Tag: weekly insight

Fund Flows & Issuance: According to a Wells Fargo report, flows week to date were -$0.1 billion and year to date flows stand at -$5.7 billion. New issuance for the week was $8.1 billion and year to date HY is at $164 billion.

(Oil & Gas Journal) US rig count drops for third time in 6 weeks

• The overall US rig count has recorded its largest decline since before the drilling rebound commenced in late May-early June of 2016.
• Baker Hughes’ tally of active rigs in the US dropped 4 units to 954. However, this week’s downward movement was primarily supplied by gas-directed rigs. The overall count is still up 550 units since the bottom of the drilling dive on the weeks ended May 20-27, 2016.
• US oil-directed rigs edged down a unit to 765, also their third drop of the past 6 weeks, during which time they’ve added just 7 units. They’re still up 449 units since May 27, 2016.
• Gas-directed rigs fell 3 units to 189, mostly stagnant since May but still up 108 units since last Aug. 26.
• US crude oil production, meanwhile, continues to rise according to preliminary estimates from the US Energy Information Administration. In EIA’s more-accurate monthly report based on its EIA-914 survey of producers, the agency indicated that May production averaged 9.17 million b/d, up 60,000 b/d from April. Weekly preliminary data for the month, however, put average May output above 9.3 million b/d, indicating that, for a second straight month, more-accurate survey data lagged behind preliminary weekly data.

(Fierce Cable) Altice’s Charter bid could be as high as $185B

• Hungry European telecom conglomerate Altice could be prepping a bid as high as $185 billion for Charter Communications.
• According to Reuters, the No. 2 U.S. cable company is worth $180 billion including debt—but excluding any takeover premium.
• However, analysts have serious doubts as to whether Altice—which has a market cap of around $23 billion to go along with $22.6 billion in debt—has the balance sheet needed to entice Charter shareholders, notably the cable company’s biggest investor, Liberty Broadband and its chief, John Malone.
• “On the most positive view of synergies, we don’t think there is enough value for Malone and other Charter investors to accept a deal where they cede control, despite holding the majority of the pro forma equity, while taking on the risk associated with a deal,” said a New Street Research investor memo spearheaded by analyst Jonathan Chaplin.

(Business Wire) AES Reports Second Quarter 2017 Financial Results; Reaffirms 2017 Guidance and Long-Term Expectations

• AES reported financial results for the three months ended June 30, 2017. Compared with last year, the Company benefited from higher margins, primarily driven by higher availability at certain generation businesses, and lower Parent interest expense.
• Consolidated Net Cash Provided by Operating Activities for the second quarter of 2017 was $251 million, a decrease of $472 million compared to the second quarter of 2016. The decrease was primarily driven by the receipt of overdue receivables at Maritza in Bulgaria in 2016, and the impact from the recovery of high purchased power costs at Eletropaulo in Brazil in 2016. Second quarter 2017 Consolidated Free Cash Flow (a non-GAAP financial measure) decreased $448 million to $106 million compared to the second quarter of 2016, primarily due to the same drivers as Consolidated Net Cash Provided by Operating Activities.
• “In the last few months, we completed the acquisition of sPower, the largest independent solar developer and operator in U.S., brought on-line an additional 122 MW in the Dominican Republic by closing the cycle at DPP and closed on $2 billion in non-recourse financing for the 1.4 GW Southland CCGT and energy storage project in California,” said Andrés Gluski, AES President and Chief Executive Officer. “These are concrete steps towards achieving our growth objectives, based on long-term, U.S. Dollar-denominated contracts, with decreased carbon intensity. Overall, we are making good progress on our 5 GW of projects under construction, with the exception of our 531 MW Alto Maipo hydroelectric project in Chile, where we are disappointed with the project’s current status and continued cost overruns.”
• “Our second quarter results reflect our efforts to improve the efficiency of our portfolio through higher availability and our capital allocation decisions that resulted in lower Parent interest,” said Tom O’Flynn, AES Executive Vice President and Chief Financial Officer. “Based on our performance year-to-date, we are reaffirming our 2017 guidance and expectations through 2020.”

