Category: Weekly Insights

20 Jan 2017

CAM High Yield Weekly Insights

 

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 $7.2 billion and year to date HY is at $8.6 billion.

(Food Business News) B&G Foods ready to make another Green Giant-size acquisition

  • B&G doubled its corporate infrastructure with the Green Giant deal and “set ourselves to really continue an acquisition path in a big way,” said Bob Cantwell, chief executive officer and president
  • “We still believe that the right answer for B&G is to get bigger managing smaller things. That really differentiates ourselves against everybody else, but certainly, be ready to buy more things like Green Giant of that size, $500-plus million, because we’re certainly capable of doing that.”
  • “If there’s an acquisition out there that really fits B&G, we’re going to be ready. We’re ready for it today. We’d prefer a little time just to absorb everything we have, but we’re not going to lose out on an acquisition that’s an absolute fit for B&G today.”

(Washington Post) Trump vows ‘insurance for everybody’ in Obamacare replacement plan

  • President-elect Donald Trump said in a weekend interview that he is nearing completion of a plan to replace President Obama’s signature health-care law with the goal of “insurance for everybody,” while also vowing to force drug companies to negotiate directly with the government on prices in Medicare and Medicaid
  • In addition to his replacement plan for the ACA, also known as Obamacare, Trump said he will target pharmaceutical companies over drug prices. “They’re politically protected, but not anymore”
  • “We’re going to have insurance for everybody,” Trump said. “There was a philosophy in some circles that if you can’t pay for it, you don’t get it. That’s not going to happen with us.” People covered under the law “can expect to have great health care
  • Trump said his plan for replacing most aspects of Obama’s health-care law is all but finished. Although he was coy about its details — “lower numbers, much lower deductibles” — he said he is ready to unveil it alongside Ryan and Senate Majority Leader Mitch McConnell (R-Ky.)
  • “It’s very much formulated down to the final strokes. We haven’t put it in quite yet but we’re going to be doing it soon,” Trump said. He noted that he is waiting for his nominee for secretary of health and human services, Rep. Tom Price (R-Ga.), to be confirmed

(Broadcasting & Cable) Spectrum Auction: TV’s New Exit Price Plummets to $10B

  • That is a huge drop from the previous round and sounds like a number wireless operators might be able to love, or at least meet, so long as the average price in the top markets also meets the second prong for closing the auction successfully. It is a far cry from the $86 billion broadcaster asking price when the auction began, though that was for much more spectrum
  • That $10 billion is how much the government will have to pay—actually it will be wireless companies if/when the auction finally closes for good—to move broadcasters off 84 MHz of spectrum so it can offer it to forward auction bidders for wireless broadband. That is down from the $43 billion broadcasters wanted for 108 MHz in stage 3 of the auction

(Bloomberg) IEA Sees Significant Gains in U.S. Shale Oil as Prices Rise

  • Oil-price gains will trigger a “significant” increase in U.S. shale output as OPEC and other producers rein in supply, according to the head of the International Energy Agency
  • “U.S. shale-oil production will definitely react strongly,” said Executive Director Fatih Birol. “At $50, $55, we’ve already seen a lot of activity,” Birol said. “U.S. oil production will continue to increase in significant terms.”
  • The oil industry is becoming more cost-efficient and a “big chunk” of global output is now profitable at $50 to $55 a barrel, citing Brazil, Mexico and China as countries that will also boost production. There’ll be “lots more” supply in late 2017 or early 2018, he said
  • Oil prices have risen about 20 percent since the Organization of Petroleum Exporting Countries reached a deal to curtail supply last year. The Nov. 30 agreement prompted a surge in activity in the U.S. — not an OPEC member — where oil and gas producers increased drilling the most since April 2014

(Business Wire) Mediacom Communications Makes Iowa First Gigabit State in the Nation

  • Nearly 1 million households in the more than 300 Iowa communities passed by Mediacom’s fiber-rich digital network will be able to enjoy download speeds that are up to 40 times faster than the minimum broadband definition set by the Federal Communications Commission
  • “In addition to enhancing speeds for residential and small business customers today, the Gigasphere platform we have deployed also lays the groundwork for offering multi-Gig services in the future,” said Mediacom’s Chief Technology Officer, JR Walden. “This next generation technology is an excellent complement to the Gigabit+ Fiber SolutionsTM that Mediacom Business has been offering local businesses in our markets for many years.”
20 Jan 2017

CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Lipper, for the week ended January 18th, investment grade funds posted a net inflow of $1.893bn. The total year-to-date net inflow into investment grade funds ended the week at $8.108bn. Per Bloomberg, investment grade corporate issuance through Thursday was ~$29bn. Thus far, $121.8bn of investment grade corporate bonds have been issued in January, besting consensus estimates of $112bn.

