High Yield Weekly 03/09/2018

Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were -$1.8 billion and year to date flows stand at -$17.1 billion. New issuance for the week was $4.9 billion and year to date HY is at $40.2 billion, which is -23% over the same period last year.

(Bloomberg) High Yield Market Highlights

• Junk bonds, though cautious overall, ignored stumbling stocks as issuance continued its steady pace, with Teva Pharmaceuticals pricing through price talk and increasing the size of the offering.
• Junk bonds were impervious to wide-spread fears of a possible trade-war as investors saw that as just noise, and that has now become evident in the introduction of new exemptions from the proposed tariff
• High yield investors shrug off any talk of rise in rates as the 10 year yield has stayed flat or range bound in the last four weeks
• While junk bond yields dropped a tad in sympathy with steadily declining oil prices, there was no material collapse of the market, as was evident in the new issue market, which added a CCC-rated FTR to the calendar after pricing TEVA
• CCCs continued to outperform BBs and single-Bs with YTD positive returns of about 0.8%
• Goldman Sachs, however, cautioned against CCCs and recommended BBs

(Bloomberg) Sinclair Making Progress Toward FCC Nod on Tribune

• Sinclair’s latest FCC filing shows progress on looming issues in the review of its Tribune acquisition. FCC approval is likely in 2Q, after the Justice Department finishes its work. The FCC will now take public comment on Sinclair’s divestiture plan. Sinclair’s bigger risk likely comes after the deal closes, from litigation over the FCC’s UHF discount.
• Sinclair’s March 7 update to the FCC indicates that the company is making progress on work needed to get approval of its Tribune M&A. The company now says it seeks to use a recently relaxed FCC rule to own top-four rated stations in only two markets; it abandoned its request for the Harrisburg, Pennsylvania, market. To satisfy a national cap, Sinclair will divest stations in Chicago, New York, and San Diego. The fact that Sinclair will still provide service to some of those stations isn’t likely to dissuade FCC Republicans from backing the deal.
• The FCC’s review of the Sinclair-Tribune deal will likely stretch into 2Q, after Sinclair on March 7 amended its application to address divestitures. The FCC will now probably set a brief period to take public comments on the issue. It will then likely take weeks to reach a decision. Sinclair said it plans to sell stations in nine markets where it would otherwise have two top-four stations. It also said it would like to retain two top-four stations in two markets. Justice Department approval will likely come first.

(Bloomberg) Community Health’s Loan Is Said to Fall After Rating Downgrade

• Community Health’s outstanding $1.9b term loan H dropped to almost a point, after Moody’s downgraded the hospital operator to Caa1 from B3, according to people familiar with matter.
• The Company’s outstanding $1.037b term loan G also fell about a point
• The ratings cut “is driven by material erosion in financial performance over the last six months and a lower earnings and cash flow outlook for 2018″: Moody’s
• Moody’s now expects adjusted debt/EBITDA to remain above 7.5x over the next 12-18 months
• First Lien secured ratings also downgraded to B2 from Ba3

(Business Wire) Frontier Communications Announces $1.6 Billion Second Lien Secured Notes Offering

• Frontier intends to use the proceeds from the offering to finance the cash consideration payable in connection with its previously announced offers to purchase for cash certain of its senior notes maturing in 2020, 2021, 2022 and 2023 and to pay related fees and expenses.

(CAM Note) Moody’s downgraded Frontier Communications debt one notch to Caa1