Category: Insight

03 Mar 2017

CAM High Yield Weekly Insights

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $0.5 billion and year to date flows stand at $8 billion. New issuance for the week was $2.3 billion and year to date HY is at $40 billion.

(Reuters) Sinclair approaches Tribune Media about possible deal

  • A deal between Sinclair and Tribune Media, which have market capitalizations of $3.8 billion and $3.3 billion respectively, would combine two of the largest U.S. local TV station owners and face regulatory curbs on how many households they can reach
  • Analysts have said the broadcast industry hopes President Donald Trump will lift caps on ownership concentration, allowing it to compete for audiences and advertising dollars against Facebook Inc and Alphabet Inc’s Google
  • The discussions between the companies are preliminary and there is no certainty they will lead to any deal, the sources said

(Business Wire) Frontier Communications Reports Financial Results

  • Dan McCarthy, President and CEO, stated, “During the quarter we made significant progress in positioning our company to deliver a better customer experience and improved financial performance, with greater financial flexibility. Our reorganization into separate Commercial and Consumer business units will result in a more customer-centric approach, while reducing expenses and enabling more efficient capital deployment.”
  • “Results for the fourth quarter were impacted by our intensified efforts to resolve acquired accounts in California, Texas and Florida that we have determined to be non-paying. This process is almost complete, and we expect to return to a normalized trend by the start of the second quarter. I am pleased that underlying CTF customer trends improved in Q4 and continue to improve in Q1.”

(Business Wire) Intelsat and OneWeb Announce Conditional Combination Agreement

  • Intelsat and OneWeb today announced that they have entered into a definitive combination agreement pursuant to which Intelsat and OneWeb will merge in a share-for-share transaction. Intelsat and SoftBank Group also entered into a definitive share purchase agreement pursuant to which SoftBank will invest $1.7 billion in newly issued common and preferred shares of the combined company
  • Both the merger and the SoftBank investment are subject to, among other conditions, successful completion of debt exchange offers to certain existing Intelsat bondholders as well as receipt of certain regulatory approvals

(Industrial Distribution) U.S. Oil Rig Count Now Above 600, Up 50% Year-Over-Year

  • The U.S. total active rig count made a small gain last week, adding three total. It was the sixth straight week the combined oil and gas rig total has increased. Friday’s rig count provided by oilfield services provider Baker Hughes, checked in at 754 — its highest since Nov. 20, 2015. The total is up by 50.2 percent from a year earlier, and up 86.6 percent since bottoming out at 404 in May 2016
  • The U.S. added five oil rigs last week, pushing its current mark to 602. It was the sixth straight week that the oil rig count has grown, and the 16th week in the past 17. The U.S. lost two gas rigs last week, marking just the second week of decline in the past 16. The active gas rig count of 151
  • Texas once again dominated the overall rig count gain last week, adding eight to a total of 386. That figure is up 67.1 percent year-over-year. Wyoming added one rig, Alaska and Louisiana each lost two and North Dakota lost one

(Business Wire) AES Corp. Reports Financial Results

  • Overall results reflected the impact from the devaluation in foreign currencies, lower electricity prices, certain gains that benefited 2015 results and higher non-cash impairment losses, partially offset by a lower effective tax rate
  • Consolidated Net Cash Provided by Operating Activities for full year 2016 was $2,884 million, an increase of $750 million compared to full year 2015. The increase was primarily driven by higher collections at the Company’s distribution businesses in Brazil, Eletropaulo and Sul, and the settlement of overdue receivables at Maritza in Bulgaria. These positive contributions were offset by lower margins across the SBUs, as well as the recovery of overdue receivables in the Dominican Republic in 2015, which benefited 2015 results. Full Year 2016 Proportional Free Cash Flow (a non-GAAP financial measure) increased $176 million to $1,417 million compared to full year 2015, primarily due to the same factors as Consolidated Net Cash Provided by Operating Activities
  • “We ended 2016 on a high note, achieving our guidance for all metrics, with cash flow coming in at the high end, and Adjusted EPS well within, our ranges. We also continued to make strides on our strategic objectives by completing 3 GW of construction projects, selling non-core assets and making further cost cuts and revenue enhancements,” said Andrés Gluski, AES President and Chief Executive Officer. “The recent purchase of sPower increases our long-term contracted, U.S. Dollar-denominated, renewable portfolio, which was one of our stated objectives for 2016.”
24 Feb 2017

CAM High Yield Weekly Insights

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $0.8 billion and year to date flows stand at $7.4 billion. New issuance for the week was $1 billion and year to date HY is at $37.7 billion.

