January 2017 – Cincinnati Asset Management

27 Jan 2017

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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

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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

20 Jan 2017

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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 Solutions^TM that Mediacom Business has been offering local businesses in our markets for many years.”

20 Jan 2017

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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.

13 Jan 2017

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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 $1.1 billion. New issuance for the week was $1.2 billion and year to date HY is at $1.4 billion.

(Business Wire) Williams and Williams Partners Announce Financial Repositioning for Long-Term, Sustainable Growth

Williams and Williams Partners L.P. announced an agreement to permanently waive payment obligations under the incentive distribution rights held by Williams and convert Williams’ economic general partner interest into a non-economic interest for 289 million newly issued Williams Partners common units
The estimated transaction value is approximately $11.4 billion. Following the IDR Waiver, Williams will hold approximately 660 million Williams Partners common units, representing approximately 72% of the common units outstanding
Williams also announced that it expects to purchase newly issued common units of Williams Partners at a price of $36.08586 per unit. Williams expects to fund the unit purchase with equity. With respect to units issued to Williams in the private placement, Williams Partners will not be required to pay distributions for the quarter ended December 31, 2016 and the prorated portion of the first quarter of 2017 up to closing of the private placement
As a result of the measures announced today, Williams expects that Williams Partners will not be required to access the public equity markets for the next several years. In addition, the Transactions result in debt reduction at Williams Partners and a meaningful increase in its cash coverage ratio to approximately 1.2x in 2017 and maintenance of strong coverage in excess of 1.1x thereafter
Strengthening Williams Partners’ coverage and credit profile through the Transactions will benefit stakeholders in Williams Partners, including Williams. In addition, maintaining Williams Partners as a strong, separate entity provides on-going strategic and financial flexibility to Williams, enabling it to capitalize on future opportunities to grow both organically and inorganically

(Business Wire) Parsley Energy Buys Permian Properties for $607 Million

Parsley Energy Inc. is buying oil and gas properties in America’s hottest shale play for $607 million as it seeks to boost production by almost 60 percent this year
The acquisition comprises 23,000 net acres of land adjacent to the company’s existing operations in the Midland and Southern Delaware portions of the Permian Basin
The Permian shale formation straddling West Texas and New Mexico has been a hot spot for deals and the center of a revival in U.S. oil drilling as producers have managed to make a profit in the region even during the worst price crash in a generation

Sabine Pass Liquefaction was recently upgraded to BBB- by Fitch. This makes the Sabine bonds rated investment grade by two of the three major rating agencies.

(Bloomberg) Valeant Sells $2.1 Billion in Assets to Ease Debt Burden

Valeant Pharmaceuticals agreed to sell about $2.1 billion in assets in two deals, an important first step in the struggling drugmaker’s endeavor to get cash and begin easing its debt burden
L’Oreal SA, the Paris-based cosmetic giant, will pay Valeant $1.3 billion for three skin-care brands. Valeant will also sell its Dendreon Pharmaceuticals unit to closely held Chinese conglomerate Sanpower Group Co. for about $820 million. Valeant’s shares and bonds jumped after the news
The agreements mark Valeant’s biggest divestitures in almost three years, and a start to its efforts to pay down about $30 billion in debt. It’s a significant break for Chief Executive Officer Joe Papa, who took over in May to help turn around a company that had been embroiled in scandals about high prices and accounting that led to legal and regulatory investigations
Proceeds from both sales will be used to permanently repay term-loan debt under Valeant’s senior credit facility, according to the company. The Sanpower transaction is expected to close in the first half of this year, while the sale to L’Oreal should close in the first quarter

(Bloomberg) Sprint Debt Upgraded by Moody’s on Better Performance, Liquidity

“Despite the heavy promotional activity, profitability has remained stable due to Sprint’s cost-reduction initiatives,” Moody’s said, adding that annual savings could top $2 billion. The more solid footing “has reduced Sprint’s refinance risk and its dependence upon the often-volatile high-yield bond market,” Moody’s said. Sprint also benefits from implicit support of its parent, SoftBank Group Corp., the report said.
Sprint has struggled to improve its finances under Chief Executive OfficerMarcelo Claure. The unprofitable carrier, based in Overland Park, Kansas, has had to borrow money using assets including airwave licenses as collateral to help finance the business. Through promotions such as half-off pricing, it has curbed subscriber defections and turned in its first annual increase in seven years.

