Author: CAM Bond Funds

Fund Flows & Issuance: Fund flows remain positive but final data for the week is not yet available as we go to print. Issuance was strong ahead of the holiday shortened week which saw $48.775bn in investment grade corporate primary issuance. Through the end of this week, YTD total corporate bond issuance was $621.145bn. As we near the close of the week, the BofAML US Corporate IG Index is at +118 vs +117, tying the tight YTD and the tightest level since Sept. 2014, was also seen May 15-16 (Source: Bloomberg).

(Bloomberg Intelligence, CAM notes from conference call) Broad-Based Demand Fuels Toll’s Volume Gains, Prices Slip on Mix

• Toll Brothers’ 2017 homebuilding revenue may top the midpoint of revenue guidance calling for an 11% gain. Closings are likely to skew toward the high end of the range, signaling growth of more than 20%, while average selling prices fall about 6% (driven solely by mix). Volume growth is being fueled by broad-based demand, particularly in California, where Toll will open 18 communities in 2017 as part of its 7% community count growth target. In addition, Toll’s lower-priced products should support faster turnover.
• Regions: Toll Brothers’ homebuilding operations are divided into five regions and City Living. As of fiscal 2016, California accounted for 28% of revenue, followed by the West (18%), Mid-Atlantic (17%), South (16%), North (16%) and City Living (5%).
  
  • 2017 Outlook per conference call & investor presentation:
    • 9500 – 7,450 home closings (Previously 6,700-7,500)
    • ASP of $775-825k (unchanged)
    • Revenue of $5.4-6.1bn (Previously $5.19-6.19bn)
    • Community count growth similar to 2016 (unchanged)
    • Gross margins of 24.8% – 25.3% (unchanged)
    • SG&A Margin of 10.6% of revenues (unchanged)
    • JV income between $160-200mm (unchanged)

(CNET) Sports-free digital TV for $10 a month? Viacom may be trying

• Hunting for a streaming TV option that doesn’t make you pay for ESPN? Viacom may be aiming to deliver.
• The TV company, which owns networks like Comedy Central, MTV and Nickelodeon, is talking with rival programmers AMC and Discovery about a possible digital-TV bundle that could cost as little as $10 a month, according to a report late Monday in the New York Post.
• Scripps, which operates channels like HGTV, is also a possible partner.
• It would add a fresh option in the ballooning marketplace for live, online TV options. In the past year, YouTube, Hulu and DirecTV have rolled out livestreaming television subscriptions that go up against traditional cable as well as existing digital competitors like Sling TV and PlayStation Vue.
• But Viacom’s potential bundle would be unique from all the rest in a major way: You wouldn’t be paying for the most expensive kind of TV out there, like sports on ESPN.

(PR Newswire) Vulcan Announces Agreement to Acquire Aggregates USA LLC

• Vulcan Materials Company (NYSE:VMC), the nation’s largest producer of construction aggregates, today announced that it has reached a definitive agreement with SPO Partners to acquire its aggregates business, Aggregates USA LLC for $900 million in cash. Aggregates USA LLC operates 31 facilities serving high growth markets in Georgia, Florida, Tennessee, South Carolina and Virginia.
• “We are pleased to have reached agreement with SPO Partners for these strategic assets, which enhance our ability to serve high growth markets throughout the southeastern U.S.,” said Vulcan’s Chairman and Chief Executive Officer Tom Hill. “With the addition of these quarries and related assets, Vulcan will be able to capitalize on continuing increases in state highway funding programs in Georgia, Florida, South Carolina, Tennessee, and Virginia, and on the continued private sector growth across the region. This transaction will provide Vulcan with long-term high quality reserves across the entire portfolio. Aggregates USA operates efficient, high productivity facilities run by strong teams, and we welcome them to our Company.”
• The acquisition complements and expands Vulcan’s service offerings in Georgia with three granite quarries – two of which have rail capabilities extending the Company’s reach into important markets – along with 16 rail distribution yards in Georgia, South Carolina and Florida. In addition, the acquisition includes 12 limestone quarries in eastern Tennessee and southwest Virginia. Vulcan may divest several quarries in Tennessee to a third party in order to expedite the regulatory approval process.