(RigZone) 2017 Offshore Spending Plan To Rival Shale Investment

  • For every dollar invested this year in North American shale plays, another dollar will be allocated for planned projects offshore, racking up spending of $70 billion in each sector, analysts at Rystad Energy said in a report
  • But not all analysts agree that offshore spending is in the midst of a surge. Terry Childs, director at Rigzone Data Services, said offshore investment declined between 30 percent and 35 percent in 2016. For the current year, offshore CAPEX is also expected to decline, but not at the same steep rate
  • Marc Edwards, CEO at Diamond Offshore, said deepwater operators understand that for now, it’s difficult to compete with the unconventional space. “In the short run, if oil stays in a range bound, let’s say $50 to $55, I think you’ll see our clients’ capital still have a propensity to be deployed to unconventional light-tight oil onshore.”

(The Associated Press) McConnell intends to replace ‘Obamacare’ without Democrats

  • “It’s clear that in the early months it’s going to be a Republicans-only exercise,” the Kentucky senator said. “We don’t expect any Democratic cooperation on the replacement of Obamacare, we don’t expect any Democratic cooperation on tax reform.”
  • McConnell has condemned Democrats for passing Obamacare in the first place, in 2010, without any Republican votes, claiming the partisan exercise set the law up to fail

(Bloomberg) Toll Brothers Beats Estimates as Company Delivers More Homes

  • Toll Brothers Inc., the biggest U.S. luxury-home builder, reported better-than-expected earnings for its fiscal first quarter as it faced limited competition from other public companies focused on cheaper properties
  • “Their results have been very impressive,” Drew Reading, a homebuilding analyst for Bloomberg Intelligence, said before Toll released earnings. “You can attribute a lot of it to the strength of their land positions. A lot of their communities are in better located submarkets within the areas they operate.”
  • The company delivered 1,190 homes in the quarter, about 12 percent more than a year earlier, while the average selling price fell about 11 percent to $773,700 due to changes in the type of properties being constructed

(Business Wire) Community Health Systems, Inc. Announces Financial Results and 2017 Guidance

  • Net operating revenues for the year ended December 31, 2016, totaled $18.438 billion, a 5.1 percent decrease compared with $19.437 billion for the same period in 2015
  • Adjusted EBITDA for the year ended December 31, 2016, was $2.225 billion compared with $2.670 billion for the same period in 2015, representing a 16.7 percent decrease
  • On a same-store basis, admissions decreased 1.9 percent and adjusted admissions decreased 0.5 percent during the year ended December 31, 2016, compared with the same period in 2015
  • Commenting on the results, Wayne T. Smith, chairman and chief executive officer of Community Health Systems, Inc., said, “Significant progress has been made in our work to divest certain hospitals and other operations, enabling a reduction in our debt and the opportunity to reshape our portfolio into a stronger, more sustainable organization. Moving forward in 2017 and beyond, we are intently focused on efficiency improvements in our operations, strategic initiatives that enhance growth in our markets, and portfolio optimization that reduces our total debt.”

(Business Wire) Cloud Peak Energy Inc. Announces Public Offering of Common Stock

  • Cloud Peak Energy Inc. announced that it has commenced a registered underwritten public offering of 13,500,000 shares of its common stock. CPE Inc. intends to grant the underwriters a 30-day option to purchase 2,000,000 additional shares of common stock. CPE Inc. intends to use the net proceeds from the offering to fund the full redemption of its outstanding 8.50% Senior Notes due 2019, plus accrued and unpaid interest to the redemption date, with any remaining proceeds to be used for general corporate purposes.

(Globe Newswire) Pinnacle Foods Inc. Reports Financial Results

  • Grew net sales 17.8%, driven by the Boulder Brands acquisition and continued strong growth of the Frozen segment – particularly the Birds Eye franchise.
  • Expanded gross margin by 140 basis points versus year-ago and Adjusted gross margin by 120 basis points.
  • Commenting on the results, Pinnacle Foods Chief Executive Officer Mark Clouse stated, “We are pleased with our strong finish to 2016, as effective investment in the fourth quarter behind our key franchises, particularly Birds Eye, drove significant retail consumption growth and meaningful market share expansion for the Company. For the full year, solid top-line performance, coupled with gross margin expansion, continued tight management of overhead expenses and the benefit of acquisition synergies, enabled us to finish 2016 ahead of our long-term growth algorithm and at the top of our recently increased guidance range. Looking ahead, we are highly confident in our outlook for 2017, due to strong underlying momentum in the business, our very robust innovation and margin agenda and the benefit of our recent refinancing.”
24 Feb 2017

CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Lipper, for the week ended February 22nd, taxable bond funds posted a net inflow of $3.987bn. The weekly average inflow thus far in 2017 remains just north of $4bn per week. Per Bloomberg, investment grade corporate issuance through Thursday was $13.925bn. February issuance stands at $75bn, while year-to-date investment grade issuance has now topped $231bn, up about 21% year-over-year.

