Category: Insight

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

(Bloomberg)  High Yield Market Highlights

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

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

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

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

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

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

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

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

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

Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were -$0.3 billion and year to date flows stand at -$14.7 billion. New issuance for the week was $4.8 billion and year to date HY is at $34.5 billion, which is -7% over the same period last year.

(Bloomberg) High Yield Market Highlights

• Junk bond yields were at two-week lows across ratings amid lackluster stocks and a drop in VIX. Oil was steady and well above the $60 mark bolstering junk bonds.
• However, the recent turbulence in equity volatility amid fears of an accelerated pace in rate hike following strong economic data, took its toll on junk bonds forcing JPMorgan to lower its spread and returns forecast for 2018
• Spread forecast was revised to +375bps from +390 and returns to 4.60% from 5.5% earlier
• High yield still offers 5.6% return from here
• It is still likely to outperform most fixed income asset classes, JPMorgan wrote
• Recall that the recent turmoil caused the yield to rise to a 14-mo. high and the 10Y treasury yield jumped 30bps by the end of January to 2.70 and 52bps YTD to close at 2.92% yesterday
• High yield was back to business this week with yields steadily declining and issuance gaining traction
• While issuance was slow and cautious this month, four more deals for $1.5b priced yesterday, taking the WTD total to $4.85b and MTD to $10.725b
• Investors seem to return to junk bonds as retail funds report a modest inflow of $160m at close on Tuesday
• Investor interest in junk bonds was also evident in the primary market with a CCC- credit, Weatherford International, driving by and pricing at talk even amid wobbly stocks
• Earlier in the week, Sprint had orders of ~$3.75b and increased the size of the offering by $500m to price at the tight end of talk; talk tightened 25bps from the initial whisper of 8% area

(CNBC) Fed minutes: All signs pointing to more rate hikes ahead

• FOMC members said they have revised upward the economic projections they made at the previous meeting in December.
• The January meeting was the last one for Chair Janet Yellen, who had guided the Fed through the first rate normalization steps a decade after the financial crisis.
• Markets already were on edge after the January Fed meeting, during which the committee said it expected that “further gradual adjustments” in monetary policy.

(Forbes) Rite Aid’s PBM Becomes More Attractive Under Albertsons

• Whether Rite Aid keeps its pharmacy benefit manager or decides to sell it one day, the PBM’s potential value could take off under the umbrella of the large grocery store chain Albertsons.
• Even before this week’s announcement that Albertsons would buy Rite Aid, the pharmacy chain’s executives were talking up the PBM EnvisionRxOptions as the “growth engine” for the entire company. Those optimistic statements came in early January even as Rite Aid began the process of transferring hundreds of drugstores to Walgreens Boots Alliance, turning the chain into a regional player with only 2,500 or so drugstores.
• But Rite Aid’s sale to Albertsons will make the drugstore chain and its PBM a national player again . The combination of Albertsons and Rite Aid will create a chain with 4,345 pharmacies in stores spanning across 38 states and Washington, D.C.
• Processing more prescriptions helps pharmacies as well as PBMs like EnvisionRx. PBMs are the middlemen between drug makers and patients when it comes to buying prescription drugs and getting discounts for their customers. Having a high prescription count helps PBMs gain leverage on behalf of their clients who are employers and government health programs such as Medicare’s part D drug benefit coverage for seniors.
• In the past two years, Wall Street analysts and other observers of Rite Aid were worried EnvisionRx would lose employer clients and scale amid noise surrounding the uncertainty of its sale to Walgreens. That deal went from an outright sale to a partial deal last September when Walgreens agreed to buy just 1,932 Rite Aids following antitrust scrutiny from the Federal Trade Commission.
• Merging with Albertsons gives EnvisionRx a larger platform to do business, executives say.

(Wall Street Journal) Dish Network Gains Sling TV Subscribers but Retention Is a Problem

• Dish Network said its Sling TV streaming-video service has signed up 2.2 million subscribers in the company’s first disclosure of a figure, but Chairman Charlie Ergen said customer retention is a significant challenge.
• Dish launched the streaming service nearly three years ago in an attempt to lure younger viewers and people giving up cable TV. The hope was that it would be an avenue for growth as Dish’s traditional satellite TV business declines.
• The number of Sling TV customers grew 47% compared with the year-ago period, but it wasn’t enough to offset a 9.4% decline in satellite TV subscribers. The company finished the quarter with 13.2 million subscribers overall, including Sling and satellite customers, down from 13.7 million subscribers last year. In the fourth quarter, satellite TV subscribers fell by 121,000.
• Sling TV added 711,000 subscribers in 2017, below the 878,000 in the previous year. Growth slowed partly because of increased competition with other streaming services.