(FitchRatings) Fitch Affirms Albemarle Corp.’s IDR at ‘BBB-‘; Outlook Revised to Positive

• Fitch Ratings has affirmed the long-term Issuer Default Rating (IDR) of Albemarle Corp. (NYSE: ALB) at ‘BBB-‘. The Rating Outlook is revised to Positive from Stable. Albemarle’s ratings reflect its exposure to the growing lithium industry, the relative stability of its bromine and catalysts businesses, strong FCF generation and increased financial flexibility.
• Albemarle’s credit metrics have improved considerably since the Rockwood transaction was finalized in early 2015 due primarily to strong growth in the company’s lithium business and the repayment of greater than $2 billion of debt using proceeds from several divestitures including the sale of its Chemetall business in 2016. Fitch projects Albemarle’s FFO Adjust Leverage will stay within the 2.5x-3.0x range through 2019 and forecasts strong FCF generation that should average between $150 million to 200 million on a normalized basis. Albemarle plans to spend greater than $2 billion in CapEx through 2021 with the bulk of that spending used to increase capacity in its lithium business. While Fitch projects the company should be able to comfortably self-fund these expenditures, Albemarle has also stated its intent to utilize its strengthened balance sheet to pursue acquisitions in the lithium space and return cash to its shareholders in the form of growing dividends and/or share repurchases. However, Fitch believes the company will balance such priorities against its goal of maintaining a net leverage ratio in the 2.0-2.5x range.
• The Positive Outlook reflects Fitch’s view that Albemarle’s positive operating momentum and strengthened balance sheet paired with a demonstrated track record of adhering to a credit conscious capital allocation policy as the company pursues its strategic goals would likely lead to a positive rating action in the coming 12-18 months.

Fund Flows & Issuance: According to Lipper, for the week ended May 17, investment grade funds posted a net inflow of $3.101bn. Per Lipper data, the year-to-date net inflow into investment grade funds was $54.889bn. Per Bloomberg, with one deal pending on Friday morning, investment grade corporate issuance through Thursday of this week was $25.3bn. Qualcomm is pending and could print up to $10-12bn on Friday, which would up this total substantially. Through Thursday, YTD total corporate bond issuance now trails 2016 at $573.87bn, which is down 4% year over year.

(Bloomberg) PG&E Issuer Credit Ratings Raised to A- From BBB+ by S&P

• The higher ratings are based on reduced business risk stemming from the company’s long-term efforts to regain the confidence of its regulators and manage the financial fallout the 2010 San Bruno gas transmission explosion, S&P says.
  
  • CPUC approved multi-year rate increases: S&P
  • Outlook stable

(Bloomberg Intelligence) Vulcan’s Growth Is Tied to U.S. Highway Bill and M&A

• Vulcan Materials is sensitive to variations in the U.S. economic cycle, with a strategy to extend its domestic reach across key states. The U.S. highway bill is a key driver for the construction aggregates company, given its road-building focus. President Donald Trump’s proposal for infrastructure investments of about $1 trillion adds to Vulcan’s sharp rise in demand since the end of 2013, resulting from growth in residential and commercial construction. Vulcan can probably increase acquisitions in 2017-18.
• The company may be able to target not only small caps, but eventually bigger fish, management said on its 1Q earnings call. Since the last financial crisis, Vulcan has acquired about 20 small and medium companies in the U.S.
• In 2017, Vulcan Materials’ margins may expand further on growing demand for aggregates accompanied by a forecast 5-7% increase in selling prices. The focus on discipline over efficiency in operating areas to maximize per-hour productivity has contributed to continued margin improvement. Its Ebitda margin has widened in the past two years as the U.S. economy recovered. In 2016, the overall business delivered adjusted Ebitda margin of 26.8%. This represents an improvement of 275 bps over the prior year.

