Category: High Yield Weekly

Fund Flows & Issuance: According to Wells Fargo, flows week to date were -$0.2 billion and year to date flows stand at -$4.2 billion. New issuance for the week was $6.3 billion and year to date HY is at $143 billion.

(Reuters) Healthcare bill imperiled with 22 million seen losing insurance

• Twenty-two million Americans would lose insurance over the next decade under the U.S. Senate Republican healthcare bill, a nonpartisan congressional office said on Monday, complicating the path forward for the already-fraught legislation.
• The CBO assessment that an additional 15 million people would be uninsured in 2018 under the bill and its prediction that insurance premiums would skyrocket over the first two years prompted concern from both sides.
• McConnell’s goal was to have a vote on the bill before the July 4 recess that starts at the end of this week.
• McConnell can afford to lose just two Republican senators from their 52-seat majority in the 100-seat Senate, which would allow passage of the bill with Vice President Mike Pence casting the tie-breaking vote.
• “If you are on the fence … this CBO score didn’t help you, so I think it’s going to be harder to get to 50, not easier,” Republican Senator Lindsey Graham said of the bill’s prospects.
• The CBO is only able to assess the impact of legislation within a 10-year window, but it said that insurance losses are expected to grow beyond 22 million due to deep cuts to the Medicaid insurance program for the poor and disabled that are not scheduled to go into effect until 2025.

(CNBC) Report Arconic supplied flammable panels to Grenfell Tower

• Six emails sent to and by an Arconic manager raised questions about why the company supplied the combustible panels despite a public warning that they posed a risk.
• Grenfell Tower, which is more than 200 feet tall, was badly damaged in a June 14 fire that killed at least 79 people. London police said Friday the fire started after an appliance malfunction, adding they were considering manslaughter charges over the disaster.
• Arconic, a former Dow Jones industrial index component, told CNBC in a statement that it is discontinuing the sales of the panels around the world.
• “We believe this is the right decision because of the inconsistency of building codes across the world and issues that have arisen in the wake of the Grenfell Tower tragedy regarding code compliance of cladding systems in the context of buildings’ overall designs,” the company said in a statement.
• It had also told Reuters in a statement it’s not up to the company to decide what’s compliant with local building regulations.

(The Verge) Comcast and Charter reportedly talking with Sprint to offer wireless service

• Sprint’s merger talks with T-Mobile are temporarily on hold while the carrier mulls over a number of potential deals with the United States’ two biggest cable companies, Comcast and Charter.
• The trio of companies has reportedly agreed to a two-month exclusivity period on cutting a deal. Comcast and Charter appear to be interested in reselling Sprint’s wireless service under their own name. That’s something Comcast has already been doing with Verizon, and it could use Sprint’s network to improve coverage.
• Such a deal would likely involve the two cable companies making an investment in Sprint, which the carrier would then use to build out its network, generally known to be the worst of the four major phone service providers.

(Bloomberg) Alphabet Inks Deal for Avis to Manage Self-Driving Car Fleet

• Waymo, the self-driving car unit of Alphabet Inc., has reached an agreement for Avis Budget Group Inc. to manage its fleet of autonomous vehicles. It’s the first such deal in a field that’s still fledgling but exploding with partnerships. Avis shares surged.
• The rental car firm will service and store Waymo’s Chrysler Pacifica minivans in Phoenix, where the parent of Google is testing a ride-hailing service with volunteer members of the public. Waymo will own the vehicles and pay Avis for its service, an arrangement that is set for multiple years but not exclusive. The companies would not share financial terms.
• Avis gives Waymo a potential asset that rivals like the major automakers and Uber Technologies Inc already have: a sprawling network of traditional cars and customers that could be transformed into an autonomous transport service over time. Avis owns Zipcar, the on-demand rental service with over one million members, largely in urban centers. The new deal is limited to Waymo’s vehicles in Phoenix, where it started its first pilot service in April after nearly a decade of research.
• Yet Waymo could spread its self-driving systems into other cars over time. Zipcar was part of Avis’ appeal, said Waymo Chief Executive Officer John Krafcik. “One of the wonderful things about partnerships like this is that they are open,” he said.
• This partnership is the first major one involving oversight of driverless car fleets, a business opening that could help the technology spread. It’s a symbolic win for Avis, which now has the aide of Alphabet, a pioneer in the field that is willing to heave large sums into the unproven tech. Sales at the car rental company have slipped, facing pressure from dips in used vehicle prices, with first quarter revenue falling 2.2 percent to $1.84 billion.

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $0.6 billion and year to date flows stand at -$2.2 billion. New issuance for the week was $2.4 billion and year to date HY is at $133 billion.

(CNBC) Fed hikes interest rates despite declining inflation, sets plan for balance sheet reduction

• The Federal Reserve approved its second rate hike of 2017 even amid expectations that inflation is running well below the central bank’s target.
• In addition, the Fed provided more detail on how it will unwind its $4.5 trillion balance sheet, or portfolio of bonds that includes Treasurys, mortgage-backed securities and government agency debt.
• As financial markets had anticipated, the policymaking Federal Open Market Committee increased its benchmark target a quarter point. The new range will be 1 percent to 1.25 percent for a rate that currently is 0.91 percent.
• “The combination of a rate hike and shrinking the balance sheet equates to a tightening monetary policy at a time when inflation is lower than expected,” said Kathy Jones, senior fixed income strategist at Charles Schwab.

