CAM High Yield Weekly Insights

Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were $2.4 billion and year to date flows stand at $3.7 billion. New issuance for the week was $12.4 billion and year to date issuance is at $60.6 billion.

(Bloomberg) High Yield Market Highlights

• Zayo Group Holdings Inc. is readying more than $3 billion of junk bonds, one of the biggest buyout financings since 2018 that may test investor appetite for riskier debt in the CAA tier.
• The new notes, along with a leveraged loan package totaling more than $5b, will finance Zayo’s buyout by private equity firms Digital Colony Partners and EQT Partners
• The bond portion of the offering may include $1b of seven-year secured notes and $2.1b of unsecured eight-year bonds, and marketing begins next Tuesday
• It’s hitting the market after two straight weeks of gains for junk- bonds, which looks set to continue on Friday as stock futures edge higher and oil climbs
• Triple C rated bonds have lagged the broader high-yield market so far this year, returning 0.942% through Thursday while the larger junk universe rose 1.11%
• Yet CAA index yields have still fallen to a nine-month low of 9.71% and posted positive returns for three consecutive sessions this week. Other issuers, including Hecla Mining, have also priced debt in this rating range
• Investors have plenty of cash to put to work too after corporate high-yield funds reported inflows
• BA and single-B yields have fallen to a three- week low of 3.59% and 5%, respectively
• BAs have gained for ten straight sessions, taking year-to-date returns to 1.175%  

• (Bloomberg) Natural Gas Tumbles to 4-Year Low on ‘Epic’ U.S. Demand Loss

• Natural gas futures sank to a four-year low as the latest U.S. forecasts all but eliminated bulls’ hopes for a late-winter cold push.
• Frigid weather in parts of the Midwest and West this week won’t stick around for long, according to Commodity Weather Group LLC. Mild temperatures are poised to blanket the eastern half of the country in late February, a shift from previous outlooks that showed a lingering chill.
• Unusually warm winter weather has wreaked havoc on gas demand, allowing an onslaught of supply from shale basins to overwhelm the market. American liquefied natural gas cargoes, a key outlet for production, are at risk of being curtailed as the coronavirus outbreak in China curbs consumption in the world’s second-largest economy. The resulting collapse in global gas prices is squeezing profits for U.S. exporters.
• “The lack of heating demand is epic. It’s a worst-case scenario,” John Kilduff, founding partner at hedge fund Again Capital LLC in New York, said by phone. “We continue to have a very weak demand environment that’s persisted all winter.”
• The gas glut has been especially severe in the Permian Basin, where local prices for March delivery have dropped below zero. Output from the West Texas and New Mexico shale play, where gas is extracted as a byproduct of oil drilling, is increasing so fast there isn’t enough space on pipelines to take it away.  

(Reuters) T-Mobile-Sprint merger wins approval from U.S. judge

• T-Mobile edged closer to a takeover of Sprint Corp after a federal judge on Tuesday approved the deal, rejecting a claim by a group of states that said the proposed transaction would violate antitrust laws and raise prices.
• During a two-week trial in December, T-Mobile and Sprint argued the merger will better equip the new company to compete with top players Verizon Communications Inc and AT&T Inc as the third-largest U.S. wireless carrier, creating a more efficient company with low prices and faster internet speeds.
• Finalizing a deal will be a boon to Japan’s Softbank Group Corp, Sprint’s controlling shareholder, as the conglomerate offloads a troubled asset that has lost subscribers at a faster rate and as it seeks to secure funding for a second Vision Fund.
• Sprint and T-Mobile said in a statement that they would move to finalize the merger, which is still subject to closing conditions and possible additional court proceedings.
• A spokesman for the California Public Utilities Commission, the last regulatory body to decide on the merger, said its review of the deal is expected to conclude in July.

(Wall Street Journal) MGM Resorts Chief Set To Step Down

• MGM Resorts International Chief Executive Jim Murren will leave the global casino operator after its board picks his successor, the company said.
• Mr. Murren, who is also stepping down as chairman, has led the company since 2008. He is leaving before his contract expires at the end of 2021.
• “When I thought through how I could best serve MGM going forward, I thought it was pretty clear that a leader should help lead a company into the next decade or two,” Mr. Murren said on a conference call with Wall Street analysts on Wednesday. “I wanted to make sure the board had the time, which it will use promptly, to do a robust search and find my successor.”
• MGM Resorts, which has a market value of $17 billion, didn’t give a firm date for Mr. Murren’s departure. The board has formed a search committee to find a new CEO, the company said. Mr. Murren said he anticipates being on MGM Resorts’ next quarterly earnings call, in about three months.
• The company has sold off much of its real estate, including deals with MGM Growth Properties, a real-estate investment trust MGM Resorts spun off in 2016, and other property deals. The company’s “asset-light” strategy is intended to pull cash out of the company’s valuable real estate, including prime locations on the Las Vegas Strip.
• MGM Resorts’ remaining company-owned real estate includes MGM Springfield in Massachusetts, a 50% stake in CityCenter in Las Vegas and more than half of MGM Growth Properties.