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were -$7.1 billion and year to date flows stand at -$13.2 billion.  New issuance for the week was $1.7 billion and year to date HY is at $29.7 billion, which is -16% over the same period last year. 

(Bloomberg)  High Yield Market Highlights

• Junk bond yields dropped the most in three months, and CCC yields saw the biggest drop in more than five weeks yesterday as equity volatility fell for a fifth session yesterday; VIX is down 34% in five days.
• It was as if high yield investors were making up for the lost week. Junk spreads tightened across ratings
• Recent turbulence in equity markets across the globe took its toll on junk bonds the past week as nervous and confused investors pulled out cash from junk bond funds
• Oil prices rebounded from near a seven-week low last week and have crossed the $60 milestone after falling below that
• Issuance was on pause this week as issuers waited for the volatility to settle down
• Overall, high yield continued to operate in a supportive environment:
• The default rate should move lower in 2018 amid a growing economy and improving credit conditions in the commodity sector, Moody’s John Puchalla wrote in note
• Moody’s Liquidity Stress Indicator was at 2.7% in January, still close to all-time low of 2.5% in December, suggesting junk issuers were backed by steady economic growth and buoyant credit markets Moody’s notes that the U.S. speculative-grade default rate would end the year at 2.2%
• Corporate earnings have been robust and economic growth was synchronized across the globe
• Strong global economy and declining default rates augur well for the high yield market

(New York Times)  Trump Tells Lawmakers He’s Mulling Limits on Imported Steel

• President Trump suggested on Tuesday that the United States was likely to impose restrictions on imported metals, reviving the prospects for a continuing investigation whose future has been called into question amid months of pushback and delays.
• Despite Mr. Trump’s support for the steel measure, he gave no indication of potential timing, Senator Ron Wyden added. “I didn’t feel that a decision had been made.”
• Meeting with a bipartisan group of lawmakers, the president said such restrictions would help save struggling steel companies from foreign competitors that “dump” low-priced metal on American markets. “What we’re talking about is tariffs and/or quotas,” Mr. Trump said.
• The White House had billed the meeting as a listening session to let lawmakers air concerns about pending actions on aluminum and steel imports, as well as  Trump’s infrastructure plan that was proposed on Mondayand current trade measures like the renegotiation of the North American Free Trade Agreement.
• In April, the president began twin investigations into imports of steel and aluminum under the little used Section 232 of a 1962 trade law, which permits sweeping restrictions to protect national security. Supporters of the action say American metal makers badly need the assistance to survive and continue producing planes, armored vehicles and other products for the military.
• But the measure also has plenty of critics, who fear that such restrictions amount to a protectionist grab by metal makers and will raise prices for steel and aluminum. They argue that because the metals are widely used to make other products, other industries — including automobile manufacturers and food packagers — would suffer.

(Moody’s)  Lamar’s ratings are unchanged following the upsize of the term loan B

• Lamar Advertising Company’s ratings are unchanged following the upsize of the proposed senior secured term loan B by its subsidiary, Lamar Media Corporation, to $600 million from $400 million. Leverage is projected to be unchanged at 4.0x following the transaction. The proceeds are expected to be used to refinance its $500 million 5 7/8% senior subordinated note due 2022, pay transaction related expenses, with the remaining proceeds used to partially paydown its outstanding revolver balance. The revolver balance as of Q3 2017 was $90 million, but it was drawn in Q4 2017 to help fund several modest sized transactions.
• While the upsize does not impact the ratings, a refinancing of the existing $535 million senior subordinated notes due 2023 (callable in May 2018) with additional secured or senior unsecured debt could result in a downgrade of the existing senior secured or senior unsecured debt ratings.