(NYT) With Amazon In Cross Hairs, Walmart Posts Gains Online

• Walmart has always excelled at selling products in its cavernous stores. It appears to be getting its head around selling online, too.
• On Thursday, the company said e-commerce sales had grown 63 percent in the United States in the latest quarter. The unexpected leap offered the strongest evidence yet that Walmart, the country’s largest retailer, is making headway in its effort to be as prominent online as it is across the American landscape.
• “This is extraordinary growth, and we’re pleased with the traction we’re generating across our e-commerce offerings,” said Brett Biggs, Walmart’s executive vice president and chief financial officer.
• Walmart completed its purchase of Jet in September. Smaller digital acquisitions followed, including ModCloth, a women’s clothing retailer, and the outdoor apparel site Moosejaw.
• The deal for Jet was also widely seen as a play for its founder, Marc Lore, a serial digital entrepreneur who could help fix Walmart’s online strategy. Mr. Lore was put in charge of running Walmart.com after the acquisition, spearheading the face-off between the world’s largest brick-and-mortar retailer and its biggest online competitor.
• There is no doubt, though, that the company still has a ways to go before coming close to Amazon in e-commerce. Activity on Amazon, which recorded about $136 billion in annual sales last year, accounts for more than half of all online shopping in the United States.
• Walmart provides a growth figure only for its online business, and does not specify revenue.

(TheStreet) As Apple Battles Qualcomm, Don’t Overlook its Patent Dispute With Nokia

• Apple’s royalty dispute with Qualcomm has been a distraction from the 10th anniversary edition of the iPhone due out later this year.
• Qualcomm ratcheted up the litigation this week when it filed suit against Apple contract manufacturers Foxconn, Pegatron, Wistron, and Compal, for skipping royalty payments. The chipmaker said in April that Apple is withholding payments to its contract manufacturers to cover the royalties they owe Qualcomm. Moreover, Qualcomm alleges that Apple ordered the companies to withhold the funds, and has indemnified them.
• Messy as the fight with Qualcomm has become, Wells Fargo analyst Maynard Um suggests that Apple’s dispute with Nokia is a bigger near-term concern. Nokia filed suit in two German venues, a U.S. District Court in Texas and other venues in December, alleging patent violations.
• “While most of the focus has been on [Qualcomm] given the recent headlines, we believe the Nokia litigation is more important with the potential for initial news flow as early as the end of calendar 2017,” Um wrote.
• Nokia has filed complaints in Munich and Mannheim, Germany that could have rulings this year this year. Other disputes, such as a complaint in the Netherlands, could reach outcomes soon after.
• Um estimates that Nokia previously received just 0.2% of the price of the device in which Apple uses its technology. Nokia is unlikely to score the 2.7% rate that Qualcomm receives, Um suggested. If Nokia could obtain a 1.5% rate, it could reduce Apple’s earnings per share by 20 cents.

Fund Flows & Issuance: According to Lipper, for the week ended May 3, investment grade funds posted a net inflow of $1.051bn. Per Lipper data, the year-to-date net inflow into investment grade funds was $49.087bn. Per Bloomberg, with one deal pending on Friday morning, investment grade corporate issuance for the week is expected to come in at $37.525bn, while YTD volume has now topped $514bn. IG corporate bond issuance is now up 5% year over year.