(Bloomberg) Yellen Doubles Down on Bet Hot Job Market Stokes Inflation

• Federal Reserve Chair Janet Yellen is pressing ahead with plans to normalize monetary policy, betting that the ongoing strength of the labor market will ultimately prevail over the recent weakness in inflation.
• In a press conference on Wednesday after the Fed raised interest rates for the second time in 2017, Yellen played down a softening of price pressures in the last few months and voiced confidence the central bank was on course to hit its 2 percent inflation goal.
• “It’s important not to overreact to a few readings, and data on inflation can be noisy,” she told reporters.
• “The risk is that the Fed is too complacent on inflation and more than just transitory factors are keeping it from rising, and that the Fed is too confident about labor market improvement transitioning to wages and inflation,” said Michael Gapen, chief U.S. economist at Barclays Plc in New York.

(Modern Healthcare) CHS fires CEO of dissident Fort Wayne hospitals

• Brian Bauer, the CEO of Community Health System’s Fort Wayne hospitals, has been fired in the wake of a failed physician effort to find a buyer for the eight hospitals.
• The removal is the latest sign of trouble in the most profitable market for CHS, which has been facing hard financial times itself.
• Bauer was removed Monday as CEO of Lutheran Health Network because “current circumstances put him in an untenable position and he is unable to continue in his leadership role,” CHS Division 1 President of Operations Marty Bonick said in a letter to physicians and employees.
• Bauer’s ouster comes three weeks after Franklin, Tenn.-based CHS rejected a $2.4 billion offer from a buyout group that disgruntled physicians in Fort Wayne had brought forward to buy the profitable CHS division. More than 100 physicians supported the buyout effort.
• The physicians said in an editorial Sunday that Bauer had been put in “an untenable position” by advocating for staffing and facilities improvements that were largely ignored by CHS and gave rise to the buyout effort.
• “While this is precisely what leaders must do, it has led to Brian’s being criticized at a time when he should be praised for having the courage to say what needs to be said,” said the members of the physician group known as Fort Wayne Physicians.
• Bauer’s removal has heightened tensions in Fort Wayne, CHS’s most-profitable market, said Dr. John Crawford, a Fort Wayne city councilman who runs an anesthesiology practice in Fort Wayne that practices at the Lutheran network hospitals, rival Parkview Health and other facilities in town.
• “If you wanted a revolution rather than a resolution, this (Bauer’s firing) was the way to do it,” Crawford said.

(Business Wire) Frontier Communications Announces Cash Tender Offers for up to $800 Million Aggregate Maximum Consideration for Certain Series of Notes

• Frontier Communications Corporation announced that it has commenced tender offers to purchase for cash certain series of its senior notes up to an amount such that the maximum aggregate consideration (excluding accrued interest) paid by the Company in the Tender Offers does not exceed $800,000,000, subject to the Acceptance Priority Levels and the Acceptance Sublimits.
• The Tender Offers are intended to address maturities and reduce the Company’s current overall interest expense. The Tender Offers will be funded by the Company from borrowings under a new term loan B facility under its senior credit agreement, which the Company expects to enter into prior to the Early Settlement Date.

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $1.0 billion and year to date flows stand at -$2.8 billion. New issuance for the week was $6.8 billion and year to date HY is at $131 billion.

(New York Times) Trump Plans to Shift Infrastructure Funding to Cities, States and Business

• President Trump will lay out a vision for curtailing the federal government’s funding of the nation’s infrastructure and calling upon states, cities and corporations to shoulder most of the cost of rebuilding roads, bridges, railways and waterways.
• The federal government would make only a fractional down payment on rebuilding the nation’s aging infrastructure. Mr. Trump would rely on a combination of private industry, state and city tax money, and borrowed cash to finance the rest. It would be a departure from ambitious infrastructure programs of the past, in which the government played a major role and devoted substantial resources to paying the cost of large-scale projects.
• “We like the template of not using taxpayer dollars to give taxpayers wins,” said Gary Cohn, director of the National Economic Council and an architect of the infrastructure plan.
• “We want to be in the partnership business,” Mr. Cohn said. “We want to be in the facilitation business, and we’re willing to provide capital wherever necessary to help certain infrastructure along.”

(Reuters) Gold gains after disappointing U.S. jobs data

• Gold prices rose to a near six-week high on Friday in response to disappointing U.S. non-farm payrolls data that lowered expectations for more aggressive U.S. interest rate increases.
• Data showed that U.S. job growth slowed in May and employment gains in the prior two months were not as strong as previously reported, suggesting the labor market was losing momentum.
• A slow recovery in the world’s biggest economy dents the likelihood for higher interest rates which benefits non-interest yielding and safe-haven gold.
• “This is not the kind of report people had hoped for, and that has put pressure on the dollar and yields, and gold is always happy to profit from that,” Georgette Boele, commodity strategist at ABN AMRO, said.

(Bloomberg) Investors Given Black Eye on Frontier’s New $1.5 Billion Loan

• Loan investors helped Frontier Communications Corp. raise $1.5 billion as the struggling company tries to shore up its balance sheet. Some of them are already regretting it.
• The telecom operator’s term loan was sold and is now trading below its issue level, an unusual occurrence in a hot market where strong demand often leads to a bump in market prices after the debt has been sold. The loan was being quoted below 99 cents on the dollar. That’s less than the already discounted price of 99.5 cents it was sold at.
• Banks typically price a loan to enable trading that results in a pop on the debt price after the deal has been allocated. In this case, JPMorgan, which led the deal, seems to have miscalculated demand for the loan that has left some investors flustered.
• The new loan pays interest of 3.75 percentage points more than lending benchmarks.
• Frontier has spent the past few years buying up landline telecommunications assets from Verizon Communications Inc. and AT&T Inc. to expand its revenue base. Though these deals helped double the size of the company, Frontier has been losing phone and internet subscribers to cable competitors, which has pressured sales and its stock price.
• Its debt situation and the need for cash forced the company to cut its quarterly common dividend by 62 percent.

