CAM High Yield Weekly Insights

Fund Flows & Issuance:  According to a Wells Fargo report, flows week to date were $2.3 billion and year to date flows stand at $12.7 billion.  New issuance for the week was $8.4 billion and year to date HY is at $53.0 billion, which is -0% over the same period last year.

(Bloomberg)  High Yield Market Highlights

• S. junk bond returns hit 7 percent for the year-to-date as BB yields fell to a 13-month low after the Fed’s mid-week dove surprise.
• S. high-yield funds have seen net inflows in 8 of the last 10 weeks
• Junk bond rally also boosted by S&P 500 at a 5- month high, oil at a 4-month high
• Supply was steady, with another $1.8b pricing led by ADT’s senior secured tranches
• Senior secured notes dominated junk bond supply year-to-date accounting for 30% of the issuance activity, the highest proportion in at least 2 years
• They accounted for 13% of the supply last year and 21% the year before
• ADT cut its bond offering to $1.5b after dropping the $1.25b 8NC3 senior unsecured tranche as there was not enough demand for those notes at an acceptable rate
• Both secured tranches priced at lower end of talk, had orders above $3b for the 2 tranches combined
• With loan supply lagging this year, senior secured notes are being used to repay loans and/or fund acquisitions as in Power Solutions
• High-yield returns YTD surged to 7%, the best in fixed income
• Single-Bs beat CCCs for second time this year, with YTD return of 6.97%
• BBs and CCCs were at 6.93%
• Loans lag high yield, with YTD return of 4.2%

(Business Wire)  B&G Foods Announces that Bill Herbes, EVP of Operations, Plans to Retire

• B&G Foods announced today that William F. Herbes, the Company’s Executive Vice President of Operations, plans to retire at the end of December 2019. Mr. Herbes, age 64, has served as Executive Vice President of Operations since joining the Company in August 2009.
• Commenting on Mr. Herbes’ retirement plans, Kenneth G. Romanzi, who currently serves as Executive Vice President and Chief Operating Officer and, as previously announced, will become B&G Foods’ next President and Chief Executive Officer on April 6, 2019, said, “Bill has been a very important member of our management team since joining B&G Foods almost ten years ago. It has been a privilege to work with Bill and I am delighted that Bill has agreed to remain with B&G Foods through year end and partner with Erich Fritz, our Executive Vice President and Chief Supply Chain Officer, to continue to evolve our operations to become even more efficient and cost effective.”
• Robert C. Cantwell, President and Chief Executive Officer of B&G Foods said, “Bill has been a tremendous contributor to B&G Foods’ growth over the past ten years. Since assuming responsibility for our supply chain and manufacturing operations in 2009, our company’s net sales have more than tripled and our domestic and international sourcing and manufacturing operations and capabilities have greatly expanded. Mr. Herbes has played an integral role in our growth, including through post-M&A integration of numerous manufacturing facilities, distribution centers and co-pack arrangements, including B&G Foods’ two largest manufacturing facilities. Under Bill’s strong leadership, we also successfully established a frozen distribution network following our acquisition of the Green Giantbrand and successfully outsourced our shelf-stable distribution network to a third-party logistics provider. Over the years, Bill has also played a key role in our cost savings initiatives. I am very pleased that Bill will continue with B&G Foods through the remainder of 2019 and wish him the best of luck in his retirement.”

(PR Newswire)  Steel Dynamics Provides First Quarter 2019 Earnings Guidance

• Steel Dynamics provided first quarter 2019 earnings guidance in the range of $0.88 to $0.92 per diluted share.  Comparatively, the company’s sequential fourth quarter 2018 earnings were $1.17 per diluted share and prior year first quarter earnings were $0.96 per diluted share. Fourth quarter 2018 results included additional company-wide performance-based compensation of $0.04 per diluted share and lower earnings of $0.10 per diluted share, associated with planned maintenance outages at the company’s liquid pig iron production facility and its two flat roll steel mills.
• First quarter 2019 earnings from the company’s steel operations is expected to decrease in comparison to sequential fourth quarter results, primarily related to lower earnings from the company’s sheet operations.  However, recent increases in sheet steel prices are having a positive impact, resulting in increased order activity and reconstituted order backlogs.
• Overall steel shipments are expected to increase in the first quarter 2019, compared to fourth quarter 2018 results, and average quarterly steel product pricing is expected to decrease more than the cost of average scrap consumed.  The company believes domestic steel consumption will continue to improve through the year.

(New York Times)  Fed, Dimming Its Economic Outlook, Predicts No Rate Increases This Year

• The Federal Reserve said Wednesday that the United States economy was slowing more than it had previously thought as it left interest rates unchanged and signaled little appetite for raising them again in the near future.
• The Fed now expects 2.1 percent growth this year, down from the 2.3 percent it forecast in December. The outlook for 2020 is even more bleak, with the Fed now projecting growth of just 1.9 percent.
• The downbeat assessment comes as the Fed sees signs of weakness in areas like consumer spending and business investment, which Mr. Powell said “suggest that growth is slowing somewhat more than expected.” Average monthly job growth, while strong, “appears to have stepped down from last year’s strong pace,” he added.
• Powell tried to reassure markets by saying “economical fundamentals are still very strong,” but he acknowledged that recent developments both domestically and abroad were making it harder for the American economy to grow as quickly as it did last year.
• Forecasts released at the end of the two-day meeting show the typical member of the Federal Open Market Committee now expects not to raise rates at all this year. Most officials now expect a single rate increase in 2020 and none in 2021.