(Bloomberg) U.S. Job Gains Rebound; Unemployment Falls to Pre-Crisis Low

• U.S. payroll gains rebounded in April by more than forecast and the jobless rate unexpectedly fell to 4.4 percent, signaling that the labor market remains healthy and should support continued increases in consumer spending.
• The 211,000 increase followed a 79,000 advance in March that was lower than previously estimated, a Labor Department report showed Friday. The median forecast in a Bloomberg survey of economists called for a 190,000 gain. While the unemployment rate is now the lowest since May 2007, wages were a soft spot in the report, climbing 2.5 percent from a year earlier.
• The brighter figures follow a weaker-than-expected reading in March, when payrolls were partly depressed by a snowstorm that slammed the Northeast during the survey week. Strengthening business sentiment might be translating into hiring, and the data should keep Federal Reserve policy makers on track to raise interest rates in the coming months after officials declared the first-quarter slowdown to be temporary.

(Fitch Ratings) Fitch Rates Eli Lilly’s Notes Offering ‘A’; Outlook Stable

• Fitch Ratings has assigned an ‘A’ rating to Eli Lilly & Co. Inc.’s (Lilly) senior unsecured notes offering. The company intends to use the net proceeds for general corporate purposes including the refinancing of existing borrowings. The Rating Outlook is Stable. Lilly had roughly $10.2 billion of debt outstanding at March 31, 2017.
  
  • –Lilly is facing increasing but relatively manageable patent expiries, with roughly 26% of total sales at risk through 2019, excluding Alimta. Nearly 30% of those sales comes from Forteo, a biologic, which is expected to experience relatively lesser sales decline than a traditional small molecule drug once its patent expires in December 2018.
  • –Fitch expects Lilly will generate low- to mid-single-digit organic revenue growth during 2017-2019 with the patent expiries offset by continued strength in established and new products.
  • –Lilly needs to rebuild its late-stage pipeline following recent approvals and a few setbacks in development. We think this is achievable through advancing mid-stage development candidates and rolling in acquired/partnered products.
  • –Lilly’s leaner cost structure and improving product sales mix should support margin expansion in 2017.
  • –Fitch forecasts that Lilly will generate solid free cash flow of $1 billion (FCF; cash flow from operations minus capital expenditures and dividend payments) in 2017.
  • –The ‘A’ rating incorporates moderate share repurchases, targeted acquisitions and incremental dividend increases through the forecast period.

(TheStreet) Apple Can Return $300 Billion to Shareholders Even Without a Tax Holiday

• As a sign of Apple’s “strong confidence in our future,” CEO Tim Cook pledged to boost its capital returns to shareholders through March 2019 from the previously-announced $250 billion to $300 billion, during the company’s first-quarter earnings call after the close Tuesday.
• Apple reported $256.8 billion in cash and equivalents in the quarter, with $239.6 billion of it outside the U.S.
• “With Apple’s cash pile growing to over $250 billion, questions regarding repatriation tax policies and buybacks return,” said Moody’s Investors Service analyst Gerald Granovsky in an emailed statement about Apple’s cash dilemma. “Expansion of the shareholder return program by $50 billion puts more pressure on the company to raise debt absent repatriation.”
• For Apple and other blue chip tech companies, paying low single-digit interest on debt to fund moves is much cheaper than repatriating cash at a 35% corporate tax rate.
• The company has increased its leverage in recent years to cover shareholder returns and other expenses, even as its cash balance has topped a quarter of a trillion dollars.
• Apple issued $11 billion in debt during the second fiscal quarter, and reported long-term debt of $84.5 billion. The growth in debt over the last half decade is noteworthy. In the second fiscal quarter of 2015, Apple’s long term debt was $40.1 billion — less than half its current total. In the second fiscal quarter of 2013, according to FactSet, Apple had no long-term debt.
• President Trump supports a 15% corporate tax rate, and Secretary of the Treasury Steven Mnuchin said in late April that the administration is in talks on a proposal. “We’re working with the House and Senate on that, but I will say it will be a very competitive rate that will bring back trillions of dollars,” Mnuchin said at a White House briefing.