(Bloomberg) In T-Mobile-Sprint Talks, All-Stock Option Said to Emerge

• If a Sprint Corp. merger with T-Mobile US Inc. happens, would-be lenders might be stuck on the sidelines.
• In early-stage discussions between the two wireless carriers, an all-stock deal that would avoid the need for financing has emerged as a potential option, according to people familiar with the matter. Deutsche Telekom AG, the majority owner of T-Mobile, and SoftBank Group Corp., which holds about 83 percent of Sprint, still haven’t decided if they will even attempt a deal, said the people, who asked not to be identified because the negotiations are private.
• An all-stock offer would let Deutsche Telekom avoid paying a premium for Sprint while still making a compelling proposal for investors because of the long-term upside from cost savings and competitive advantages.
• T-Mobile has an enterprise value of more than $80 billion, compared with about $70 billion for Sprint. Such an enormous combination would typically involve billions of dollars in financing, so a stock-for-stock merger might be disappointing for Wall Street banks, which make millions of dollars from lending fees on megadeals.
• One of the proposals that’s been informally considered would involve Sprint and T-Mobile setting an exchange ratio that would give Deutsche Telekom a slightly higher percentage of the company than SoftBank, the people said. Neither company would own more than 50 percent of the new combination.

Fund Flows & Issuance: According to Wells Fargo, flows week to date were -$0.2 billion and year to date flows stand at -$4.3 billion. New issuance for the week was $6.0 billion and year to date HY is at $116 billion.

(Bloomberg) Clariant to Buy Huntsman for $6.4 Billion as M&A Surges

• Clariant AG agreed to buy Huntsman Corp. in an all-stock deal valuing the U.S. company at about $6.4 billion, extending a record run in transactions in the global chemicals industry.
• The chances another offer for Clariant emerges are “high,” given it’s the No. 1 target in the sector, a Baader Helvea analyst said in a note, adding that the planned combination with Huntsman comes across as a defensive move.
• An agreement between Huntsman and Clariant adds to an already historic level of deals in the industry as CEOs seek to bolster tepid sales growth. Global chemical companies have more than $300 billion in M&A planned, according to a report by AT Kearney published in March. That level is more than twice the previous all-time high set at the end of 2015, according to the management consulting firm.
• “We never felt or saw ourselves as a takeover candidate,” Clariant CEO Hariolf Kottmann said on the call. “It would be very surprising to me if there were another company who could match or even top the value we are creating by merging these two companies together or that could tell a more convincing story to the market.”

(Modern Healthcare) Trump budget proposal would slash Medicaid

• President Donald Trump’s budget proposal reflects the same $800 billion cut to Medicaid over a decade that was in the bill which last month passed the House. The Congressional Budget Office estimates that could lead to 10 million people losing healthcare insurance over 10 years.
• According to the Associated Press, the White House will also implement a federal order that allows states to impose work requirements on people who receive Medicaid and food stamps.
• By cutting Medicaid, Trump is rejecting the calls of some Senate Republicans who asked him not to stop expansion of Medicaid, which funneled billions into cash-strapped states. Even the most ardent opponents of the Affordable Care Act held out their hands when the federal government offered to subsidize the cost of expanding eligibility for Medicaid.
• “I would think that the health care bill is our best policy statement on Medicaid going forward,” said Rep. Greg Walden (R-Ore.), chairman of the House Energy and Commerce Committee, which has jurisdiction over the program.

(Bloomberg) Shale Is Just a Scapegoat for Weaker Oil Prices

• When the Organization of the Petroleum Exporting Countries gathers in Vienna this week, members and non-OPEC oil producers are likely to extend the production cuts put in place in November as a way to shore up prices, which have been choppy this month. Whatever the final details look like, a mix of oil-bullish policy and jawboning are likely to be on the menu.
• Oil prices have risen on trend since April 2016, but came under pressure in early May, and analysts once again pointed to U.S. shale oil production as the culprit. And while shale is a big deal, there wasn’t a major change in output that triggered the significant oil market selloff starting May 2. After all, the shale story has been playing out for some time, and oil rig counts are up around 125 percent since May 2016.
• The focus on the supply side of the market to explain this recent selloff was misguided because this time, it was demand that engendered concerns: The April Chinese Manufacturing Caixin PMI, which was released late on May 1, fell to the slowest pace in seven months.
• China is the critical marginal swing player for oil demand growth and consumption, and the weak Chinese manufacturing PMI — and its implications for oil demand growth — initiated the selloff in WTI crude oil prices that started with a close below a critical trendline that had been in place since April 2016. Although oil prices have risen since the early May selloff, they remain under pressure — and traders will be taking their cues from the action in Vienna this week.

(Bloomberg) MGM Said to Drop $1.3 Billion Bid for Sands Pennsylvania Casino

• MGM Resorts International dropped its $1.3 billion bid to acquire a casino in Bethlehem, Pennsylvania, according to a person familiar with the situation.
• The parties appeared close to a deal just weeks ago. MGM approached casino owner Las Vegas Sands Corp. in March and was performing due diligence on the property, according to the person, who asked not to be identified because the discussions were private. Sands sent a letter to employees of the casino informing them of the possible sale and halted work on an expansion.
• It wasn’t immediately clear what derailed the sale, but lawmakers in Pennsylvania are considering legislation that would allow slot machines in bars, an expansion that has eaten into the business of traditional casinos in other states such as Illinois.
• The deal would have allowed Las Vegas-based MGM to accelerate its expansion in the eastern U.S. through the company’s publicly traded real estate investment trust, MGM Growth Properties, which made the initial approach. Last year, MGM bought out its 50 percent partner in the Borgata casino in Atlantic City, New Jersey, and opened a resort in Maryland. Another casino is planned for Massachusetts next year.
• Las Vegas-based Sands, the world’s largest casino company, would have parted with an asset that doesn’t fit its focus on large international meeting and convention destinations.