(Bloomberg) Fitch Upgrades Pioneer Natural Resources to ‘BBB’

  • The upgrade reflects Fitch’s view that the company will be able to execute its medium-term growth targets given its competitive full-cycle breakeven oil price, favorable hedge position and policy, and strong liquidity position, while reducing gross debt and maintaining a leverage profile generally consistent with or better than similarly rated North American (N.A.) exploration and production (E&P) peers. Fitch’s base case currently forecasts that in 2019 Pioneer’s core Permian production will exceed 300 thousand boe per day (mboepd), gross debt/EBITDA will be below 1x, and liquidity will remain strong.

(Bloomberg) Merck Takes $1.9B Writedown as Hepatitis C Market Shrinks

  • Merck & Co., one of the U.S.’s biggest drugmakers, will write down most of what it paid for a promising, experimental hepatitis C drug in 2014, partly because of the extreme success of other new therapies has left a shrinking market.
  • In a filing Thursday, Merck said it would take a $2.9 billion charge, or $1.9 billion after taxes, on uprifosbuvir, which it bought in 2014 in its $3.9 billion acquisition of Idenix Pharmaceuticals Inc. and is still in clinical trials. Merck said it now values the drug at $240 million.
  • The market for treatments for hepatitis C, a virus that attacks the liver and can lead to cirrhosis or liver cancer, has been declining recently, with fewer patients to treat following major breakthroughs in science that brought to market highly effective, fast-working cures.

(Bloomberg) HP’s Earnings Show the PC Market Is Finally Starting to Recover

  • Prior to HP Inc’s January quarter earnings report, there were already plenty of signs that the hard-luck PC market was beginning to stabilize. Shipment estimates from major research firms, as well as earnings reports from the likes of Microsoft, Intel, AMD, Seagate and Western Digital, pointed to a market whose sales declines were narrowing considerably from the steep levels seen during the first half of 2016.
  • HP’s numbers went beyond that, however. They suggest the steady arrival of compelling new hardware and form factors, together with an aging installed base and favorable annual comparisons, is positioning the PC industry to deliver positive growth over the near-term.
  • HP Inc., which contains the former Hewlett-Packard’s PC and printing businesses, reported fiscal first quarter revenue of $12.68 billion (up 4% annually) and adjusted EPS of $0.38. The former trounced a consensus analyst estimate of $11.83 billion, while the latter slightly beat a $0.37 consensus.
  • HP also guided for second quarter EPS of $0.37 to $0.40, in line with a $0.38 pre-earnings consensus. Fiscal 2017 (ends in October) EPS guidance of $1.55 to $1.65 was reiterated.
  • Shares rose 8.6% to $17.60 on Thursday, hitting their highest levels since the old HP broke up in late 2015.
17 Feb 2017

CAM High Yield Weekly Insights

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $0.9 billion and year to date flows stand at $5.6 billion. New issuance for the week was $5.1 billion and year to date HY is at $36.6 billion.

(Business Wire) Mediacom Communications Completes New Term Loan

  • The $1.37 billion proceeds from the financing transactions were used to repay all of Mediacom LLC’s previously outstanding indebtedness
  • “We are very pleased with today’s completed transactions, which reduce MCCC’s interest expense to an all-time low, while extending the maturities of our debt arrangements,” stated Mark E. Stephan, MCCC’s Executive Vice President and Chief Financial Officer. “Mediacom’s quality reputation in the financial community fueled robust lender demand that allowed us to upsize and tighten the pricing on the institutional term loans. Our balance sheet has never been stronger, and with an industry-leading average cost of debt now below 4%, our ability to generate free cash flow has strengthened even further.”

(New York Times) Michael Flynn Resigns as National Security Adviser

  • Michael T. Flynn, the national security adviser, resigned after it was revealed that he had misled Vice President Mike Pence and other top White House officials about his conversations with the Russian ambassador to the United States
  • Mr. Flynn, who served in the job for less than a month, said he had given “incomplete information” regarding a telephone call he had with the ambassador in late December about American sanctions against Russia, weeks before President Trump’s inauguration. Mr. Flynn previously had denied that he had any substantive conversations with Ambassador Sergey I. Kislyak, and Mr. Pence repeated that claim in television interviews as recently as this month

(Bloomberg) Fed Chair Yellen Testifies to Congress

  • Yellen’s comments lifted the odds for a rate hike at the March meeting four points to 34 percent. While futures traders still see less than 50 percent odds for three increases this year, President Donald Trump’s vow to pursue pro-growth policies could push the Fed to pick up the pace. Inflation data Tuesday from China to American showed accelerating price gains at factories, bolstering the case for tightening before a reading on U.S. consumer price data Wednesday.
  • “Waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession,” Yellen said