(WSJ) Southern Seeks $3.7 Billion From Toshiba for Georgia Nuclear Plant

• The chief executive of Southern Co. SO on Wednesday said the utility will need $3.7 billion and cooperation from Toshiba Corp. to complete a nuclear power plant in Georgia that was being built by bankrupt Toshiba unit Westinghouse Electric Co.
• But even if it obtains those commitments, Southern isn’t sure it can finish the half-built Georgia reactors, Thomas A. Fanning, Southern’s chairman and chief executive, said in an interview with The Wall Street Journal.
• “We are working with Toshiba to receive complete assurance as to the $3.7 billion guarantee that they owe us, whether we finish the project or not,” said Mr. Fanning.
• Toshiba has said it has about 650 billion yen ($5.8 billion) in parent-company guarantees made on Westinghouse’s behalf, including guarantees to make payments that would be required if Westinghouse can’t complete the nuclear-reactor projects. Toshiba has said it plans to take write-downs to account for these guarantees when it reports results for the year ended March 2017. It hasn’t released those results yet but says it is likely to report a net loss of about ¥1 trillion for that year.

(Conference Call, CAM Notes) Union Pacific 2017Q1 Recap

• Union Pacific reported results that beat consensus estimates across the board. The operating environment saw an improvement this quarter as Agricultural products, Coal, Industrial Products, and Intermodal saw positive volume with Coal seeing a 16% increase in carloads over Q1 2016. With these improved results and expected U.S. growth, 2017 is shaping up to be a better year than 2016; however, many of the industries showing strength are vulnerable to market conditions. UNP is expecting single digit volume growth, pricing slightly above inflation, and productivity savings of $350-400mm to help lead the company to a solid year (unchanged). Politically, the company could see a significant boast by a lowering of the corporate tax rate as railroads tend to be among the largest tax payers, and they have a possible headwind if the US were to withdraw from NAFTA.
• The company reiterated their “less than 2.0x” leverage target. With dividends and share repurchases outpacing FCF, UNP is expecting EBITDA growth to help them remain below this target.

(Bloomberg) Pay-TV Users Are Bailing Faster Than Ever, Clouding Media Stocks

• U.S. cable and satellite-TV providers suffered their worst first quarter of subscriber losses in history, raising fresh concerns that cord-cutting will accelerate and drag down media stocks.
• Charter Communications Inc., Dish Network Corp., AT&T Inc.’s DirecTV and Verizon Communications Inc. combined to lose almost half a million video subscribers in the period, as more consumers spurned the cost and clutter of traditional pay-TV packages for cheaper online alternatives. Only Comcast Corp. added customers.
• The results indicate that consumers may be growing more aware of on-demand streaming services like Netflix and Amazon and the increased depth their content offerings — and that may be spurring more cord-cutting in 2017. Major pay-TV operators lost 1.4 million subscribers last year, according to Bloomberg Intelligence.
• Consumers are also getting more knowledgeable about online live-TV services as well. At least a half dozen companies, including Hulu, AT&T, Dish, Sony Corp. and Google’s YouTube are convinced they can lure people back to live TV packages by offering a slimmer selection of channels at a lower cost than the average cable package. They’ve also all tried to improve upon the presentation of on-demand programs.
• At Charter, which has been busy working to integrate the acquisitions of Time Warner Cable and Bright House Networks, executives are seeing a shift in market share from satellite providers DirecTV to Dish to cable operators, according to Chief Executive Officer Tom Rutledge.
• “There is a general decline in the marketplace that is mostly price-driven, and I think that those trends are unlikely to change in the near term but not to particularly accelerate,” Rutledge said on a conference call Tuesday. Shares of Charter fell as much as 3.2 percent to $333.20 in New York Tuesday, the biggest intraday decline in three months.
• The Stamford, Connecticut-based company, backed by billionaire John Malone, is expected to rebound as customers sign up for new packages at new prices. Rutledge also said he’s confident that Charter can also differentiate its service offerings from over-the-top video providers that have become so popular with consumers.
• “None of them have a product that is better than ours that we can see in the marketplace,” said Rutledge. “So, we expect to succeed in the marketplace going forward.”
• One bright spot for Charter in the first quarter was its internet business. After all, to subscribe to online video services that have become increasingly popular around the world, you need fast a broadband connection.
• The company added 428,000 residential internet subscribers in the quarter on a pro forma basis, compared with 520,000 a year earlier. Three analysts surveyed by Bloomberg predicted a gain of 388,000 customers, on average.
• The company is also planning to integrate Netflix Inc.’s service into its user interface and is in talks with YouTube to do the same, just as Comcast has done recently.

