CAM High Yield Weekly Insights

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were $4.0 billion and year to date flows stand at $8.2 billion.  New issuance for the week was $3.7 billion and year to date HY is at $19.7 billion, which is -27% over the same period last year.

(Bloomberg)  High Yield Market Highlights

• Funds reported the highest weekly cash inflows since mid-2016.
• Investor exuberance was evident as CCC rated Clear Channel priced at lower end of talk after receiving orders of more than $5b for a $2.2b deal, which grew to $2.235b
• Price talk tightened from the initial whisper of 10%.
• CommScope priced a 3-part offering at the tight end of talk after receiving orders of ~$8b
• Yields and spreads came under pressure, as the supply surge combined with tumbling stocks and lower oil
• Yields and spreads rose across ratings and saw the biggest jump in almost seven weeks
• Junk bond returns turned negative across the risk spectrum for first time in almost 2 weeks
• High yield still is the best- performing asset in fixed income, with 4.93% return YTD
• CCCs remains on top, with YTD return of 5.73%
• High yield also ahead of leveraged loans, which have returned 2.84% YTD

(Bloomberg)  Arconic Replaces CEO Again, Extending Tumult After Apollo Snub 

• Arconic Inc. named current Chairman John Plant to serve as chief executive officer, ousting Chip Blankenship just a little more than a year after he took the helm at the embattled manufacturer.
• Plant, the company’s fourth CEO in less than two years, is expected to serve in the top post for a year, the company said in a statement Wednesday. Elmer Doty, a director, was named chief operating officer, while Arthur Collins Jr., also on the
  board, becomes lead director.
• The management overhaul comes about two weeks after Arconic backed out of late-stage talks to sell itself to Apollo Global Management, an announcement that sent the shares tumbling the most in eight months.
• Arconic plans to provide an update on its strategy and portfolio review when it reports earnings on February 8th.

(Bloomberg)  Arconic to Split Into Two Companies, Slash Dividend in Revamp 

• Arconic Inc. plans to break into two separate companies and will slash its dividend by two-thirds, marking a dramatic overhaul of the aerospace manufacturer in the wake of its failed sale to a private equity firm.
• The company will separate into Engineered Products & Forgings and Global Rolled Products businesses, one of which will be spun off, Arconic said Friday in a statement.
• The parts maker will consider a sale of any operations that don’t fit into one of those businesses.

(Verdict Foodservice)  Aramark reports $4.3bn revenue in Q1 2019 

• US-based foodservice company Aramark has reported revenue of $4.3bn in the first quarter of 2019 ending 28 December 2018, an 8% increase from the same period in the previous year.
• The catering company has also reported operating income of $373.36m, a 72% rise from $216.87m for the same period in the previous year.
• Aramark chairman, president and CEO Eric J Foss said: “2019 is off to a good start, with broad-based momentum across the portfolio, driven by strong base business performance and progress in our integration of Avendra and AmerPride.
• “We continue to elevate the consumer experience by enhancing our product offerings, obsessing on service excellence, and innovating with new technologies.”
• “Aramark benefits from an advantaged business model and excellent financial flexibility. As we look ahead to the full year, we expect to deliver solid financial performance that will drive sustainable shareholder value.”
• Furthermore, the foodservice company has received $293m of proceeds from the sale of its Healthcare Technologies business. It used a majority of the proceedings to reduce debt.

(PR Newswire)  Suburban Propane Partners, L.P. Announces First Quarter Results

• In announcing results, President and Chief Executive Officer Michael A. Stivalasaid, “Positive momentum from fiscal 2018 carried into the fiscal 2019 first quarter.  The first quarter of fiscal 2019 was characterized by colder-than-normal temperatures early in the quarter followed by significantly warmer temperatures during the month of December as compared to the prior year.  Despite this inconsistent weather during the quarter, we were very pleased to deliver another solid performance with results that were flat to the prior year first quarter. Our operations personnel continue to do an excellent job delivering outstanding service to our customers and the communities we serve, adapting our business plans to the weather-driven demand and executing on our customer base growth and retention initiatives.”
• Stivala continued, “There is still a significant amount of the heating season in front of us.  Our business is extremely well-positioned to meet the needs of our customers while, at the same time, pursuing growth through new market expansion and strategic acquisitions.”
• Revenues in the first quarter of fiscal 2019 of $377.1 million increased $3.8 million, or 1.0%, compared to the prior year first quarter, primarily due to higher average retail selling prices. Cost of products sold for the first quarter of fiscal 2019 of $182.6 million increased $17.4 million, or 10.5%, compared to the prior year first quarter.
• Combined operating and general and administrative expenses of $115.9 million for the first quarter of fiscal 2019 increased a modest $0.7 million, or 0.6%, compared to the prior year first quarter, primarily due to higher vehicle maintenance and fuel costs.