(PR Newswire) Huntsman Announces Financial Results

  • Peter R. Huntsman, our President and CEO, commented: “At the beginning of 2016, we announced our intent to generate more than $350 million of free cash flow. We delivered a record $686 million of free cash flow in 2016, including $117 million during the fourth quarter. We used this cash, together with proceeds from the sale of our European surfactants business, to repay $560 million in debt, significantly strengthening our balance sheet.
  • “We are also delivering on our commitment to separate the TiO2 business through the spin-off of Venator. We continue to make steady progress with the IRS to allow Huntsman to retain a 40% economic interest in Venator.”
  • Post the financial report, Huntsman did receive a private letter ruling from the IRS allowing the company to retain a 40% economic interest in the tax-free spinoff of Venator Materials

(PR Newswire) Equinix Reports Full Year Results

  • Revenues from continuing operations of $3,612 million, a 33% increase over the previous year; an organic and constant currency growth rate of greater than 14%
  • Adjusted EBITDA of $1,657 million, a 46% adjusted EBITDA margin
  • “2016 was a pivotal year for Equinix. We continued to capture the shift to the cloud, expand our global reach and scale, grow interconnection, and deliver record bookings and increasing shareholder returns. We are operating at the intersection of some of the greatest technology trends in our lifetime, and the digital transformation driven by cloud services is shifting compute, storage and networking to the edge, which plays into our dense ecosystems and global scale. We look forward to a busy 2017 as weintegrate our acquisitions, grow our global platform, enhance our portfolio of services and increase our reach and relevance to the cloud-enabled enterprise,” said Steve Smith, President and CEO.

(Globe Newswire) Avis Budget Group Reports Financial Results

  • For the year, the Company reported revenue of $8.7 billion, an increase of 2% compared with 2015. The Company reported full-year Adjusted EBITDA of $838 million and free cash flow of $472 million in 2016
  • “While our fourth quarter results reflect softer-than-expected volume and pricing, as well as currency movements having a $7 million adverse impact on Adjusted EBITDA compared to what we had anticipated, we are enthusiastic about our prospects for 2017 and beyond,” said Larry De Shon, Avis Budget Group Chief Executive Officer. “Our strategic initiatives are already beginning to deliver meaningful benefits, and we continue to expect that our efforts will drive substantial long-term margin growth.”
17 Feb 2017

CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Lipper, for the week ended February 15th, investment grade funds posted a net inflow of $3.054bn. The total year-to-date net inflow into investment grade funds ended the week at $20.342bn. Per Bloomberg, investment grade corporate issuance through Thursday was $25.05bn. Year-to-date investment grade issuance has now topped $218bn, up over 60% from this point last year.

(Bloomberg) 600 MHz Spectrum Auction Highlights Telco Demand Shift

  • The 600 MHz auction’s assignment phase will end no later than March 30, 24 days after it begins, as the spectrum sale nears a close. Carriers including AT&T, T-Mobile and Verizon and others such as Dish and Comcast bid $19.6 billion for the licenses in the forward portion of the auction and now will compete for their exact frequency allocations in the assignment phase of the auction.
  • Once bidding ends, the FCC will announce the winners and down payments will then be due within 10 days.
  • Broadcasters including 21st Century Fox, Gray TV, Tribune and Sinclair won’t receive proceeds at least until payments are made by forward auction bidders. Broadcasters will be paid out when license applications from winning forward auction bidders are approved on a rolling, per-license basis.

(Press Release, Conference Call) Masco reported 4Q and full year results

  • Masco has around $600mm in cash over in Europe and other jurisdictions
  • The company is seeing strong demand in their Repair & Remodeling products across all product lines and price points. R&R accounts for 83% of total sales (unchanged)
  • 2016 Revenue influenced by:
    • Decreased by $68mm (1% of revenue) due to currency translation.
      • Currency translation is expected to affect sales by $100mm during 2017
    • Decreased by $21mm (.3% of revenue) due to warranty reserve increase in their Milgard window business in Q3
  • Masco is still focusing on bolt-on strategies in either their plumbing or decorative architecture segments, which has been unchanged over the past several quarters
    • One change, in their comment, was that they are also looking at other areas, but the focus is still on plumbing and decorative architecture
  • Masco returned $585mm to its shareholders through dividends and share repurchases during 2016 (compared to $546mm in FCF)

(Bloomberg) Ford’s Dozing Engineers Side With Google in Full Autonomy Push

  • As Ford Motor Co. has been developing self-driving cars, the U.S. automaker has started noticing a problem during test drives: Engineers monitoring the robot rides are dozing off.
  • Company researchers have tried to roust the engineers with bells, buzzers, warning lights, vibrating seats and shaking steering wheels.
  • BMW, Mercedes-Benz and Volkswagen AG’s Audi plan to roll out semi-autonomous cars starting next year that require drivers to take over with as little as 10 seconds notice.
  • Ford plans to skip that level altogether. The automaker has aligned with Alphabet Inc.’s Waymo, which made similar discoveries related to human inattention while researching Google’s driverless car.
10 Feb 2017

CAM High Yield Weekly Insights

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $1.0 billion and year to date flows stand at $4.0 billion. New issuance for the week was $9.3 billion and year to date HY is at $31.5 billion.