(Bloomberg) Here’s Why Skinny TV is Still an Experiment for Companies

• Companies like Dish Network Corp., Sling TV LLC, AT&T Inc., YouTube and Verizon Communications Inc. have been trying to pull together “skinny” cable packages that would charge a reasonable price for just the channels customers really watch, without all the niche programming. Hulu LLC is the latest to offer a “skinny” package, unveiling plans for a $40-a-month service, Hulu with Live TV, on Wednesday. That makes at least seven contenders on the market or planning to enter, but providers are still trying to figure out how to streamline their offerings while making a profit.
• Take AT&T’s DirecTV Now package, introduced late last year and starting at $35 a month. The basic package, called “Live a Little,” features 19 television networks that regularly average at least 1 million viewers—a pretty big audience on cable. Network owners traditionally charge distributors a monthly fee for each subscriber—depending on the size and demographics of their audiences. If you added up the monthly charges for those 19 networks, you’d get $23 a month, according to estimates from JPMorgan Chase & Co.
• So AT&T should be able to make a pretty good profit with a $35 subscription, right? Wrong. An additional $11 a month goes to pay for 33 more channels that you may or may not want but that network owners push distributors to include in the bundle. If AT&T wants to offer Walt Disney Co.’s ESPN in its streaming package, Disney offers discounts to ensure it also buys the streaming rights for ESPN2, Disney XD and Disney Junior. The list of channels start to pile up pretty quickly.
• When you add that $11 to the $23 AT&T pays for more popular channels, AT&T walks away with less than $1 in profit. This puts companies that want to offer a “skinny bundle” in a bind. Raise prices much more than $35 and their streaming services won’t be that competitive against traditional cable. On the other hand, if they leave out some networks to pad profits or cut prices, they may not be as attractive to viewers who want to be able to watch ESPN, TNT, FX and HGTV. DirecTV Now made one big sacrifice, introducing its service without CBS—the most-watched network—after failing to come to terms on a price.
• That’s why companies continue to tinker with new “skinny” bundle packages. The right channels at the right price point make a big difference to the bottom line.

Fund Flows & Issuance: According to Lipper, for the week ended April 26, investment grade funds posted a net inflow of $4.699bn. Per Lipper data, the year-to-date net inflow into investment grade funds was $48.036bn. Per Bloomberg, investment grade corporate issuance for the week was $22.4bn, while volume for the month of April was $78.45bn. IG corporate bond issuance started the year at a robust pace but that has now somewhat abated, still, issuance is slightly outpacing last year and is up 1% year over year.

(Bloomberg, Conference Call) Masco Corporation Reports First Quarter 2017 Results

• Masco Corporation (NYSE: MAS), one of the world’s leading manufacturers of branded home improvement and building products, reported strong net sales and operating profit growth in the first quarter of 2017.
• “Our strong operating performance continued in the first quarter of 2017 as our leading brands coupled with our innovative products and programs drove demand with consumers and pros alike, resulting in profitable growth across our portfolio,” said Masco President and CEO, Keith Allman.
• Conference Call Highlights:
  