(New York Times) Senate Takes Major Step Toward Repealing Health Care Law

In a 51 to 48 vote, the Senate took their first major step toward repealing the Affordable Care Act, approving a budget blueprint that would allow the health care law to be gutted without the threat of a filibuster.

13 Jan 2017

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CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Lipper, for the week ended January 11th, investment grade funds posted a net inflow of $4.029bn. The total year-to-date net inflow into investment grade funds ended the week at $6.215bn. Per Bloomberg, investment grade corporate issuance through Thursday was $38.8bn. Thus far, $92.8bn of investment grade corporate bonds have been issued in January, while consensus estimates call for $112bn for the full first month of the year.

(Bloomberg) Teflon Chemical Cases Face Uncertain Fate If Dow, DuPont Merge

Uncertainty cloaks DuPont Co.’s liability for 3,500 toxic tort lawsuits over a Teflon-related chemical as the company proceeds toward a merger with Dow Chemical Co.
PFOA has been found in drinking water in West Virginia and Ohio, near the Parkersburg plant. In the first three of those 3,500-plus cases, DuPont lost to residents of that area who claimed DuPont’s PFOA was responsible for their cancer.
DuPont’s spinoff, Chemours Co., will defend the PFOA cases although DuPont has been the named defendant.
Tom Claps, litigation analyst at Susquehanna Financial Group LLLP, said his company estimates DuPont will be liable for about $550 million for settlement of the current 3,500-plus PFOA cases. Chemours is required to reimburse DuPont for that amount, as the companies agreed in 2015.
“However, DuPont must write the initial PFOA checks to plaintiffs in these cases, and will then go after Chemours for reimbursement,” Claps said.
According to the Environmental Protection Agency, PFOA was found in blood serum in 99 percent of the U.S. general population between 1999 and 2012, but that percentage has been decreasing as domestic companies phase out production of the chemical.
The agency issued a health advisory in 2016 limiting PFOA exposure to 0.07 parts per billion after studies in test animals showed the chemical has adverse health effects, including cancers and impacts on development and the immune system.

(Moody’s, CAM notes) Constellation Brands Raised to Investment Grade by Moody’s

The rating upgrade reflects Constellation’s strong brand portfolio and favorable category trends, and its commitment to manage its net debt/EBITDA leverage to around 3.5x compared to a historical targeted range of 3x to 4x.
Moody’s expects that Constellation will maintain strong liquidity, characterized by over $1.4 billion in annual operating cash flow and $1.15 billion in revolving credit facilities with substantial borrowing availability.
With this Moody’s upgrade, Constellation is now rated investment grade by all three rating agencies.

(Bloomberg) ‘End of Covenants’ Sparks Revolt Over Erosion of Bond Safeguards

The first time Adam Cohen’s Covenant Review sounded the alarm in October about a new passage creeping into bond offerings, it described the junk-rated deal from Rackspace Hosting Inc. as “outrageous” and “unprecedented.” Investors bought it anyway.
To Cohen, it seemed no one was paying attention to the fine print. So he blasted out a report titled “The End of Covenants,” ultimately fingering 18 deals with the disputed passage.
“I had to do something dire,” said Cohen, founder and chief executive officer of his New York-based firm. “By sending out something with the ridiculous title of ‘The End of Covenants,’ people figured out, ‘Wait, something’s going on here.’”
Bonds typically come with a lengthy array of standard covenants that protect bondholders by requiring company managers to maintain certain financial ratios, limit asset sales and meet certain deadlines. If they don’t, it can be deemed a voluntary default that entitles bondholders to penalty payments. The “no premium on default” passage casts doubt on those payments, according to Cohen’s firm.
Such language may be less jarring to junk-bond owners, who accept more risk and allow corporate managers more leeway in return for higher yields. Mainstream investors weren’t so forgiving.
Chatter about the covenants spread through buy-side e-mail chains and chatrooms Monday and Tuesday, with some investors urging others to contact banks to oppose the language.
The firestorm that erupted by the middle of this week pushed issuers including Marsh & McLennan, GM and Broadcom Ltd. to drop the idea. The report had struck a nerve with buyers of high-grade bonds, who already have fewer protections and aren’t eager to go down the path that led to five years of eroding protection for junk-bond covenants, as tracked by Moody’s Investors Service.