(Bloomberg) Junk Bonds Slump as Morgan Stanley Sees a Bigger Unwind Ahead

• A high-yield bond fund run by BlackRock Inc. slumped on Thursday to its lowest level since March, a day after Morgan Stanley warned a correction may already be underway. The cost of protecting speculative-grade bonds against default in the credit-default swap market climbed to its highest level since July 6. Investors demanded the most extra yield in almost a month to buy junk debt, according to a Bloomberg Barclays index fixed late Wednesday.
• Investors haven’t abandoned the junk market altogether — Tesla Inc. will probably pay lower-than-average yields on $1.5 billion of bonds it’s selling now. But that kind of enthusiasm for speculative-grade securities may get increasingly rare, Morgan Stanley analysts said.

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $0.4 billion and year to date flows stand at -$5.6 billion. New issuance for the week was $6.8 billion and year to date HY is at $157 billion.

(MarketWatch) AMC hits record low as unrelentingly poor box office continues to take a toll

• AMC said on Tuesday that not only would the company swing to a loss in the quarter, but that it would be wider than analysts surveyed by FactSet were expecting.
• Analysts have, for the most part, stayed positive on the film exhibitor group, as box office revenues have suffered so far this year. While investors clearly don’t like the news, analysts believe that this too will pass.
• So far in the year, box office revenue is down 2% compared with the same point last year.
• “[Our] fundamental view is unchanged, but the stock is likely in the penalty box,” RBC analyst Leo Kulp wrote in a note to investors. “The news does not change our fundamental view given our already low expectations around the second quarter. With higher costs and a weaker third-quarter box office outlook now baked in as well as a positive outlook on the 2018 box office, we believe we could be near a bottoming out.”

(DSL Reports) Frontier Communications Loses Another 101,000 Frustrated DSL Users

• Frontier continues to lose DSL customers frustrated by the company’s high prices and slow broadband speeds. Frontier’s latest earnings report indicates that the company lost another 101,000 DSL customers last quarter, thanks in large part to users fleeing to cable or wireless services that offer dramatically faster connectivity. Customers in Florida, Texas and California are also still fleeing the ISP due to its bungled acquisition of Verizon’s unwanted DSL and FiOS customers in those states.
• Frontier CEO Dan McCarthy tried to put a positive spin on the company’s problems with the acquisition, its outdated speeds, and the ongoing defections.
• “We’re back in the market with new offers, slightly higher speeds, and we feel pretty good about that,” McCarthy said. “Those offers launch really this week, and we’re expecting to see continued voluntarily churn reduction, as well as an uptick in gross adds, and the combination of the two is where we see improvements in net as we get into this quarter.”
• But that statement tries to obfuscate that many Frontier customers are leaving because the company still refuses to upgrade older DSL lines at any real scale, leaving many users on 3-6 Mbps DSL that falls well below the base definition of 25 Mbps. Cable providers have been having a field day in these markets as DOCSIS 3.1 now allows them to offer gigabit speeds for relatively little investment.

(24/7 Wall St.) More Upside Seen for Cell Tower Giants Ahead of 5G Deployments

• If there is one part of the communications industry that many consumers tend to overlook, it is the cell and communications tower operators. At least until they lose their signal. SBA Communications Corp. reported mixed earnings that looked a bit softer than expected, but analysts by and large call for more upside in SBA and from its two top rivals.
• Jeffrey Stoops, president and CEO of SBA Communications, talked up the spending climate ahead of spectrum and 5G deployments in the quarters and years ahead.
  “With substantial spectrum and 5G deployments on the horizon in both the U.S. and internationally, we expect customer demand to remain solid for years to come. Against that demand, we intend to continue to execute well and we expect to continue to favor allocating capital to portfolio growth and stock repurchases. We continue to remain on track to achieve our long term goal of $10 or more of AFFO per share in 2020.”

(CNBC) Sprint swings to a profit, helped by cost cuts

• Sprint on Tuesday swung to a quarterly profit for the first time in three years and its chief executive said an announcement on merger talks should come in the “near future.”
• Sprint is in the middle of a turnaround plan and has sought to strengthen its balance sheet to compete in a saturated market for wireless service.
• While Sprint has cut costs, analysts say the company is highly leveraged. And although its customer base has expanded under Chief Executive Marcelo Claure, growth has been driven by heavy discounting.
• On the company’s post-earnings conference call, Claure said that while Sprint could sustain itself on its own, the synergies that could come with a transaction were significantly better than remaining a standalone entity.
• “We have plenty of options, and we’ve had discussions with a lot of different parties,” he said.
• He said he was surprised Charter said it was not interested in acquiring Sprint given Sprint was never offered for Charter to buy. Rather, he said, it was part of the “bigger play that has been reported.”
• “Everybody has shown a high level of interest in evaluating Sprint as a potential merger partner. We’re very encouraged by the results of our conversations,” Claure later told reporters.