(Reuters) Tax reforms might impact U.S. bond market

  • US corporate tax reform proposals are causing consternation among bond market players, who fear their implementation will drastically reduce issuance levels
  • President Donald Trump has plans to cut corporate tax rates, allow repatriation of cash stuck in overseas accounts, and eliminate companies’ ability to deduct debt interest expenses from tax – actions some think would hugely reduce companies’ current reliance on debt
  • “The elimination of tax deductibility will not be the death knell for the corporate bond market all of a sudden,” said Matthew Minnetian, a portfolio manager at Alliance Bernstein
  • “I’d be very surprised to see capital structures change overnight, and if you look at the cost of debt versus the return on equity, the cost of debt is still very low.”

(New York Times) Trump Says Health Law Replacement May Not Be Ready Until 2018

  • President Trump said in an interview that aired on Sunday that a replacement health care law was not likely to be ready until either the end of this year or in 2018, a major shift from promises by both him and Republican leaders to repeal and replace the law as soon as possible
  • “Maybe it’ll take till sometime into next year, but we’re certainly going to be in the process,” Mr. Trump said during an interview with Bill O’Reilly of Fox News, after Mr. O’Reilly asked the president whether Americans could “expect a new health care plan rolled out by the Trump administration this year.”
  • “It statutorily takes awhile to get,” Mr. Trump said. “We’re going to be putting it in fairly soon, I think that, yes, I would like to say by the end of the year at least the rudiments but we should have something within the year and the following year.”

(Fierce Wireless) Mobile video to grow almost 900% by 2021, Cisco predicts

  • Worldwide consumption of mobile video will grow nearly ninefold from 2016 to 2021, Cisco predicted, and will account for 78% of all mobile traffic by the end of that time period, up from 60% last year
  • “With the proliferation of IoT, live mobile video, augmented and virtual reality applications, and more innovative experiences for consumers and business users alike, 5G technology will have significant relevance not just for mobility but rather for networking as a whole,” said Doug Webster, Cisco’s vice president of service provider marketing. “As a result, broader and more extensive architectural transformations involving programmability and automation will also be needed to support the capabilities 5G enables, and to address not just today’s demands but also the extensive possibilities on the horizon.”

(Globe Newswire) CoreCivic Reports Fourth Quarter and Full Year 2016 Results

  • “The final quarter of 2016 was exceptionally busy, with many significant accomplishments of which we are proud. During the quarter we formally launched the CoreCivic brand which more appropriately reflects the range of solutions we can provide, substantially completed the expansion of our Red Rock Correctional Center, entered into two new contracts with Immigration and Customs Enforcement to help address their emergent bed capacity needs, and extended our contract with the Federal Bureau of Prisons at our McRae Correctional Facility, to name a few of those accomplishments,” said Damon T. Hininger, CoreCivic’s President and Chief Executive Officer. “We see many opportunities to work with new and existing partners to deliver real estate solutions that address each partner’s unique needs, and we have the expertise and flexibility to deliver those solutions in an innovative and cost-effective manner.”
  • Revenue of $464.1 million for 4Q increased 3.6% from the prior year quarter
  • Total revenue of $1.85 billion in 2016 versus $1.79 billion in 2015

(Bloomberg) Junk May Slam Into $1 Trillion Wall as Maturities Hit Record

  • A record $1 trillion of junk debt will mature by 2021, leaving high-risk companies to hunt for new cash at a time when markets are likely to be less welcoming, according to Moody’s Investors Service
  • Speculative-grade companies have $1.06 trillion of debt maturing between 2017 and 2021, with the bulk of it, $933 billion, coming due after 2019, Moody’s said Wednesday in a report
  • More than 30 percent of the high-yield bonds coming due are rated Caa1 or below by Moody’s, at least seven levels below investment grade. More than 8 percent of leveraged loans are rated Caa1 or below, up from 5.8 percent in the equivalent 2016 study. The telecommunications sector has the most debt coming due over the next five years with $81 billion

(Bloomberg) OPEC Keeps Its Promise About Crude Oil Cuts, IEA Says

  • OPEC achieved the best compliance rate in its history at the outset of an accord to clear the oil glut
  • The Organization of Petroleum Exporting Countries implemented 90 percent of promised output cuts in January
03 Feb 2017

CAM High Yield Weekly Insights

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $1.4 billion and year to date flows stand at $3.0 billion. New issuance for the week was $3.9 billion and year to date HY is at $21.6 billion.

(New York Times) Trump Fires Acting Attorney General

  • President Trump fired his acting attorney general on Monday night, removing her as the nation’s top law enforcement officer after she defiantly refused to defend his executive order closing the nation’s borders to refugees and people from predominantly Muslim countries
  • The president replaced Ms. Yates with Dana J. Boente, the United States attorney for the Eastern District of Virginia, saying that he would serve as attorney general until Congress acts to confirm Senator Jeff Sessions of Alabama
  • Ms. Yates’s order was a remarkable rebuke by a government official to a sitting president. Ms. Yates’s decision had effectively overruled a finding by the Justice Department’s Office of Legal Counsel, which had already approved the executive order “with respect to form and legality.”