  • Masco has no exposure to Canadian lumber tariffs
  • The company is seeing some cost inflation; however, it takes two quarters to flow through the financial statements
  • The company is seeing strong demand in their Repair & Remodeling products across all product lines and price points. R&R accounts for 83% of total sales (unchanged)
  • Masco is still focusing on bolt-on strategies in either their plumbing or decorative architecture segments, which has been unchanged over the past several quarters
    
    • The company looked at the paint assets divested from the Valspar/Sherwin-Williams transaction, but they weren’t a good strategic fit
  • Masco returned $124mm to its shareholders through dividends and share repurchases for the quarter

(Bloomberg) Comcast Leaps to a Record as ‘Get Out’ Helps Film Unit Shine

• Comcast Corp.’s foray into Hollywood is paying off, with box-office hits “Get Out” and “Fifty Shades Darker” boosting first-quarter profits and sending shares to a record.
• The shares rose as much 3.9 percent to $40.29 in New York Thursday, the highest price since at least 1983.
• The results offer the latest proof of Comcast’s ascent to the heights of the American entertainment industry, a trajectory that seemed unlikely when the Philadelphia-based company bought NBCUniversal in 2011. Comcast is showing it can compete head-on with Walt Disney Co. for TV audiences, moviegoers and theme-park tourists.
• Comcast executives attributed the turnaround largely to the company’s new video platform, called X1, which makes it easier to search for shows and movies, as well as YouTube and Netflix, from their cable set-top box. X1 is in about half of Comcast homes.
• At the same time, the company is continuing to add residential high-speed internet subscribers. Comcast signed up 397,000 new broadband customers in the quarter, shy of the average prediction of 400,000 from three analysts. It signed up 403,000 broadband subscribers in the same quarter a year ago.

 
(Bloomberg) Microsoft Momentum Slows on Weaker Sales of Surface Tablets

• Satya Nadella’s plan to reshape Microsoft Corp. as a cloud-computing company hit a snag in the third quarter, when lackluster sales of Surface tablets and weaker demand for corporate services kept revenue growth in check.
• Adjusted sales in the period that ended in March rose to $23.56 billion, falling slightly short of analysts’ average estimate. The miss was enough to give investors pause — the software maker’s shares slipped 1.9 percent following the report, after rising to an all-time high at Thursday’s close in New York.
• Even as some non-cloud businesses underperformed, the company posted another quarter of brisk demand for internet-based versions of Office software and its Azure service for running and storing customers’ data and applications. Azure sales rose 93 percent, while commercial Office 365 — cloud-based versions of Word, Excel and other productivity software — increased 45 percent. Microsoft spent last year pouring billions into data centers to run these services and is now signing up customers to fill them. Meanwhile, the personal-computer market, a drag on Microsoft results for the past several years, has begun to stabilize.

(WSJ) Southern’s Georgia Power Objects to Westinghouse Bankruptcy Loan

• Georgia Power Co. has taken issue with Westinghouse Electric Co.’s proposed $800 million bankruptcy loan, saying the financing could threaten the construction of the first new nuclear reactors to be built in the U.S. in decades.
• Westinghouse filed for chapter 11 bankruptcy at the end of March and wants to borrow money to keep its other businesses healthy, while it contends with the fallout of nuclear construction projects that are years behind schedule and billions of dollars over budget.
• With a Friday deadline looming for Georgia Power to decide whether to continue construction at the Vogtle Electric Generating Plant, it and other plant owners are protesting Westinghouse’s efforts to pledge intellectual property as collateral for the loan deal.
• If Westinghouse’s bankruptcy loan goes through as planned, the company’s lenders would be in position to “foreclose on the intellectual property, which could seriously disrupt or even potentially halt construction,” lawyers for Georgia Power, the largest subsidiary of Southern Co., warned in a court filing.
• Based on Westinghouse’s AP1000 nuclear power plant design, the new Vogtle reactors are the first of what is supposed to be a new generation of commercial nuclear plants to be built in the U.S.
• U.S. Commerce Secretary Wilbur Ross told The Wall Street Journal this week that the fate of Westinghouse’s nuclear business is a matter of national security. Asked if he would consider using public funds to assist Westinghouse, Mr. Ross said he believed the company’s bankruptcy funding was “adequate” for the immediate future. Any change to the financing, however, could change that assessment.