Fund Flows & Issuance: According to Wells Fargo, flows week to date were -$0.3 billion and year to date flows stand at -$6.0 billion. New issuance for the week was $2.0 billion and year to date HY is at $151 billion.

(Bloomberg) Lean Inventory Fueling Home-Price Gains in 20 U.S. Cities

• Steady price gains in 20 U.S. cities in May indicate that a tight supply of properties paired with increased demand is boosting home values, according to figures from S&P CoreLogic Case-Shiller on Tuesday.
• A shortage of listings is still behind the rapid appreciation of home prices, particularly in high-demand areas such as Portland, Oregon, and Seattle, where values have surpassed pre-recession peaks. Housing demand is supported by a solid labor market, steadily rising wages and low mortgage rates. While lofty asking prices are making it difficult for some Americans to become homeowners for the first time, they’re encouraging owners of more expensive properties to put their houses up for sale, as trade-up demand remains solid.
• “Home prices continue to climb and outpace both inflation and wages,” David Blitzer, chairman of the S&P index committee, said in a statement. “The small supply of homes for sale, at only about four months’ worth, is one cause of rising prices. New home construction, higher than during the recession but still low, is another factor in rising prices.”

(Reuters) Saudi vows to cap crude exports next month

• Saudi Energy Minister Khalid al-Falih said his country would limit crude oil exports at 6.6 million barrels per day in August, almost 1 million bpd below levels a year ago.
• Russian Energy Minister Alexander Novak also told reporters that an additional 200,000 bpd could be removed from the market if compliance with a global deal to cut output was 100 percent.
• The Saudi and Russian energy ministers were in St. Petersburg for a gathering of the Organization of the Petroleum Exporting Countries and other producers. Ministers discussed their previous agreement to cut production 1.8 million bpd from January 2017 through March 2018.
• Falih said OPEC and non-OPEC partners were committed to cut output longer if necessary but would demand that non-compliant nations stick to the agreement.
• OPEC members Nigeria and Libya have been exempt from the output cuts, and market watchers remain concerned that production from the two countries is offsetting the impact of the global reduction.
• In the United States, rig counts were up to 764 in the latest week, from 371 rigs a year ago.
• The executive chairman of energy services company Halliburton said he expected a U.S. rig count above 1,000 by year end, but that about 800 to 900 rigs was more sustainable in the medium term.

(MarketWatch) HCA’s weak quarter speaks to a long-term trend: People are going to the doctor less

• Hospital operator HCA Healthcare Inc. reported a dismal quarter early Tuesday, complete with profit and revenue misses and a cut to its earnings-per-share outlook for the year.
• Hospital operators haven’t been having a particularly good time in recent months, especially given congressional Republicans’ effort to repeal the Affordable Care Act. The ACA, also called Obamacare, greatly benefited hospitals because more people became insured, especially through the law’s Medicaid expansion.
• But there’s another possible reason at play, too: fewer people going to the doctor, said Veda Partners analysts Spencer Perlman and Sumesh Sood.
• Health plans increasingly shift more costs to consumers through such things as high deductibles and cost-sharing, which has in turn changed how patients behave, they said.
• HCA earnings show that “we remain in a much lower healthcare utilization environment post-2008 and this is the new normal,” they said.
• Perlman and Sood also pointed to data published by the Healthcare Cost and Utilization Project in June, which “clearly indicates a continued decline in inpatient stays, surgical volumes and deteriorating payer mix.”