(Company Release) Huntsman’s Pori, Finland Facility Experiences Fire

  • A fire started at Huntsman Corporation’s titanium dioxide manufacturing facility in Pori, Finland. All Huntsman associates at the site have been accounted for and there were no injuries. The fire brigade responded quickly and extinguished the fire.
  • Pori has a capacity of 130,000 metric tons, which represents approximately 15% of Huntsman’s total titanium dioxide capacity and approximately 10% of total European demand. The site is insured for property damage as well as earnings losses.

(The Hollywood Reporter) Charter Preparing to Claim Fox News Breached Carriage Deal

  • The legal fight over Charter Communications’ television carriage contracts is expanding and will soon involve deals made by other cable and satellite companies. Charter has told a New York judge about its intention to sue Fox News over the “most favored nations” provision of its distribution agreement.
  • Fox News has asserted breach of contract and fraud in the way Charter told regulators and shareholders of being the acquiring company only to hold up TWC’s contracts as surviving. Charter looks to dismiss Fox News’ fraud claim and is arguing that it is customary for a bigger operator, with more customers, to pay lower rates

(TMoNews) T-Mobile named No. 1 in Customer Service Satisfaction by Nielsen

  • T-Mobile’s customer service has been named the best in the wireless industry.
  • Nielsen Mobile Insights gave T-Mobile the top spot in Customer Service Satisfaction at the end of 2016, with Verizon, AT&T, and then Sprint following. T-Mobile beat out its competition in the Likelihood to Recommend, Net Promoter Score, and Overall Customer Satisfaction categories, too.
  • T-Mobile has been named No. 1 in customer satisfaction by Nielsen Mobile Insights before, and John Legere and Co. are pretty pleased to win it again. Here’s the CEO’s statement on the news:
    “We have the best damn care team in the business – at this point, that’s not even up for debate. But like everyone else at this company, our care team takes ‘we won’t stop’ pretty literally. They’ve got their sights on being the #1 care team in any industry, anywhere – not just wireless. That was so 2016.”

(Bloomberg) Weatherford Surges on Plans to Sell Assets And Be More ‘Boring’

  • Weatherford rose the most in more than two months after announcing plans to pair up with the world’s biggest onshore driller and sell assets for as much as $2 billion
  • Weatherford’s interim Chief Executive Officer Krishna Shivram is working on multiple fronts to revitalize the troubled oilfield service company as the oil industry begins to dig out from the worst downturn in a generation. He plans to sell Weatherford’s U.S. onshore fracking business and its land-rigs unit to cut debt and streamline its service offerings, shed more workers and boost sales through an alliance with Nabors Industries Ltd
  • “You will see a new, revitalized Weatherford with disciplined growth and improved returns, with no surprises and better predictability,” Shivram told analysts and investors Thursday on a conference call

(Business Wire) HCA Reports Fourth Quarter 2016 Results

  • Revenues in the fourth quarter totaled $10.641 billion, compared to $10.249 billion in the fourth quarter of 2015
  • Adjusted EBITDA for the fourth quarter of 2016 increased 3.6 percent to $2.206 billion compared to $2.131 billion in the prior year period
  • Fourth quarter same facility revenue growth of 3.4 percent was driven by an increase of 1.5 percent in same facility equivalent admissions and an increase of 1.9 percent in same facility revenue per equivalent admission in the fourth quarter of 2016
03 Feb 2017

CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Lipper, for the week ended February 1st, investment grade funds posted a net inflow of $2.657bn. The total year-to-date net inflow into investment grade funds ended the week at $12.355bn. Per Bloomberg, investment grade corporate issuance through Thursday was $45.8bn. For the month of January, new issuance came in at $178.45bn, one of the largest months on record.

(Conference Call, CAM Notes) Simon Property Group Reports Full Year 2016 Earnings

  • Conference Call Highlights:
    • SPG currently has 434 department store spaces in their portfolio
      • 1 current vacancy
    • Also of the recently announced department store closures, 1 was in their portfolio
    • SPG says they saw more stores closings in 2015 than 2016 (non-department)
    • On Traffic:
      • Gift cards sales were up 14% which, SPG believes, is a good indicator of traffic
      • Premium Outlet traffic (counted by cars entering parking lot) was up 1.5% YoY
    • David Simon stated on the call that they believe retailers are spending a lot of capital on internet sales, “and between that and the promotions required to get them to buy online between the cost of shipping and the returns, it’s not a great model for them.”
    • Mall & Premium outlets catering to foreign buyers were negatively affected by the strong dollar during the quarter (same as last)
    • Retail centers outside of tourist oriented malls were stable during the quarter
    • As far as development pipeline:
      • Redevelopment expansion projects are happening at 29 properties for approximately $1.1bn (their share)
      • Five outlets are currently under construction (all open in 2017):
      • Domestic: Norfolk, VA
      • The Clarksville Premium Outlet (D.C.) opened in late October and, “had the strongest open of any premium outlet in a long time.”
      • Internationally: France, South Korea, Malaysia and Canada.
      • One new mall is currently under construction: The Shops of Clearfork (Fort Worth) which is anchored by Niemen is to open in the fall of 2017
      • Brickell City Centre (Miami) opened in the 4th quarter