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $0.4 billion and year to date flows stand at -$4.1 billion. New issuance for the week was $2.4 billion and year to date HY is at $110 billion.

(Reuters) Oil rises after Saudi and Russia back longer supply cut

• Oil jumped more than 2 percent to its highest in more than three weeks, topping $52 a barrel after Saudi Arabia and Russia said that supply cuts need to last into 2018, a step toward extending an OPEC-led deal to support prices for longer than first agreed.
• Energy ministers from the world’s two top producers said that supply cuts should be prolonged for nine months, until March 2018. That is longer than the optional six-month extension specified in the deal.
• Oil traders were surprised by the strong wording of the announcement, though it remained to be seen whether all countries participating in the deal would agree with the Saudi-Russian stance. Some analysts said that U.S. production could still threaten to disrupt the market balance unless the cuts were deepened.

(Globe Newswire) Avis Budget Group Announces Resignation of David Wyshner, President and CFO

• Avis Budget Group, Inc. (NASDAQ:CAR) today announced the resignation of David B. Wyshner, President and Chief Financial Officer. Mr. Wyshner, who has served as the Company’s chief financial officer since 2006 and its president since January 2016, will leave the Company in June to pursue other opportunities.
• “During his tenure at the Company, David consistently delivered results, and was instrumental in growing our global footprint and deploying our cash flow to enhance shareholder value,” said Larry De Shon, Avis Budget Group Chief Executive Officer. “We thank David for the work he has done and his dedication to our Company, which have positively impacted our strategies and contributed to our success, and wish him all the best in the future.”
• “I am proud of what the Company has done to drive its evolution as a leading global player in its industry,” said Mr. Wyshner. “I look forward to moving on to new opportunities. At the same time, I am immensely grateful for the opportunity to have played a role in Avis Budget Group’s development and to have worked with so many talented colleagues.”
• The Company intends to appoint Martyn Smith, who previously served as finance director of the Company’s Avis Budget EMEA subsidiary and of Avis Europe plc, to serve as interim chief financial officer and is conducting a search to fill the CFO position on a permanent basis.

(Business Wire) Thomas J. Aaron Named Chief Financial Officer of Community Health Systems

• Aaron joined Community Health Systems in November 2016 following a 32-year career at Deloitte & Touche LLP where he retired as Tennessee Managing Partner. He led teams for many of the firm’s largest national healthcare provider and payer clients, including Community Health Systems, most recently in 2013.
• Aaron succeeds W. Larry Cash, who retired May 16, 2017, after 20 years of service as the Company’s Chief Financial Officer.

(Benzinga) Signs A Sprint, T-Mobile Tie-Up Is Gaining Momentum

• A long awaited Sprint Corp merger may be closer to completion than previously anticipated.
• Sprint’s parent company SoftBank may be starting informal deal discussions with Deutsche Telekom, T-Mobile’s parent company, according to several recent press reports.
• Softbank Group CEO Masayoshi Son previously stated that the preferred option of a Sprint merger was with T-Mobile.
• According to Barclays’ analyst Amir Rozwadowski, the deal will ultimately come down to whether both parent companies can close a complicated and wide bid-ask spread.
• Based on recent Barclays’ meetings with company management, T-Mobile has expressed it wants clear operational ownership in order to make sure a potential deal does not disrupt its three-year growth plan.
• Rozwadowski believes Softbank is more flexible to get the deal done, especially after expressing a clear preference for a deal with T-Mobile. “We believe core considerations for Sprint would include value attribution to its expected margin expansion/and cash flow improvement, and significant 2.5 GHz spectrum holdings. Given its admission that it would be a willing buyer or seller, we believe the company seems more flexible on ownership structure.”

(The Hill) Sinclair deal puts heat on FCC

• The proposed acquisition by Sinclair Broadcasting Group of Tribune Media Company is inflaming criticism of the Federal Communications Commission (FCC), which helped pave the way for the deal by relaxing media ownership restrictions.
• Sinclair announced earlier this month that it had reached an agreement to buy Tribune for $3.9 billion. The announcement came several weeks after the FCC voted to ease restrictions on the amount of local television stations that broadcasters can own.
• Broadcasters are now limited to serving 39 percent of the country’s households. Last month, the FCC reinstated what’s known as the UHF discount, which makes stations that used to broadcast on ultra-high frequency count less toward the 39 percent ownership limit.
• Without the discount, Sinclair already reaches 38 percent of U.S. households, according to an analysis from Fitch Ratings. Once the discount goes into effect, the Fitch study finds, Sinclair’s share will drop to 25 percent — giving the company more room to buy local television stations.
• The deal with Tribune is still likely to push Sinclair over the media limit, and the company has said that it will explore ways to avoid exceeding the cap.

Fund Flows & Issuance: According to Wells Fargo, flows week to date were -$1.6 billion and year to date flows stand at -$2.4 billion. New issuance for the week was $7.1 billion and year to date HY is at $108 billion.

