CAM Investment Grade Weekly Insights

Fund Flows & Issuance: According to Lipper, for the week ended August 9, investment grade funds posted a net inflow of $2.464bn. This marks 34 straight weeks of inflows and inflows in 70 of the last 75 weeks. Per Lipper data, the year-to-date net inflow into investment grade funds was $81.490bn. According to Bloomberg, investment grade corporate issuance for the week was $43.55bn, as 26 issuers tapped the market across 48 tranches. Through the week, YTD total corporate bond issuance was $899.475bn. Investment grade issuance thus far in 2017 is down 4.5% y/y when compared to 2016.

(Bloomberg) IG NIC ANALYSIS: Softer Backdrop Prompts New Issue Concessions

• High-grade bond issuers shrugged off a soft broader market tone for the second day running, pricing $4.25b Thursday.
• Given the geopolitical tensions between the U.S. and North Korea, the recent deluge of primary supply, and wider credit spreads, many investment-grade bond deals are requiring new issue concessions. Thursday’s three corporate bond sellers, all rated BBB, provided no exceptions.
• Deals priced with low-mid single digit concessions as issuers look to navigate the more uncertain primary market terrain.
  • Thermo Fisher Scientific Inc. (TMO) Baa2/BBB/BBB Mkt Cap $69.1b Healthcare/Medical Equipment
    
    • New Issue Concession: 10y: 8bps, 30y: 10bps
  • The Priceline Group Inc. (PCLN) Baa1/BBB+ Mkt Cap $91.1b Communications/Media
    •  New Issue Concession: 5bps
  • O’Reilly Automotive Inc (ORLY) Baa1/BBB+ Mkt Cap $17.6b Consumer/Auto Retailer
    
    • New Issue Concession: 5bps

(Bloomberg) Cimarex Reports Second Quarter 2017 Results

• Second Quarter Production up 9% sequentially; Oil Production up 11% sequentially
• Successful Wolfcamp Downspacing test in the Delaware Basin
  
  • 16 wells per section in Reeves County Upper Wolfcamp
• E&D Capital unchanged for 2017; Production guidance raised slightly
• Cimarex invested $296 million in exploration and development during the second quarter, 53 percent in the Permian Basin and 45 percent in the Mid-Continent. Cimarex completed 51 gross (18 net) wells during the quarter. At June 30, 2017, 98 gross (29 net) wells were waiting on completion. Cimarex is currently operating 14 drilling rigs.
• Of note, Cimarex completed a successful four-well downspacing project testing 16 wells per section in the Upper Wolfcamp. Located in Reeves County, the Pagoda State project was brought on production in late April. The four 10,000-foot lateral wells had an average peak 30-day initial production of 1,922 BOE per day of which 956 barrels per day (50 percent) is oil. Please see our latest presentation (posted at www.cimarex.com) for more detail.

(Bloomberg) American Water Capital $1.35b Debt Offering in Two Parts

• American Water Works Co., Inc. provides drinking water, wastewater, and other water-related services in multiple states and Ontario, Canada. The Company’s primary business involves the ownership of regulated water and wastewater utilities that provide water and wastewater services to residential, commercial, and industrial customers.
• Tranches
  
  • $600m 10Y (09/01/2027) at +73
  • $750m 30Y (09/01/2047) at +93
• UOP: To lend funds to American Water and its regulated operating subsidiaries and to (1) repay $524m principal of the issuer’s 6.085% notes due 2017 upon maturity on Oct. 15, 2017, (2) redeem up to $327m aggregate principal amount of the issuer’s outstanding long-term debt securities due 2018 and 2021 and which have a weighted-average interest rate of 5.71% and (3) repay commercial paper obligations