 
(FBN) Crown Castle International Corp. Makes a Big Bet on Small Cells

• Crown Castle exceeded the high end of management’s guidance ranges on many metrics, including revenue and AFFO profits.
  
  • Site rental revenue showed 4% organic year-over-year growth, with the remaining increases coming from new site acquisitions.
  • Small-cell revenue jumped 41% higher and now accounts for 15% of Crown Castle’s total sales. That’s up from 11% in the year-ago quarter.
  • Crown Castle is emphasizing its small-cell operations in a big way, backed by large capital investments. Sixty-one percent of this quarter’s discretionary capital expenses, or $151 million, were funneled into construction and infrastructure improvements in the small-cell segment. That’s up from 43% or $79 million in the first quarter of 2016.
  • Crown Castle is planning to double its network of small-cell stations over the next 28 to 24 months. The network model of small wireless stations supported by direct fiber-optic backbone connections promises to match the traditional cell tower market in terms of long-term revenue footprint.

(WSJ) Coke to Cut 20% of Corporate Workers as It Battles Soda Slump

• Coca-Cola Co. executives said Tuesday they plan to eliminate roughly 20% of corporate staff, as the beverage giant battles a slump in soda sales and expands a long-running cost-cutting program.
• James Quincey, a company veteran who will take over as chief executive from Muhtar Kent next week, said the Atlanta-based company will cut 1,200 jobs to run a “more focused, lean corporate center.”
• Coke’s beverage volumes were flat in the first quarter globally, dragged down by the macroeconomic conditions in some Latin American markets and the shift of the Easter holiday into the second quarter. Soda volumes world-wide fell 1%.
• Mr. Kent said the company remains on track to meet its revenue and profit targets for the year.
• The beverage giant has been aiming to cut sugar from its products and diversify beyond soda as more countries consider special taxes on high-calorie drinks to combat rising obesity and diabetes, and as consumers switch to healthier beverages.
• On Tuesday, Mr. Quincey said the company is adjusting its growth model to meet people’s changing tastes and preferences.

(Bloomberg) Spirits Maker Castle Said to Eye Sale Amid Takeover Interest

• Castle Brands Inc., a producer of whiskey, vodka and other spirits, is exploring a sale and may draw interest from potential buyers including Corona-maker Constellation Brands Inc. and Sazerac Co., according to people familiar with the matter.
• The New York-based company is working with advisers at Perella Weinberg Partners on a potential sale, the people said, asking not to be identified as the information is private. Castle Brands may also attract bigger rivals, such as Diageo Plc, the world’s largest distiller, and Pernod Ricard SA, the people said. Heaven Hill Distilleries Inc. may also consider a bid, the people said. Castle Brands had a market value of about $260 million at the close of trading on Tuesday.
• Sales of distilled spirits in the U.S. may outperform the 3.7 percent annual growth rate they’ve maintained since 2007 on the back of reduced regulatory restrictions on product availability under the Donald Trump administration and new emphasis on luxury and super-premium products, according to a report from Bloomberg Intelligence.

(Bloomberg) Entergy Sees ‘Strong’ Power Demand by Refiners in Rest of 2017

• Entergy CFO Drew Marsh cites wider crack spreads and end to turnarounds for forecast, commenting on 1Q earnings call.
  
  • Says “premature” to lower 2017 forecast after 1Q EPS miss; adds no change to spending plan if federal taxes cut
  • CEO Leo Denault says co. may propose smaller peaker, renewables in New Orleans
  • Seeking to lower CO2 emissions regardless of President Trump’s executive order
  • Co. says all steps on track for Indian point closing; litigation ended