(Variety) AMC Entertainment Quarterly Revenues Beat Estimates, but Buying Spree Takes Bite Out of Profits

• Earnings at the world’s largest exhibition chain fell more than 70% to $8.4 million, which the company attributed to costs associated with its purchase of Odeon Cinemas Group and Carmike Cinemas, two deals that expanded its presence in Europe and the United States. Revenue for the three-month period ending in March rose 67.6% to $1.28 billion. Analysts had projected that the company would do $1.25 billion in sales.
• Excluding merger and acquisition costs, AMC said its net earnings increased 7.5% to $34.6 million. Box office hits such as “Beauty and the Beast” and “Logan” helped goose attendance at the chain, with admissions revenues climbing nearly 70% to $817.3 million. AMC has invested heavily in updating its menu and moving beyond popcorn and soda. It has added alcoholic beverages and more inventive snacks at many locations. The strategy appears to be working — food and beverage revenues at the chain rose 63% to $397.9 million.
• In a statement, AMC CEO Adam Aron said the company will continue to invest in sprucing up its food offerings and in outfitting theaters with recliner seats. He also predicted that the theater chain’s acquisitions would result in certain cost synergies.
• “We are only just beginning to unlock the growth potential of our recent acquisitions,” Aron said. “The initial integration efforts of creating a transformed AMC have been done quickly and have been very smooth.”

(CNBC) Mortgage applications rise 2% as more buyers hit the spring market

• Total mortgage application volume increased 2.4 percent on a seasonally adjusted basis last week from the previous week. Volume is still nearly 14 percent below year-ago levels because of weaker refinancing, according to the Mortgage Bankers Association .
• Even as buyers complain of high home prices and limited listings, mortgage applications to purchase a home gained 2 percent for the week and are 6 percent higher than a year ago.
• “Continuing strength in the job market and improving consumer confidence drove overall purchase applications to increase last week,” said MBA economist Joel Kan. “The index for purchase applications reached its highest level since the beginning of October 2015, which was the week prior to the implementation of the federal government’s ‘know before you owe’ rule.”

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

• AES reported financial results for the three months ended March 31, 2017. Compared with last year, these results primarily reflect higher margins at the Company’s: Mexico, Central America and the Caribbean (MCAC) Strategic Business Unit (SBU). The positive contributions were partially offset by lower margins at the Company’s Europe SBU, due to the restructuring of the Power Purchase Agreement at Maritza in Bulgaria in the second quarter of 2016.
• Consolidated Net Cash Provided by Operating Activities for the first quarter of 2017 was $703 million, an increase of $63 million compared to the first quarter of 2016. The increase was primarily driven by higher margins, as well as lower tax. First quarter 2017 Consolidated Free Cash Flow increased $56 million to $546 million compared to the first quarter of 2016.
• “During the first quarter we made meaningful progress on our objectives for 2017, including restructuring our 531 MW Alto Maipo hydroelectric project in Chile, prepaying $300 million in Parent debt and reshaping our portfolio by exiting 3.7 GW of merchant coal-fired generation in Kazakhstan and Ohio,” said Andrés Gluski, AES President and Chief Executive Officer. “We secured final permits for our 1.4 GW Southland repowering project in California and agreed to acquire 386 MW of wind generation in Brazil. Along with our 3.4 GW currently under construction and expected to come on-line through 2019, we expect these projects to be significant contributors to our future growth.”
• “Based on our first quarter results and our future outlook, we are reaffirming our 2017 guidance for all metrics, as well as our 8% to 10% average annual growth rate through 2020,” said Tom O’Flynn, AES Executive Vice President and Chief Financial Officer. “Our strong cash flow and continued Parent debt paydown keep us on track to achieve investment grade credit statistics.”

(Houston Business Journal) Calpine Corp. reportedly considers selling itself

• People familiar with the matter told the Wall Street Journal that the company is working with investment bankers at Lazard Ltd. (NYSE: LAZ). A variety of private equity firms have expressed interest in Calpine, per the WSJ. However, the process is in the early stages, and there’s no guarantee a deal will be reached.

Fund Flows & Issuance: According to Wells Fargo, flows week to date were -$0.3 billion and year to date flows stand at -$0.8 billion. New issuance for the week was $3.9 billion and year to date HY is at $101 billion.

(New York Post) Almost 500K drop pay TV in Q1

• Almost half a million subscribers stopped paying for cable, satellite and other pay TV formats in the first quarter
• Charter Communications, which is integrating Time Warner Cable and Bright House Networks, lost 100,000 TV subscribers in the first quarter, on top of 105,000 in the prior quarter.
• Charter, backed by John Malone’s Liberty Broadband, has said new pricing has led to customer departures, though it added 428,000 broadband subscribers.
• The picture at Charlie Ergen’s satellite service Dish is even bleaker. The satellite provider lost 143,000 TV subscribers versus Street estimates for a loss of 72,000.
• AT&T, which operates DirecTV and U-Verse, said its satellite TV service DirecTV was flat, while its U-Verse service lost 233,000.
• Only Comcast managed to eke out subscriber growth, adding 32,000 TV accounts.

(Business Wire) Frontier Communications Reports 2017 First Quarter Results

• Frontier Communications Corporation reported its first quarter 2017 results, and announced that the Board of Directors has revised the Company’s capital allocation strategy, which includes a reduction in the quarterly dividend to $0.04 per share, to enhance financial flexibility and achieve a targeted leverage ratio of 3.5x by year-end 2021, down from the current ratio of 4.39x.
• Dan McCarthy, President and CEO, stated, “During the quarter, we continued to realize our targeted efficiencies and synergies, and I am also pleased to have achieved our third consecutive quarter of improved FiOS gross additions in the California, Texas and Florida (CTF) markets. We are executing on a number of initiatives with the goal of enhancing customer experience, reducing churn, stabilizing revenues and generating cash flow.
• “Our Board regularly reviews the Company’s long-term capital allocation strategy, and it has determined to reduce the dividend at this time to provide additional financial flexibility, while still returning a meaningful cash dividend to shareholders. As we continue to execute on our strategy to deliver on the full potential of our strong assets and generate additional cash flow, we will optimize our capital allocation to ensure we strike a balance between investing in the business, paying down debt and returning capital to shareholders,” said McCarthy.

