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 -$2.8 billion. New issuance for the week was $6.8 billion and year to date HY is at $131 billion.

(New York Times) Trump Plans to Shift Infrastructure Funding to Cities, States and Business

• President Trump will lay out a vision for curtailing the federal government’s funding of the nation’s infrastructure and calling upon states, cities and corporations to shoulder most of the cost of rebuilding roads, bridges, railways and waterways.
• The federal government would make only a fractional down payment on rebuilding the nation’s aging infrastructure. Mr. Trump would rely on a combination of private industry, state and city tax money, and borrowed cash to finance the rest. It would be a departure from ambitious infrastructure programs of the past, in which the government played a major role and devoted substantial resources to paying the cost of large-scale projects.
• “We like the template of not using taxpayer dollars to give taxpayers wins,” said Gary Cohn, director of the National Economic Council and an architect of the infrastructure plan.
• “We want to be in the partnership business,” Mr. Cohn said. “We want to be in the facilitation business, and we’re willing to provide capital wherever necessary to help certain infrastructure along.”

(Reuters) Gold gains after disappointing U.S. jobs data

• Gold prices rose to a near six-week high on Friday in response to disappointing U.S. non-farm payrolls data that lowered expectations for more aggressive U.S. interest rate increases.
• Data showed that U.S. job growth slowed in May and employment gains in the prior two months were not as strong as previously reported, suggesting the labor market was losing momentum.
• A slow recovery in the world’s biggest economy dents the likelihood for higher interest rates which benefits non-interest yielding and safe-haven gold.
• “This is not the kind of report people had hoped for, and that has put pressure on the dollar and yields, and gold is always happy to profit from that,” Georgette Boele, commodity strategist at ABN AMRO, said.

(Bloomberg) Investors Given Black Eye on Frontier’s New $1.5 Billion Loan

• Loan investors helped Frontier Communications Corp. raise $1.5 billion as the struggling company tries to shore up its balance sheet. Some of them are already regretting it.
• The telecom operator’s term loan was sold and is now trading below its issue level, an unusual occurrence in a hot market where strong demand often leads to a bump in market prices after the debt has been sold. The loan was being quoted below 99 cents on the dollar. That’s less than the already discounted price of 99.5 cents it was sold at.
• Banks typically price a loan to enable trading that results in a pop on the debt price after the deal has been allocated. In this case, JPMorgan, which led the deal, seems to have miscalculated demand for the loan that has left some investors flustered.
• The new loan pays interest of 3.75 percentage points more than lending benchmarks.
• Frontier has spent the past few years buying up landline telecommunications assets from Verizon Communications Inc. and AT&T Inc. to expand its revenue base. Though these deals helped double the size of the company, Frontier has been losing phone and internet subscribers to cable competitors, which has pressured sales and its stock price.
• Its debt situation and the need for cash forced the company to cut its quarterly common dividend by 62 percent.

(Bloomberg) In T-Mobile-Sprint Talks, All-Stock Option Said to Emerge

• If a Sprint Corp. merger with T-Mobile US Inc. happens, would-be lenders might be stuck on the sidelines.
• In early-stage discussions between the two wireless carriers, an all-stock deal that would avoid the need for financing has emerged as a potential option, according to people familiar with the matter. Deutsche Telekom AG, the majority owner of T-Mobile, and SoftBank Group Corp., which holds about 83 percent of Sprint, still haven’t decided if they will even attempt a deal, said the people, who asked not to be identified because the negotiations are private.
• An all-stock offer would let Deutsche Telekom avoid paying a premium for Sprint while still making a compelling proposal for investors because of the long-term upside from cost savings and competitive advantages.
• T-Mobile has an enterprise value of more than $80 billion, compared with about $70 billion for Sprint. Such an enormous combination would typically involve billions of dollars in financing, so a stock-for-stock merger might be disappointing for Wall Street banks, which make millions of dollars from lending fees on megadeals.
• One of the proposals that’s been informally considered would involve Sprint and T-Mobile setting an exchange ratio that would give Deutsche Telekom a slightly higher percentage of the company than SoftBank, the people said. Neither company would own more than 50 percent of the new combination.