S&P awards Regal Entertainment unsecured debt an upgrade to B+

• Regal unsecured debt was upgraded one notch to B+ on the expectation of continued investment in the theater network and stable leverage over the next 12-18 months

(Fierce Cable) Charter’s 90K lost video subscribers in Q2 far better than forecasts

• Charter Communications delivered far better pay-TV customer metrics in the second quarter than predicted by investment analysts, with the No. 2 U.S. cable company dropping only 90,000 customers in the three-month period that is typically the weakest for pay-TV operators.
• Video subscriber losses at legacy Charter (down 10,000 vs. -7,000 in the second quarter of 2016) and Bright House Networks (down only 12,000 vs. -72,000 in Q2 2016) were offset by 68,000 lost former Time Warner Cable customers during the period.
• Most of the decline came from the loss of “limited basic relationships” at TWC, Charter CFO Christopher Winfrey told investment analysts.
• Revenue grew 3.9% to $10.4 billion on a pro forma basis, while second quarter EBITDA was up 8.6% to $3.8 billion.
• “Results were a nice surprise, with EBITDA ahead of estimates and subscriber trends well ahead,” said New Street Research analyst Jonathan Chaplin. “Video losses in the TWC markets were half what we and consensus expected. This bears out management’s comment that they had turned the corner on TWC integration and churn. This quarter should have been the low-water mark, and the results were good.”

Fund Flows & Issuance: According to Wells Fargo, flows week to date were $1.9 billion and year to date flows stand at -$5.7 billion. New issuance for the week was $3.5 billion and year to date HY is at $149 billion.

(PR Newswire) Valeant Agrees To Sell Obagi Medical Products Business

• Valeant Pharmaceuticals International, Inc. announced that certain affiliates of the Company have entered into an agreement to sell its Obagi Medical Products business for $190 million in cash to Haitong International Zhonghua Finance Acquisition Fund I, L.P. Limited partners of the Fund include industry veterans in other geographic markets, such as China Regenerative Medicine International Limited.
• “The sale of Obagi marks additional progress in our efforts to streamline our operations and reduce debt,” Joseph C. Papa, chairman and CEO, Valeant. “As we continue to transform Valeant, we will remain focused on the core businesses that will drive high value for our shareholders.”
• Obagi Medical Products is a global specialty pharmaceutical company founded by leading skin care experts in 1988. Obagi products are designed to help minimize the appearance of premature skin aging, skin damage, hyperpigmentation, acne and sun damage and are primarily available through dermatologists, plastic surgeons, medical spas and other skin care professionals.
• Valeant will use proceeds from the sale to permanently repay term loan debt under its Senior Secured Credit Facility. The transaction is expected to close in the second half of 2017, subject to customary closing conditions, including receipt of applicable regulatory approvals.

(Reuters) Buffett, Malone explore investment in Sprint

• Warren Buffett’s Berkshire Hathaway Inc and John Malone’s Liberty Media Corp are exploring an investment of between $10 billion and $20 billion in U.S. wireless carrier Sprint Corp, people familiar with the matter said.
• Masayoshi Son, the chief executive of Japan’s SoftBank Group Corp, which controls Sprint, met Buffett and Malone separately this week at an annual gathering of business and media moguls in Sun Valley, Idaho, the sources said on Friday, confirming a report in The Wall Street Journal. Sprint CEO Marcelo Claure is also involved in the negotiations, the sources said.
• Berkshire Hathaway is considering an investment of up to $20 billion in Sprint, while the amount that Liberty Media is looking to invest is not yet known, the sources said. Talks are in the early stages and could still fall apart, the people added.

(New York Times) Health Care Overhaul Collapses as Two Republican Senators Defect

• Two more Republican senators declared on Monday night that they would oppose the bill to repeal the Affordable Care Act
• The announcement by the senators, Mike Lee of Utah and Jerry Moran of Kansas, left their leaders at least two votes short of the number needed to begin debate on their bill to dismantle the health law. Two other Republican senators, Rand Paul of Kentucky and Susan Collins of Maine, had already said they would not support a procedural step to begin debate.
• With four votes against the bill, Republican leaders now have two options.
• They can try to rewrite it in a way that can secure 50 Republican votes, a seeming impossibility at this point, given the complaints by the defecting senators. Or they can work with Democrats on a narrower measure to fix the flaws in the Affordable Care Act that both parties acknowledge.
• Senator Mitch McConnell, the Republican leader, conceded Monday night that the effort to repeal and immediately replace the Affordable Care Act will not be successful. He outlined plans to vote now on a measure to repeal the Affordable Care Act, with it taking effect later. That has almost no chance to pass, however, since it could leave millions without insurance and leave insurance markets in turmoil.