(Business Wire) Community Health Systems, Inc. Announces First Quarter 2017 Results

• Net operating revenues for the three months ended March 31, 2017, totaled $4.486 billion, a 10.3 percent decrease, compared with $4.999 billion for the same period in 2016.
• During the three months ended March 31, 2017, the Company recorded a non-cash expense totaling $250 million related to impairment charges to reduce the value of long-lived assets, primarily allocated goodwill, at hospitals that the Company has identified for sale. The impairment charges do not have an impact on the calculation of the Company’s financial covenants under the Company’s Credit Facility.
• Commenting on the results, Wayne T. Smith, chairman and chief executive officer of Community Health Systems, Inc., said, “We continue to make good progress on our strategic and operational initiatives, and we are pleased to see these efforts reflected in our first quarter results. We are focused on performance improvements that we believe will yield additional efficiencies as we move through 2017. At the same time, we are making progress with our portfolio rationalization strategy as we work to create a stronger, more sustainable company for the future and further reduce our debt.”

(Globe Newswire) Avis Budget Group Reports First Quarter 2017 Results

• For the quarter, the Company reported revenue of $1.8 billion and a net loss of $107 million, or $1.25 per share. The Company reported an Adjusted EBITDA loss of $27 million and an adjusted net loss of $81 million, or $0.94 per diluted share, in the quarter.
• “Our first quarter results reflect higher-than-expected fleet costs, continued pricing pressures and a shift of Easter traffic to the second quarter,” said Larry De Shon, Avis Budget Group Chief Executive Officer. “We have taken meaningful actions to reduce costs by more than $50 million to mitigate the effects of weak vehicle residual values. We are optimistic that our results will be stronger over the balance of the year as used-car values began to improve near the end of the quarter and our strategic initiatives continue to gain momentum.”
• Revenue declined 2% in first quarter 2017 primarily due to a 5% decline in pricing partially offset by a 3% increase in rental days. Our first quarter net loss was $107 million, and our Adjusted EBITDA loss was $27 million. Results were impacted by lower pricing and higher per-unit fleet costs in the Americas, and by the shift in Easter from March last year to April this year.

(Business Wire) The GEO Group Reports First Quarter 2017 Results

• GEO reported first quarter 2017 Normalized Funds From Operations of $58.1 million compared to $48.7 million for the first quarter 2016. GEO reported first quarter 2017 Net Operating Income of $142.4 million compared to $136.3 million for the first quarter 2016.
• George C. Zoley, Chairman and Chief Executive Officer of GEO, said, “We are pleased with our strong first quarter results, which were driven by robust financial and operational performance across our diversified platform of real estate, management and programmatic services. Our diversified platform has allowed us to provide cost-effective, high quality services for our government partners while delivering industry-leading, evidence-based rehabilitation programs to the men and women who have been entrusted to our care. We’re also pleased to have been able to confirm our split-adjusted Normalized FFO and AFFO guidance for the full-year despite our recent equity offering of 10.4 million split-adjusted shares in March of this year. We remain focused on expanding the delivery of our services and programs and on the effective allocation of capital to continue to enhance value for our shareholders.”
• GEO reported total revenues for the first quarter 2017 of $550.6 million up from $510.2 million for the first quarter 2016. First quarter 2017 revenues reflect $57.2 million in construction revenues associated with the development of the 1,300-bed Ravenhall Facility in Australia compared to $40.8 million in construction revenues for the first quarter 2016.

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $0.8 billion and year to date flows stand at -$0.5 billion. New issuance for the week was $4.2 billion and year to date HY is at $97 billion.

(Modern Healthcare) Some hospitals want to end mandatory bundled pay programs

• Several hospitals have called on the CMS to turn bundled-payment initiatives for cardiac and orthopedic care into voluntary programs, as they don’t have the financial resources to invest in the changes.
• The bundled-payment initiatives pose a serious hardship for safety net hospitals that rely mostly on the Medicare, Medicaid and disproportionate-share hospital payments, according to the Greater New York Hospital Association.
• “Medicare and Medicaid rates no longer cover an adequate level of operating and capital costs, and the resulting lack of margins for safety net hospitals does not allow for capital investment,” the trade group said in an April 19 comment letter.
• Pennsylvania-based Geisinger Health System said it is against making the models voluntary, as some hospitals may game the system by selectively referring or transferring complex patients to providers not participating in the model.
• The American Hospital Association said it supported the models’ overall goal to make providers more accountable for coordinating patients’ care. However, it has voiced concerns in the past over the CMS’ pace of rolling out the models. The AHA supports an implementation delay through Jan. 1, 2018. However, the agency should not delay the models beyond that, the group said.

(Globe Newswire) PULTEGROUP, INC. REPORTS FIRST QUARTER 2017 RESULTS

• “Reflecting our increased business investment over the past few years and the ongoing execution of our Value Creation strategy, PulteGroup delivered another quarter of significant operating and financial gains that drove a 17% increase in earnings to $0.28 per share,” said Ryan Marshall, President and CEO of PulteGroup. “Consistent with our focus on delivering superior returns over the housing cycle, we continue to realize strong operating margins, improve our asset efficiency and return excess funds to our shareholders.”
• “Buyer interest during the spring selling season of 2017 has been high and points to the ongoing strength in recovery for the housing industry,” added Marshall. “Strong buyer demand continues to be supported by an improving economy and resulting employment and wage gains, high consumer confidence, a low inventory of new and existing homes, and the powerful demographic forces of Millennials and Baby Boomers. Given the strength of our land pipeline and our disciplined investment practices, PulteGroup is well positioned to grow its market presence and improve its financial performance within this operating environment.”
• Home sale revenues for the first quarter totaled $1.6 billion, an increase of 14% over the prior year. Higher revenues for the quarter were driven by a 7% increase in closings to 4,225 homes, in combination with a 6% increase in average selling price to $375,000.
• PulteGroup’s backlog at quarter end totaled 9,323 homes valued at $3.8 billion, compared with prior year backlog of 8,755 homes valued at $3.4 billion. The average sales price in backlog of $408,000 is up 6% over the prior year and reflects the ongoing shift in both the mix of homes sold toward more move-up product and toward higher prices within the buyer category.

