $1.5 billion, helped by its higher double B ratings.
  • Two of today’s offerings have similar ratings, which will likely appeal to investors looking to buy higher credit quality bonds.

(Bloomberg) With 49 Deals in 30 Hours, U.S. Corporate Bond Market Ignites


  • A record number of companies borrowed in the U.S. investment-grade bond market this week as plunging yields spurred another wave of refinancing. And the frenzy isn’t letting up. Since Tuesday, corporations including Coca-Cola Co., Walt Disney Co., and Apple Inc. have sold or are selling notes, bringing the total number of sellers to 49.
  • Completed sales totaled $54 billion through Wednesday, putting this week on track to be the busiest ever for corporate bond deals. At least another $70 billion are projected for the rest of the month, and the activity is spilling over to junk bonds and leveraged loans as well. With more than $16 trillion of bonds in Europe and Asia paying negative yields, investors worldwide are snatching up debt that offers higher returns, keeping demand strong in the U.S.
  • For investment-grade companies, the average yield on bonds was 2.77% as of Wednesday, according to Bloomberg Barclays index data. In late November, that figure was above 4.3%. For a company selling $1 billion of debt, that amounts to $15.3 million of annual interest savings, before taxes. Junk-bond yields have dropped too, with notes rated in the BB tier, the uppermost high-yield levels, paying a near record-low 4.07%.
  • It’s not clear how long that will last — on Thursday, U.S. Treasury yields surged, with the 10-year note jumping as much as 0.12 percentage point to 1.59%.
  • In the leveraged loan market, 17 deals totaling more than $16 billion have launched this week, making it the busiest week since October. Investment-grade and high-yield bankers are telling clients that the good times may not last.
  • “If someone has near-term financing needs, they should be looking to take advantage of this window,” said Jenny Lee, co-head of leveraged loan and high-yield capital markets at JPMorgan Chase & Co. “Things potentially could shut down or get more difficult as we head toward the back half of this year.”