CAM High Yield Weekly Insights

Fund Flows & Issuance: According to a JP Morgan report, flows week to date were -$2.1 billion and year to date flows stand at -$12.5 billion. New issuance for the week was $7.2 billion and year to date HY is at $171 billion.

(Food Business News) B&G Foods names head of corporate strategy

• Bruce C. Wacha has been appointed to the newly created position of executive vice-president of corporate strategy and business development for B&G Foods, Inc., effective Aug. 21. In this role, Mr. Wacha will oversee the company’s corporate strategy and business development, including mergers and acquisitions, capital markets transactions and investor relations. Additionally, he will serve on B&G Foods’ executive management team.
• “We are very pleased to have Bruce Wacha join our team,” said Robert C. Cantwell, chief executive officer of B&G Foods. “M.&A. and capital markets transactions are vital to our growth strategy, and Bruce is an experienced and talented executive who will be a valuable addition as we continue to execute that strategy.”
• Mr. Wacha joins B&G Foods from Amira Nature Foods Ltd., where he spent three years as the chief financial officer and executive director on the board of directors. Previously, he spent more than 15 years in the financial services industry advising corporate clients across the food, beverage and consumer products landscape at Deutsche Bank Securities, Merrill Lynch and Prudential Securities.

(Business Wire) AES Announces Pricing of $500 Million of Senior Notes in Public Offering

• The AES Corporation announced that it has priced $500 million aggregate principal amount of 5.125% senior notes due 2027. AES intends to use the net proceeds from the offering of the Notes to fund the concurrent tender offer to purchase AES’ outstanding 8.00% senior notes due 2020 and to pay certain related fees and expenses. AES intends to use any remaining net proceeds from this offering after completion of the tender offer to retire certain of its outstanding indebtedness. The closing of the offering of the Notes is expected to occur, subject to certain customary conditions, on August 28, 2017.

(CNBC) Tesla’s first junk bond offering is a hit

• Tesla raised $1.8 billion, $300 million more than expected, in its first high-yield junk bond offering.
• The yield of 5.30 percent was slightly higher than the original guidance of 5.25 percent.
• Goldman Sachs was the lead underwriter of the eight-year bonds. S&P rated the bonds negative B and Moody’s B3.
• “It was well-received,” said Efraim Levy of CFRA. “In a large extent it does show that people are interested in the bonds of the company because they believe in the long-term growth … story.”
• It “speaks to the sheer insanity found in the high-yield market to have a deal like this upsized with terms so unappealing to investors,” said Larry McDonald, author of The Bear Traps Report newsletter. “The deck is stacked for Tesla in bond deal terms, congrats to Elon Musk.”

Meanwhile, away from CNBC, a daily high yield publication ran the headline “Tesla Trades Terribly.”

• The article had many quotes from bond traders on Wall Street. One trader commented that the Tesla deal “was one that a lot of high-yield money managers basically avoided.”
• Another trader said that there was some demand overseas but that “among your regular on-the-run high-yield guys, we couldn’t find anybody that played in it.”
• Finally, a trader went on to say that the “deal was away from the normal high-yield universe” and the order book “was hyped.”

(Bloomberg) Junk-Debt Wrecking Ball Swings Toward Telecom

• Buried in last week’s debt sell-off was an important message to credit investors: Not all bonds are the same, and those of telecommunications companies appear worse off than others.
• While U.S. high-yield bonds lost 0.8 percent last week, debt of companies such as Frontier, CenturyLink and Intelsat were hit even harder. Speculative-grade bonds of telecom companies lost 1.3 percent on average, more than those in any other industry.
• The pronounced industry weakness was due in part to some company-specific issues, such as some disappointing second-quarter earnings and merger speculation. But the disproportionate declines highlight broader investor concern about an increasingly challenging backdrop for these companies.
• While a collapse is hardly imminent for these companies, it’s worthwhile questioning what their futures look like in three, five or 10 years. And from debt investors’ perspective, it’s worth taking note of this, especially in light of current trends in the $1.3 trillion U.S. junk-bond market. Instead of a broad-based sell-off, weakness has cycled through specific sectors, one or two at a time. (Remember when energy bonds were the focus, back in 2014 and 2015, or retail debt of late?)

(Bloomberg) Energy Capital, Investors to Buy Calpine for $5.6 Billion

• Private equity firm Energy Capital Partners and a consortium of investors have struck a deal to buy U.S. power generator Calpine Corp. for $5.6 billion in cash.
• Tyler Reeder, a partner at Energy Capital, said the firm doesn’t expect to make any changes to the way Calpine operates or to the company’s financial policy and previously announced $2.7 billion debt reduction plan.