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.