CAM High Yield Weekly Insights

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were $0.2 billion and year to date flows stand at $11.0 billion.  New issuance for the week was $2.2 billion and year to date HY is at $31.4 billion, which is -10% over the same period last year.

(Bloomberg)  High Yield Market Highlights 

• U.S. junk bond supply has revved up, with $21 billion priced in February making it the busiest month since March 2018. It was the highest-volume second month in four years.
• 30 deals priced, all oversubscribed multiple times, most priced at lower end of talk
• About 26% of the supply was to fund LBO suggesting strong demand for risk
• About 25% was rated CCC, some funding dividend distributions to equity sponsors
• About 54% of total supply was drive-by offerings
• S. high yield returned most YTD since 2001, up 6.26% after the best January since 2009
• Triple-Cs led the gains in junk bonds with 6.96%, also best since 2001
• CCCs January performance was best in almost 3 years, at 5.28%
• Junk bond yields dropped across ratings closing February near 4-month lows, with the exception of BBs, which closed at a 10-month low of 5%
• CCC yields and spreads dropped most for the month, closing at 10.52% and +780bps, respectively
• CCC spreads fell below +800 for first time since early December
• Low default, better-than-feared corporate earnings, firm oil and above all a dovish Fed boosted risk assets

(Globe Newswire)  Windstream Holdings, Inc. Files for Voluntary Reorganization Under Chapter 11 of the U.S. Bankruptcy Code Following Judge Furman’s Decision

• The Company intends to use the court-supervised process to address debt maturities that have been accelerated as a result of the recent decision by Judge Jesse Furman in the Southern District of New York against Windstream Services, LLC, a subsidiary of the Company.
• “Following a comprehensive review of our options, including an appeal, the Board of Directors and management team determined that filing for voluntary Chapter 11 protection is a necessary step to address the financial impact of Judge Furman’s decision and the impact it would have on consumers and businesses across the states in which we operate,” said Tony Thomas, president and chief executive officer of Windstream. “Taking this proactive step will ensure that Windstream has access to the capital and resources we need to continue building on Windstream’s strong operational momentum while we engage in constructive discussions with our creditors regarding the terms of a consensual plan of reorganization. We acted decisively to secure the long-term financial stability of Windstream, and we are confident that, upon completion of the reorganization process, we will be even better positioned to invest in our business, expand our speed and capabilities for our customers and compete for the long term.
• As previously announced on February 15, 2019, Judge Furman ruled that Windstream Services, LLC’s 2015 spinoff of certain telecommunications network assets into a real estate investment trust (REIT) violated its agreements with bondholders. The decision arose from challenges by Aurelius Capital Management (“Aurelius”) and U.S. Bank National Association that the spinoff was invalid under the terms of those agreements.
• The effect of Judge Furman’s decision was that an event of default under the relevant indenture had occurred that had not been cured or waived. The acceleration of the obligations outstanding under such indenture gave rise to a cross-default under the indentures governing Windstream’s other series of secured and unsecured notes. In addition, the decision gave rise to a cross-default under the credit agreement governing Windstream’s secured term and revolving loan obligations.

(PR Newswire)  S&P Global Ratings Upgrades Equinix to Investment Grade (‘BBB-‘) On Improving Credit Quality

• Equinix, the global interconnection and data center company, announced that S&P Global Ratings (“S&P”) has upgraded all of Equinix’s ratings with S&P by one notch to the investment grade rating of “BBB-“, including its issuer credit rating, its global multi-currency credit facility and term loan ratings, and all of the company’s senior unsecured notes.
• “We are very pleased to have received an investment grade credit rating from S&P, which reflects increased confidence in improving leverage levels and our demonstrated commitment to fund expansion in a disciplined and balanced manner,” said Keith Taylor, Chief Financial Officer, Equinix.

(PR Newswire)  Huntsman Receives Investment Grade Ratings from Moody’s and Fitch

• Huntsman Corporation announced that Moody’s Investors Service, Inc. has upgraded our senior unsecured rating from “Ba1” to “Baa3” with a “stable outlook”.  In addition, Fitch Ratings, Inc. published an initial Long-term Issuer Default Rating for the Company of “BBB-” with a “positive outlook”.
• Peter Huntsman, Chairman, President and CEO commented: “We are pleased to receive today the formal recognition of Investment Grade.  This has been our objective for many years and reflects the significant transformation of our balance sheet and downstream portfolio of businesses. This action will further strengthen our shareholder base, provide greater flexibility with our balance sheet and allow us to continue to expand our downstream businesses.”