(CAM Note)  S&P did raise the senior unsecured ratings of Lamar to BB from BB- on the back of the refinancing

(Bloomberg)  Continental Resources Raised to Investment Grade by S&P

• S&P raises corporate credit rating to BBB- from BB+, outlook stable.
• Sees the company’s production growing at a double-digit rate in 2018 and 2019
• Expects the company to maintain funds from operations to debt ratio above 30% with neutral free operating cash flow in next 2-3 years

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were -$3.6 billion and year to date flows stand at -$6.0 billion.  New issuance for the week was $3.6 billion and year to date HY is at $27.8 billion, which is flat over the same period last year. 

(Bloomberg)  High Yield Market Highlights

• Recent spread widening for high yield markets should see at least a short-term reversal to tighter levels before potentially taking a leg higher. Flows remain unsupportive and absolute levels tight, but the 34-bp widening over the seven trading sessions through Feb. 6 looks overdone. Renewed equity uncertainty may push spreads toward 360 bps.
• Equity market pressures over the last week have translated into spread widening in high yield, eliminating year-to-date returns for the asset class. The market had been up as much as 0.53% as of Jan. 26, before rates and spread pressures took hold, leaving high yield lower by 0.35% as of Feb. 6. Basic materials and energy have seen the greatest weakness, though energy remains the best performer on a total return basis for 2018.
• Fixed income exchange-traded funds have attracted a net $12 billion in 2018, about 1.5% as a share of AUM, with inflows favoring shorter duration and less risky assets. U.S. Treasury ETFs saw a spike of demand through the recent bout of volatility, adding a net $2 billion in February for a total of $3.2 billion year-to-date, about 4% of assets under management. A weakening dollar boosted demand for emerging market debt with EM sovereign and corporate ETFs attracting net inflows of $3.4 billion, about 6% of AUM.
• By contrast, flows into ETFs pegged to high grade U.S. corporate bonds remain flat for the year with investors reassessing valuations amid the tightest credit spreads in a decade, while almost $3.2 billion has fled U.S. high yield, 6% of AUM, including $2 billion in the past two weeks.

(Bloomberg)  Sprint Is Said to Seek Looser Terms on $4 Billion Term Loan

• Sprint Corp. has approached lenders seeking relaxed terms on the credit agreement governing its $4 billion term loan B, according to people with knowledge of the matter.
• The company is seeking the release of liens on some properties
• Investors are being offered a 5 basis-point fee to agree to the changes
• JPMorgan launched the amendment process for Sprint
• A representative for JPMorgan declined to comment, while Sprint didn’t immediately have comment

(Reuters)  Teva Pharmaceutical warns on 2018 profits citing US market, Copaxone

• Teva Pharmaceutical on Thursday said 2018 results would be weaker than expected due to difficult conditions in the U.S. generics market and fierce competition facing its branded multiple sclerosis drug.
• Teva, the world’s largest generic drugmaker, is facing price erosion, increased competition and a consolidating customer base, particularly in the United States.
• It also has a hefty debt load that company executives said would be tackled in the near term.
• CEO Kare Schultz attributed half of the expected revenue decline in 2018 to its multiple sclerosis blockbuster Copaxone, which began to face competition last year.
• Persistent price pressure in the U.S. generics market, lower revenue following the sale of several businesses and expected competition to its ProAir inhaler in the second half of 2018 also hurt its outlook, he said on an earnings call.
• Schultz said Teva would no longer comment on expected price developments, noting such estimates were leading to steeper declines.

(Business Wire)  Zayo Group Holdings, Inc. Reports Financial Results

• Second quarter operating income increased by $8.6 million and net income decreased by $11.7 million over the previous quarter primarily due to the provision for income taxes. Income tax expense increased by $17.5 million in the second quarter, largely due to the impact from tax reform under the Tax Cut and Jobs Act of 2017 of $44.1 million partially offset by a $28.5 million release of a valuation allowance on deferred tax assets for certain foreign subsidiaries. During the three months ended December 31, 2017, capital expenditures were $193.4 million.
• As of December 31, 2017, the Company had $280.8 million of cash and $442.0 million available under its revolving credit facility.
• On November 26, 2017, the Company entered into a definitive agreement to acquire Spread Networks, LLC, a privately owned telecommunications provider that owns and operates a 825-mile, high-fiber count long haul route connecting New York and Chicago, for $127.0 million in cash. The all-cash transaction is expected to be funded with cash on hand and debt and is expected to close in the first calendar quarter of 2018.
• On January 18, 2018, the Company completed the CAD $31.0 million (or $24.9 million) cash acquisition of Vancouver-based Optic Zoo Networks. Optic Zoo Networks owns and operates high-capacity fiber in Vancouver and has achieved a significant penetration of customers, with a focus on the digital media sector.
• On January 28, 2018, the Company entered into an agreement to acquire substantially all of the assets of Neutral Path Communications and Near North Partners for $31.5 million. Neutral Path is a long haul infrastructure provider, operating a fiber network in the Midwest. The transaction will add 452 owned plus additional leased route miles to the Company’s extensive North American network, including a unique, high-count fiber route from Minneapolis to Omaha.

Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were -$2.0 billion and year to date flows stand at -$2.3 billion. New issuance for the week was $5.6 billion and year to date HY is at $24.3 billion, which is up 30% over the same period last year.

(Bloomberg) High Yield Market Highlights

• Junk yields were on the ascent amid lackluster stocks and a continuing climb in Treasury yields as the 10Y jumped 3% at close yesterday, the biggest since September; 10Y closed at a multi-year high of 2.789%.
• Junk investors were cautious amid volatility in Treasuries and pulled cash from retail funds
• While prudence and caution prevailed, there was no risk aversion with the primary market pricing $1.85b yesterday
• CCCs outperformed the Energy sector and the high yield index in January amid a flood of issuance
• Investor resilience was reflected again yesterday in the continuing demand for new issues with JBS USA, a single-B credit, getting orders of ~$3b, and pricing at the tight end of talk; boosted the size of the offering to $900m from $700m
• Earlier in the week Shelf Drilling priced at the tight end of talk with orders more than $2b. Scientific Games had orders of more than $3b and increased the size of the offering to $900m from $500m . Western Digital priced its $2.3b offering earlier in the week, at the middle of price talk, with orders more than $4b
• While there was some nervousness and caution caused by volatile Treasuries, the high yield continued to be backed by an overall supportive environment:
  1. The default rate should move lower in 2018 amid a growing economy and improving credit conditions in the commodity sector, Moody’s John Puchalla, wrote in note yesterday
  2. Moody’s Liquidity Stress Indicator was a new low of 2.4% mid-January, suggesting junk issuers were backed by steady economic growth and buoyant credit markets
  3. Corporate earnings have been robust and economic growth was synchronized across the globe

(Bloomberg) Wynn Outlook to Negative Following CEO Investigation

• S&P believes recent misconduct allegations against Wynn Resorts’ founder and CEO, which the company’s board of directors and at least one gaming regulator are investigating, could impair the company’s brand and ability to maintain or renew its gaming licenses.
• S&P changed the rating outlook on Wynn debt to negative from stable
• S&P did also affirm the current ratings of BB-

(Reuters) Hospital operator HCA reports strong quarter

• HCA Healthcare Inc., the largest U.S. for-profit hospital operator, on Tuesday reported better-than-expected quarterly earnings and revenue, helped by higher patient admissions.
• HCA’s same-facility equivalent admissions, which include patients who stay in the hospital overnight and those who are treated on an outpatient basis, rose 2.3 percent in the fourth quarter.
• Hospital operators have been plagued by weak patient admissions in the past few quarters, but HCA has been buying hospitals from rivals in the face of the decline.
• Flu continues to be widespread across the United States and the season is on track to be one of the most severe since 2014/2015, U.S. health officials said last week.
• The company, which operates 179 hospitals and 120 freestanding surgery centers, reported revenue of $11.56 billion, above analysts’ estimates of $11.17 billion.
• HCA, which also initiated a quarterly dividend, forecast 2018 EBITDA (earnings before interest, taxes, depreciation and amortization) of $8.45 billion-$8.75 billion. That was above consensus estimates of $8.4 billion, according to Evercore ISI.

(Reuters) Teva Pharma to raise $5 billion in debt securities

• Teva Pharmaceutical Industries said on Tuesday it planned to raise $5 billion of debt securities as it pushes ahead with a global overhaul aimed at cutting costs and managing its massive debt burden.
• “The net proceeds from the sale of securities … will be used for general corporate purposes, which may include additions to working capital, investments in or extensions of credit to our subsidiaries and the repayment of indebtedness,” Teva said in a filing with the U.S. Securities and Exchange Commission.
• Teva, the world’s biggest generic drugmaker, announced in late 2017 a restructuring that would combine its generic and specialty medicine businesses, cut more than a quarter of its workforce and close many of its factories.
• The plan set a target to reduce costs by $3 billion by the end of 2019, from about $16.1 billion in 2017.

