CAM High Yield Weekly Insights

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were -$0.5 billion and year to date flows stand at -$31.8 billion.  New issuance for the week was $1.7 billion and year to date HY is at $96.5 billion, which is -28% over the same period last year. 

(Bloomberg)  High Yield Market Highlights

• Junk bond yields are up slightly with equity weakness and rising VIX, while lack of supply is supportive.
• Yield to worst on Bloomberg Barclays US Corporate High Yield Bond Index rose to 6.26%
• VIX saw the biggest jump in more than three weeks, closed at a 3-week high
• DJIA dropped in nine of the last 10 sessions, closed at a 3-week low amid continuing tensions over tariffs
• New issuance has been quite sparse
• Junk bond YTD returns are 0.69%, the best performing in U.S. fixed income
• CCCs continue to top BB, single-Bs with YTD returns of 3.52%
• CCCs also beat investment grade bonds, which are down 3.58%

(Moody’s)  Moody’s Upgrades AES Corporation’s Corporate Family Rating to Ba1 from Ba2; Rating Outlook is Stable

(CAM notes)  Moody’s upgrade was based on the business diversity, lowering of carbon risk exposure, and an improving credit profile.

(Bloomberg)  Cheniere to Buy Unit for $30.93 a Share in Streamlining Move

• Cheniere Energy Inc., the first U.S. company to export shale gas overseas, will buy the remaining stake in a holding company it already controls for $30.93 a share, moving to simplify amid a U.S. tax overhaul that’s pummeling natural gas partnerships.
• Investors in Cheniere Energy Partners LP Holdings LLC will receive 0.475 of a share in Cheniere Energy Inc. for each share of the holding company, of which Cheniere already controls 91.9 percent. The deal values the acquired company at about $7.2 billion.
• The pact comes as companies from Williams Cos. to Enbridge Inc. take steps to tighten their structures as changes in U.S. tax law upend the master limited partnerships often used to own pipelines. Units in MLPs plunged in March after regulators said they can no longer charge customers for taxes they don’t pay.
• “This has been the plan all along,” for Cheniere, Pavel Molchanov, an analyst at Raymond James Financial Inc., said by phone “This is part and parcel of a broader theme across the MLP landscape: companies are cleaning up, simplifying their structures.”
• The holding company has a stake in Cheniere Energy Partners LP — the business that owns and operates Sabine Pass, the terminal that was first to export U.S. shale gas overseas.

(Moody’s)  Moody’s downgrades U.S. Concrete’s Corporate Family Rating to B2 from B1; outlook remains stable

(CAM Notes)  Moody’s downgrade was based on leverage being elevated from the expected level.  Moody’s does see value in the Company’s ability to generate free cash flow.  Additionally, the private non-residential commercial segment of the construction market is favorable.

(CNBC)  Conagra has approached Pinnacle Foods about a potential deal 

• Conagra Brands has approached Pinnacle Foods about a potential acquisition, sources familiar with the situation told CNBC on Thursday.
• A pairing of Healthy Choice-owner Conagra and Bird’s Eye-owner Pinnacle would combine two companies with a large presence in frozen foods at a time when the category is seeing a resurgence. Food companies, including Conagra, have poured money into previously neglected brands to highlight their healthiness, affordability and ease of use.
• Pinnacle has a market capitalization of $7.9 billion, while Conagra’s is $15.1 billion. A combination of Conagra and Pinnacle would create the second-largest U.S. frozen food company, analysts at RBC Capital Markets recently wrote. The other major players include Kraft Heinz and Nestle, the latter of which is the largest in the U.S., according to RBC.
• The deal talks come after activist hedge fund Jana Partners recently disclosed a roughly 9 percent stake in Pinnacle and said it planned to talk with the company on a range of subjects, including a possible sale.

(Street Insider)  Frontier Communications CFO R. Perley McBride Resigns

• Frontier Communications announced that R. Perley McBride, its Executive Vice President and Chief Financial Officer, will be resigning from the company for personal reasons, and to return to Atlanta where his family resides. Mr. McBride will remain in his position until August 31, 2018 to help transition responsibilities. A search for his successor is being conducted.
• Frontier’s President and Chief Executive Officer Daniel J. McCarthy stated, “We announce Perley’s resignation with regret. Perley has done a tremendous job managing our balance sheet. He has negotiated improvements in the terms of our credit agreements, raised $1.6 billion of new second lien debt, and retired approximately $1.7 billion of unsecured notes. These steps, together with the stabilization in our business as reflected in our most recent quarterly results, have placed Frontier on a positive path forward. On behalf of everyone at Frontier, I wish Perley and his family the best in the future.”