(Bloomberg) Apple, Microsoft Borrow Now Instead of Waiting for Tax Reform

  • This year, tax reform could give U.S. companies access to hundreds of billions of dollars they have stashed overseas. Many corporations can’t wait that long.
  • Apple Inc. and Microsoft Corp. combined sold $27 billion of debt this week to fund their daily operations, repay maturing debt, and buy back shares. Those bond sales might be unnecessary if new tax laws come this year, because under President Donald Trump’s proposed plan, companies could pay a one-time 10 percent levy to bring back money held overseas, less than a third of the current rate.
  • Whenever companies can bring back cash, corporate bond issuance will likely drop, by as much as $150 billion a year, Bank of America Corp. estimated in November. That’s equal to more than 10 percent of the U.S. investment-grade debt issued last year, according to data compiled by Bloomberg. The companies with the most overseas cash tend to be in the technology and pharmaceutical industries.
  • The U.S. last saw a tax holiday under a 2004 law. As part of that legislation, companies were allowed to bring back foreign earnings for one tax year at essentially a rate of 5.25 percent if they reinvested the funds in programs like worker hiring or capital investments. Although that holiday had a time frame of a single tax year, a program like the House Republicans’ could be implemented almost immediately, and last at least 10 years, Mills said.
  • For now, companies don’t mind heading back to the debt markets, considering the low yields and minimal volatility, said Dave Novosel, a bond analyst at research firm Gimme Credit.
  • “Markets are still pretty good. Why not take advantage of it?,” Novosel said. “A month from now, or two months from now, things might not be as good depending on what happens with Trump and Congress.”
27 Jan 2017

CAM High Yield Weekly Insights

 

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $0.7 billion and year to date flows stand at $1.5 billion. New issuance for the week was $9 billion and year to date HY is at $17.6 billion.

(Globe Newswire) Pinnacle Foods Inc. Launches Proposed Refinancing

  • On the heels of a strong finish to 2016, Pinnacle Foods intends to launch a refinancing of its outstanding indebtedness under its senior secured credit facilities
  • The proposed refinancing is expected to result in interest expense comparable to or slightly below 2016, despite the impact of the rising interest rate environment on the Company’s floating rate debt. It is also expected to improve the Company’s debt maturity profile

(Washington Post) Trump signs executive order on the Affordable Care Act

  • President Trump signed an executive order giving federal agencies broad powers to unwind regulations created under the Affordable Care Act
  • The executive order, signed in the Oval Office as one of the new president’s first actions, directs agencies to grant relief to all constituencies affected by the sprawling 2010 health-care law: consumers, insurers, hospitals, doctors, pharmaceutical companies, states and others

(Press Release) Northern California County Selects Zayo for School District Connectivity

  • The Office of Education for a northern California county has selected Zayo Group Holdings, Inc. for a dark fiber network that will connect 28 school districts. The 183-mile network includes 173 miles of network in place or already under construction and 10 miles of new build, which will be leveraged for follow-on tenants
  • “Dark fiber is a highly scalable, cost-effective solution that provides the county with dedicated, high-capacity infrastructure,” said Dave Jones, executive vice president of Dark Fiber Solutions at Zayo. “They appreciate the flexibility of a solution they can manage themselves to meet the dynamic, long-terms needs of the county.”

(PR Newswire) Royal Caribbean Reports Over 25% Increase In Earnings And Anticipates Fifth Consecutive Year Of Double Digit Earnings Growth In 2017

  • The company’s booked position for 2017 is better than last year’s record high, and at higher rates. Strength from North American consumers is driving exceptionally positive trends for North American and European products
  • “Our global portfolio of products is demonstrating strength across virtually all key markets, positioning us to deliver strong yield growth in 2017,” said Jason T. Liberty, chief financial officer. “Strong topline growth combined with continued focus on cost management will generate another year of record setting results. Even with significant pressure from FX and fuel, we will deliver another stellar year.”