(Press Release) IBM Reports 2016 Fourth-Quarter and Full-Year Results

  • Highlights
    • Diluted EPS from continuing operations: GAAP of $4.73; Operating (non-GAAP) of $5.01
    • Revenue from continuing operations of $21.8 billion
    • Strategic imperatives revenue for full-year 2016 of $32.8 billion up 13 percent (up 14 percent adjusting for currency) represents 41 percent of IBM revenue
    • Cloud revenue of $13.7 billion for full-year 2016, up 35 percent
      • Cloud as-a-service annual exit run rate of $8.6 billion at year end, up 61 percent year to year (up 63 percent adjusting for currency)
    • 2017 EPS Expectations: GAAP of at least $11.95; Operating (non-GAAP) of at least $13.80
  • “In 2016, our strategic imperatives grew to represent more than 40 percent of our total revenue and we have established ourselves as the industry’s leading cognitive solutions and cloud platform company,” said Ginni Rometty, IBM chairman, president and chief executive officer. “IBM Watson is the world’s leading AI platform for business, and emerging solutions such as IBM Blockchain are enabling new levels of trust in transactions of every kind. More and more clients are choosing the IBM Cloud because of its differentiated capabilities, which are helping to transform industries, such as financial services, airlines and retail.”

(NYT) Morgan Stanley Nearly Doubled Profit From Year Earlier Fourth Quarter

  • Morgan Stanley roared in the fourth quarter, but it also exposed the limits of animal spirits. The bank led by James Gorman almost doubled its profit in the period from a year earlier to $1.7 billion. As at rivals, though, return on equity remains subpar.
  • Some banking businesses do not fare well when too much hangs in the balance, as occurred with an OPEC meeting, an Italian constitutional referendum and the American election late last year. Fees from new stock sales, for example, fell 5 percent from the third quarter at Morgan Stanley, 19 percent at JPMorgan Chase and 34 percent at Bank of America.
  • Trading desks ought to have been reaping the benefit from market mood swings. They certainly performed better in last year’s final quarter than during the same span in 2015. Morgan Stanley’s fixed-income, currency and commodities dealers raked in, at $1.5 billion, nearly three times as much revenue.
  • Profitability also remains subdued. With annualized return on equity of 8.7 percent in the fourth quarter, Mr. Gorman is inching toward his 2017 goal of 9 percent to 11 percent. For now, Morgan Stanley keeps failing to cover its cost of capital, generally assumed to be 10 percent for large banks.
  • Business may pick up in time, but that story has been told for years. What could power earnings is largely beyond Wall Street’s control: more and faster interest-rate increases from the Federal Reserve and financial rule changes from Washington.
  • Morgan Stanley is well placed to benefit from both. It is growing its lending business and its mostly domestic wealth-management unit accounts for an increasing share of the company’s profit. With a capital ratio of 16.8 percent, the bank holds more excess than rivals and thus has plenty to return to shareholders if regulators allow.

(Bloomberg) Key Republicans at Tom Price Hearing Still Wary on Health Law Repeal

  • A hearing on President-elect Donald Trump’s choice for health secretary became an arena Wednesday for key Republicans to stress their opposition to overturning the current health law without a clear replacement.
  • The panel was considering the selection of Rep. Tom Price (R., Ga.), but much of the session focused on GOP plans for undoing the health law. Sens. Lamar Alexander (R., Tenn.) and Susan Collins (R., Me.) pointedly told Mr. Price their concerns about an initial Republican strategy of repealing the law without an agreed alternative in hand.
  • Mr. Alexander, who chairs the Senate Health, Education, Labor and Pensions Committee, warned that the fragile insurance market in his state means he cannot support anything that would trigger further disruption. He finished on a similar note, telling Mr. Price he was confident he had secured his agreement.
  • “What I heard from you, I believe I’m correct about this, is that while we intend to repair the damage of Obamacare and that will eventually mean repealing parts of it—major parts of it—that won’t become effective until there are practical, concrete alternatives in place to give Americans access to health care,” he said.
  • The GOP-controlled Senate and House have taken their first procedural steps toward repealing the ACA, passing a budget that directs lawmakers to start drafting legislation to dismantle much of the law. But Republicans’ 52-48 Senate majority offers little room for defections as they move ahead.

(Bloomberg Intelligence) Dakota Access Still Has Path to Completion Despite Corps’ Review

  • The Dakota Access Pipeline project may be delayed by a new Army Corps environmental review, but that isn’t likely to stop the project from being completed.
  • The pipeline lost a court bid to block the Army Corps from preparing an environmental impact statement on the lake crossing, opening up the project to a period of public comment and review ending Feb. 20.
  • While publication of the EIS notice somewhat hems in the incoming Trump administration, the new president’s appointees may still withdraw it or reverse course.
  • In the interim, the federal district court in Washington could also agree with Dakota Access that the easement was actually granted in July, negating the EIS process completely.
  • If the EIS process is allowed to go to completion, that process may last as long as six months.