(Reuters) Trump’s plan to slash business taxes seen as ‘guidepost’

• President Donald Trump unveiled a one-page plan proposing deep U.S. tax cuts, many for businesses, that would make the federal deficit balloon if enacted, drawing a cautious welcome from fiscal conservatives and financial markets.
• Trump’s package fell far short of the kind of comprehensive tax reform that both parties in Washington have sought for years
• Investors, who had been awaiting tax-plan details for months, largely shrugged off the news, with many saying it was still short on specifics and faced a long road to enactment.
• House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell and the top Republicans on the congressional tax-writing committees welcomed the Trump proposals, while leaving space for details to change as legislation evolves.
• “The principles outlined by the Trump administration today will serve as critical guideposts” as Congress and the administration work on tax changes, they said in a statement.

(PR Newswire) Graphic Packaging Holding Company Reports First Quarter 2017 Results

• Graphic Packaging reported Net Income for first quarter 2017 of $37.0 million. This compares to first quarter 2016 Net Income of $57.5 million.
• “Our first quarter Adjusted EBITDA was lower as expected at $161 million compared to $193 million in the prior year period. Net sales were up 2.7%, reflecting recent acquisitions and stable core volumes, consistent with the trends we experienced in 2016. Operating efficiencies improved during the quarter and we successfully upgraded two headboxes on the number six paper machine at our West Monroe, Louisiana mill” said President and CEO Michael Doss. “The quarter was negatively impacted by accelerating commodity input costs, primarily recycled fiber, and the planned downtime costs associated with the upgrade of the two headboxes.”
• “We are executing price increases to offset the unprecedented recycled fiber input cost inflation we are experiencing and expect margins to improve from our pricing actions during the second half of 2017, and in 2018. Our focus on meeting cash flow commitments, growing cash flow, and returning more of it to stockholders over time has not changed.”

Fund Flows & Issuance: According to Wells Fargo, flows week to date were -$21 million and year to date flows stand at -$1.3 billion. New issuance for the week was $1.4 billion and year to date HY is at $93 billion.

(Company Release) GEO Group Awarded Contract

• GEO Group has been awarded a contract by U.S. Immigration and Customs Enforcement (“ICE”) for the development and operation of a new $110 million, company-owned 1,000-bed Detention Facility to be located in Conroe, Texas
• GEO expects to design, finance, build, and operate the company-owned Facility under a ten-year contract with ICE, inclusive of renewal option periods. The 1,000-bed Facility is scheduled for completion in the fourth quarter of 2018 and is expected to generate approximately $44 million in annualized revenues and returns on investment consistent with GEO’s company-owned facilities.
• “We are very appreciative of the continued confidence placed in our company by U.S. Immigration and Customs Enforcement,” said George C. Zoley, GEO’s Chairman and Chief Executive Officer.

(Fierce Cable) Sinclair, 120 Sports launching new linear sports network

• Sinclair Broadcast Group, Silver Chalice and 120 Sports are launching a new multiplatform sports network with linear broadcast and digital offerings.
• The companies will merge 120 Sports’ live studio operations, Silver Chalice’s Campus Insiders’ live collegiate games and Sinclair’s American Sports Network’s (ASN) distribution and live collegiate games. The companies intend to use the professional and collegiate rights from 120 Sports and Silver Chalice to increase access to post-game highlights, news, original long-form programming and full game archives provided by various partners.
• “With this incomparable set of strategic partners, we are evolving ASN into a vastly improved network with access to exclusive content and a combined linear and premium OTT offering that is the model for the future of television,” said Chris Ripley, president and CEO of Sinclair, in a statement.
• “Our recent focus has been on expanding our business with new digital multicast networks that leverage our broadcast spectrum and household reach,” said Ripley in a statement. “Much of the multicast market today focuses on classic TV and movie content, with little aimed at audiences for whom fresh and relevant pop culture content is important. With the launch of TBD, we aim to pair the very best premium digital-first content with the unmatched branding power of traditional television.”

(Business Wire) HCA Previews 2017 First Quarter Results

• HCA anticipates revenues for the first quarter of 2017 to approximate $10.623 billion compared to $10.260 billion in the first quarter of 2016. Net income attributable to HCA Holdings, Inc. for the first quarter is expected to approximate $659 million, or $1.74 per diluted share, compared to $694 million, or $1.69 per diluted share, in the first quarter of 2016. Adjusted EBITDA for the first quarter of 2017 is expected to approximate $2.005 billion compared to $2.003 billion in the previous year’s first quarter.
• Same facility admissions for the first quarter of 2017 increased 1.2 percent, while same facility equivalent admissions increased 1.6 percent when compared to the first quarter of 2016. Same facility emergency room visits for the first quarter of 2017 increased 1.1 percent from the prior year’s first quarter.
• Results for the first quarter of 2017 were affected by changes in payer mix and the loss of one day when compared to the first quarter of 2016. Same facility Medicare admissions comprised 48.1 percent of the first quarter 2017 admissions, compared to 47.0 percent in the prior year’s first quarter. In the first quarter of 2017, same facility managed care/health exchange admissions comprised 27.4 percent of admissions, compared to 28.6 percent in the prior year’s first quarter.
• Same facility revenue per equivalent admission is expected to increase approximately 1.7 percent in the first quarter of 2017 compared to the prior year’s first quarter.