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were -$1.3 billion and year to date flows stand at -$0.3 billion.  New issuance for the week was $7.5 billion and year to date HY is at $18.6 billion, which is up 16% over the same period last year. 

(Bloomberg)  High Yield Market

• Issuance kicked off the week with T-Mobile driving by with $2.5b 2-part senior notes offering and pricing at the tight end of talk; received orders of more than $5.5b
• Recent new issues have been seeing big orders
  • Extraction Oil & Gas saw orders of more than $2b, that is, 4 times the size of the original offering
  • IRB Holding priced at the tight end of talk to fund the buyout of Buffalo Wild Wings, with orders of ~$1.5b
  • Earlier, Noble Holding got orders more than $2b and increased the size of the offering to $750m from $500; Olin Corp saw orders of more than $2b; and Nabors Industries about $3b, 5 times the size of the offering

• Strong equities with stocks setting new highs, and oil near 37-mo. high bolster junk bonds leading to lower risk premium
• High yield continued to be backed by an overall supportive environment: Moody’s Liquidity Stress Indicator kicked off 2018 with a new low of 2.5%, suggesting junk issuers were backed by steady economic growth and buoyant credit markets as investors scramble for yield
• Corporate default rates declined, another critical factor for high yield
• Steady economy, declining default rates, low volatility, steady oil prices and stocks augur well for high yield

(PR Newswire)  Steel Dynamics Reports Financial Results

• Company records for 2017: company-wide safety performance, steel shipments of 9.7 million tons, net sales of $9.5 billion, operating income of $1.1 billion, and EBITDA of $1.4 billion
• “The performance of the entire Steel Dynamics team was exceptional this year,” said Mark D. Millett, President and Chief Executive Officer.  “We performed at the top of our industry, both operationally and financially, and most importantly, we did it safely.  Based on our strong cash flow generation from operations of $740 millionin 2017, we maintained near-record liquidity of over $2.2 billion, while simultaneously investing in our company through organic growth, a sustained positive dividend profile and the continuation of our share repurchase program.  We have a firm foundation for our continued growth.”
• “In spite of the continuation of elevated levels of steel imports, which were over 15 percent higher than in 2016,” continued Millett, “the domestic steel industry benefited in 2017 from an improvement in underlying demand, as the automotive sector remained strong, and the construction and energy sectors continued to improve.  Our steel operations achieved record annual operating income of $1.1 billion.  Supported by improved domestic steel utilization, the metals recycling team maintained volume, increased metal spread and reduced costs throughout the year.”

(Reuters)  Advisory group ISS recommends that Cineworld investors oppose Regal deal

• Influential advisory group Institutional Shareholder Services has recommended that investors in Cineworld oppose the company’s $3.6 billion reverse takeover of U.S. rival Regal Entertainment.
• ISS told clients in a report that a vote against the deal and its associated rights issue “is warranted based on the significant financial and operation risks related to the transaction.”

(Politico)  Trump nominee Powell overwhelmingly confirmed as Fed chair

• The Senate on Tuesday confirmed Jerome Powell, the president’s pick to chair the world’s most important central bank, in a bipartisan 84-13 vote.
• But the Fed might not be radically different with Powell at the helm. The Fed under Powell will likely continue its path of steady interest rate increases — three are projected for 2018 — and cautious removal of its decade long extraordinary support for the U.S. economy.
• Powell joined the Fed board in 2012 as an Obama appointee, and since then he has worked with Yellen and her predecessor, Ben Bernanke, to craft the central bank’s monetary and regulatory policy in the wake of the 2008 financial crisis.
• “The best way to sustain the recovery, I believe, is to continue on this path of gradual interest rate increases,” Powell said at his confirmation hearing in November.
• Powell will probably be more interested in specific regulatory policy details than any Fed chair in history, making his relationship with newly minted Fed regulatory czar Randal Quarles a key one. Powell and Quarles are good friends who have known each other for decades, but Quarles seems slightly more inclined to loosen regulation than his soon-to-be boss.