(Bloomberg) United Rentals to Acquire Competitor NES in $965 Million Deal

  • United Rentals Inc. agreed to buy NES Rentals Holdings II for $965 million to bolster its equipment-leasing operations in regions such as the U.S. East Coast and Midwest
  • Buying NES, which generated sales last year of $369 million, “will augment our revenue, earnings, Ebitda, free cash flow and overall scale,”Michael Kneeland, chief executive officer of United Rentals, said in the statement

(Bloomberg) Spectrum Brands Reports 1Q Results

  • 1Q net sales $1.21b, est. $1.22b (range $1.21b-$1.25b)
  • 1Q gross margin 37.1%, est. 36.6%
  • Sees FY17 free cash flow $575m to $590m, est. $567.6m

(Bloomberg) Verizon Exploring Possible Combination With Charter

  • A combination of Verizon and Charter would follow several recent industry mega-mergers, including Charter’s acquisition of Time Warner Cable and Bright House Networks, which made the Stamford, Connecticut-based company, partly owned by billionaire John Malone, the second-largest cable operator in the U.S. behind Comcast. Verizon, while facing a slowdown in its core wireless business, is the No. 1 mobile carrier and No. 2 telecommunications provider

(Bloomberg) Dialysis Provider Donation Disclosure Rule Blocked

  • A federal rule requiring kidney dialysis providers such as U.S. Renal Care Inc. and DaVita Inc. to disclose their donations to charities that provide premium assistance for dialysis patients can’t be enforced by the HHS
  • Judge Amos L. Mazzant of the U.S. District Court for the Eastern District of Texas entered a preliminary injunction against the rule Jan. 25, finding the Department of Health and Human Services didn’t follow the proper rulemaking procedure when implementing the rule. The court further said the rule, if implemented, would harm dialysis patients by leaving them with no insurance coverage for their treatment
  • Dialysis providers generally receive more reimbursement for dialysis treatments covered by private insurance, including plans on Affordable Care Act exchanges, than by Medicare or Medicaid plans. Providers said the HHS rule was flawed because it had the effect of allowing private insurers to refuse to cover patients once they learned that the patients received premium assistance from those charitable donations
27 Jan 2017

CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Lipper, for the week ended January 25th, investment grade funds posted a net inflow of $1.589bn. The total year-to-date net inflow into investment grade funds ended the week at $9.697bn. Per Bloomberg, investment grade corporate issuance through Thursday was ~$25bn. Thus far, $146.8bn of investment grade corporate bonds have been issued in January.

(WSJ) Apple Sues Qualcomm Over Licensing Practices

  • The suit, filed Friday in federal district court in the Southern District of California, claims that Qualcomm leveraged its monopoly position as a manufacturer of baseband chips, a critical component used in cellphones, to seek “onerous, unreasonable and costly” terms for patents, and that Qualcomm blocked Apple’s ability to choose another supplier for chipsets.
  • The complaint seeks $1 billion in rebate payments that Apple says Qualcomm has withheld as retribution for Apple’s participation in an investigation by South Korea’s antitrust regulator.
  • Apple said in a statement that it sued Qualcomm “after years of disagreement over what constitutes a fair and reasonable royalty.”

(Bloomberg) Ford Seen as ‘Canary’ With Record Leases Spurring Used Glut

  • A glut of used vehicles has started to depress prices. That trend will intensify as Americans will return 3.36 million leased cars and trucks this year, another jump after a 33 percent surge in 2016, according to J.D. Power. The fallout has already begun, with Ford Motor Co. shaving $300 million from its financial-services arm’s profit forecast for this year.
  • “Ford is the canary in the coal mine,” said Maryann Keller, a former Wall Street analyst who’s now an auto industry consultant in Stamford, Connecticut.
  • This drag may be hitting the rest of the industry, too. A National Automobile Dealers Association index of used-vehicle prices declined each of the last six months of last year. When auto lenders lease out vehicles, they charge the customer a monthly payment and make an assumption of the car or truck’s value when it will be returned for resale. If vehicles are depreciating more than expected, losses can pile up.
  • “We haven’t seen anything that suggests that what’s happening to our portfolio is different from what’s happening across the industry,” Bob Shanks, Ford’s chief financial officer, told analysts in November.
  • Another way automakers could cope is by expanding their offerings of certified pre-owned vehicles — used cars with extended warranties — to try to bolster prices.
  • The question for auto companies is whether pulling those levers will offset any losses from overlooking the true cost of using hefty incentives and discounted leases to boost new-vehicle sales.

(Bloomberg) Dow Sees DuPont Merger Closing in 1H, CEO Says on Conf. Call

  • Dow Chemical says DuPont merger could be a “2Q close”; confident that company can solve EU antitrust concerns, CEO Andrew Liveris said during conf. call.
  • Says other jurisdictions will “fall in line” after EU
  • Sees Trump using executive orders to lift regulatory burdens
  • Sees DOW benefiting from infrastructure plan, Keystone Pipeline decision
  • DOW is a big U.S. exporter, so Trump border tax “big positive”
  • Sees Trump lifting regulatory burdens in 30-60 days
  • Sees new plant delays maintaining ethylene operating rates