(CNBC) US housing starts total 1.215M in March vs. 1.25M starts expected

• U.S. homebuilding fell in March as the construction of single-family homes in the Midwest recorded its biggest decline in three years, likely reflecting bad weather.
• Housing starts declined 6.8 percent to a seasonally adjusted annual rate of 1.22 million units, the Commerce Department said on Tuesday. February’s starts were revised up to a 1.30 million-unit pace from the previously reported 1.29 million-rate.
• Economists polled by Reuters had forecast groundbreaking activity falling to a 1.25 million-unit pace last month. Homebuilding was up 9.2 percent compared to March 2016.
• Construction in February was boosted by unseasonably warm temperatures. But temperatures dropped in March and a storm lashed the Northeast and Midwest regions, which could have accounted for the drop last month in homebuilding.
• Single-family homebuilding, which accounts for the largest share of the residential housing market, fell 6.2 percent to a 821,000 unit-pace last month. Single-family starts in the Midwest declined 35 percent, the largest drop since January 2014, to their lowest level since August 2015.
• Pointing to underlying strength in the housing market, building permits increased 3.6 percent, driven by a 13.8 percent surge in the multi-family segment.
• A tightening labor market, which is generating steady wage growth is underpinning the housing market. The sector, however, remains constrained by a dearth of properties available for sale.

Fund Flows & Issuance: According to Wells Fargo, flows week to date were -$0.5 billion and year to date flows stand at -$0.6 billion. New issuance for the week was $5.0 billion and year to date HY is at $91.6 billion.

(Company Report) Frontier Communications Expands Broadband in Wisconsin

• Frontier Communications announced that it has made enhanced broadband service available to an additional 8,100 households in Wisconsin. Frontier is leveraging the FCC’s Connect America Fund (CAF) program to bring broadband to approximately 5,000 households in CAF-eligible census blocks while expanding its overall service and reach to approximately 3,100 more households throughout Wisconsin.
• “Through ongoing network investments, Frontier is providing broadband and faster speeds to residents,” John Van Ooyen, Frontier Director of Operations said. “We have been aggressively deploying and upgrading our broadband service and look forward to serving more residents.”
• The deployments are made possible through a combination of Frontier’s capital investment and the CAF. The FCC established the CAF in 2011 to facilitate broadband deployment to the millions of Americans living in rural areas without access to broadband infrastructure. As of 2016, Frontier began receiving approximately $30 million a year from the CAF to expand and upgrade the company’s network to 77,000 locations in Wisconsin by the end of 2020.

(Fierce Cable) Charter sued for selling personal customer data without consent

• According to the St. Louis Record, which obtained a copy of the Eastern District of Missouri court complaint filed on April 4, subscriber “A. Michael” said that between 2011 and 2013, Charter sold information such as names and addresses to unknown companies without customer consent.
• The plaintiffs are alleging that Charter violated Missouri’s Merchandising Practices Act. Michael claims he was not provided with a copy of Charter’s privacy policy, which is required under that law. The complaint also said Charter failed to obtain written consent to sell the information or provide an opt-out provision.
• Just as Comcast, AT&T and Verizon stated in similar messaging, Charter said the recent overturning by the Republican-led Congress of Obama-era FCC rules regulating ISP privacy does not change its position.
• “Protecting the privacy of our consumers is one of our most important responsibilities as a broadband provider,” Charter said. “Recent activity by Congress does not change, or weaken, Charter’s commitment to the protection of our customers’ online privacy, or our rigorous privacy practices and policies. To be clear it also does not change the way in which Charter collects, uses or shares customer information.”

(New York Times) Trump Administration to Pay Health Subsidies Disputed by House

• The Trump administration says it is willing to continue paying subsidies to health insurance companies under the Affordable Care Act even though House Republicans say the payments are illegal because Congress never authorized them.
• The statement sends a small but potentially significant signal to insurers, encouraging them to stay in the market.
• The Affordable Care Act requires insurers to reduce deductibles and other out-of-pocket costs for certain low-income consumers. The “cost-sharing” subsidies, which total $7 billion a year, compensate insurers for these discounts.
• House Republicans sued the Obama administration, saying that the spending — in the absence of an appropriations law — was unconstitutional. A Federal District Court judge agreed and ordered a halt to the payments, but suspended her order to allow the government to appeal.
• The Trump administration has not clearly indicated its position on the appeal. Asked to clarify, the Department of Health and Human Services sent a written statement on Monday: “The precedent is that while the lawsuit is being litigated, the cost-sharing subsidies will be funded. It would be fair for you to report that there has been no policy change in the current administration.”

(Moody’s) Moody’s upgrades DaVita to Ba2; outlook is stable

• Moody’s Investors Service upgraded the ratings of DaVita, Inc. including the Corporate Family Rating to Ba2 from Ba3 and the Probability of Default Rating to Ba2-PD from Ba3-PD. Moody’s also upgraded DaVita’s senior secured credit facilities to Baa3 from Ba1 and its senior unsecured notes to Ba3 from B1. Lastly, Moody’s affirmed DaVita’s Speculative Grade Liquidity Rating of SGL-1. The outlook is stable.
• The upgrade of DaVita’s Corporate Family Rating to Ba2 reflects Moody’s expectation that the company will benefit from US dialysis patient population growth of approximately 4% and stabilization of its integrated care business. Moody’s expects that DaVita will maintain adjusted debt to EBITDA in the mid-to-high 3 times range even in the face of several business uncertainties relating to biosimilars and the availability of charitable premium assistance.