(CNET) T-Mobile shakes off rival unlimited plans as growth soars

• The nation’s third-largest wireless carrier said it added 1.3 million net new customers in the second quarter, helped largely by the 786,000 new phone customers on a post-paid plan, or who pay at the end of the month.
• The numbers underscore the fact that despite the rival carriers throwing themselves at you for your business, T-Mobile continues to win over new customers. The heightened pressure has resulted in more deals for consumers, including Sprint offering a year of service for free(excluding taxes and fees), and its prepaid arm Virgin Mobile going with an all-iPhone model with a rate of $1 for the first year of service. AT&T is throwing its DirecTV Now streaming service into its unlimited plan for $10 extra. Likewise, it was the first full quarter that Verizon offered its unlimited plan.
• T-Mobile, conversely, has been relatively tame and quietly raised the price of its One Plus unlimited plan by $10, matching the price of Verizon’s $80 unlimited data plan.
• Unlike in previous quarters, T-Mobile is the first of the big carriers to report results, so we won’t know for sure how well it fared relative to its competitors. The company has consistently outstripped its rivals in subscriber growth, leading the industry for 14 straight quarters.

Fund Flows & Issuance: According to Wells Fargo, flows week to date were -$1.4 billion and year to date flows stand at -$6.1 billion. New issuance for the week was $0.4 billion and year to date HY is at $145 billion.

(Reuters) Fed’s Williams still sees rate hike, asset unwinding this year

• A top U.S. central banker on Tuesday said he still expected one more rise in interest rates from the Federal Reserve this year and for it to start unwinding its massive balance sheet in the next few months.
• Answering audience questions at an economics event in Sydney, San Francisco Federal Reserve Bank President John Williams said he believed a recent softening in U.S. inflation was transitory and that inflation would pick up to around 2 percent over the coming year.
• Williams emphasized that if inflation did not accelerate as expected, that would argue for a much slower pace of rate rises than currently projected.
• He also noted that raising rates and trimming the balance sheet were complimentary forms of tightening and his projections for policy took that into account.

(Wall Street Journal) Frontier’s Big Bets on Landlines Falter

• The once small phone company amassed $17 billion in debt by scooping up networks across the country from Verizon Communications Inc. and AT&T Inc. It was a contrarian strategy that Frontier could generate steady revenue from residential internet and video services even as wireless use exploded.
• Instead, Frontier has been losing customers and scrambling to cover looming debt payments.
• Frontier’s troubles multiplied in spring 2016 after it closed a $10.5 billion deal for phone and internet lines from Verizon. The move nearly doubled Frontier’s revenue and gave it millions of new customers in California, Texas and Florida. They included 1.6 million subscribers on Fios, a fiber-optic service that appeared lucrative but hid some snags below the surface.
• “This last acquisition was largely about acquiring fiber,” a strategy the company still supports, Frontier finance chief Perley McBride said. “It’s just integration that didn’t go well. When you double in size and you don’t do it well, it’s sort of up front and center.”
• Mr. McBride said he doesn’t expect revenue growth anytime soon from the consumer markets acquired from Verizon last year. That is a reversal from the forecast of his predecessor, John Jureller, who in 2015 called the revenue trends “very positive.”
• “Cable companies are beating the pants off Frontier,” said Jonathan Chaplin, an analyst for New Street Research, noting that companies like Charter Communications Inc. have invested more heavily in marketing, network equipment and customer service in the past three years.

(Reuters) U.S. mortgage activity posts biggest weekly drop since December

• U.S. mortgage application activity recorded its steepest drop since December as interest rates on 30-year fixed-rate home loans climbed to their highest level in nearly two months, Mortgage Bankers Association data released on Wednesday showed.
• The Washington-based group said its seasonally adjusted index for mortgage applications fell to 391.9 in the week ended July 7, down 7.4 percent from the prior week which marked its biggest decline since a 12.1 percent fall in the Dec. 23 week.

(Washington Post) Siemens and AES team up on industrial-size batteries

• Transnational engineering giant Siemens is taking aggressive steps to expand into the ¬alternative energy market through a new partnership with AES, an Arlington-based power company that operates in 17 countries.
• The two firms said in a Tuesday regulatory filing that they are forming a new D.C.-based joint venture called Fluence, which will sell industrial-scale batteries to large businesses.
• Fluence will compete against established players such as Elon Musk’s Tesla, which has built out a line of business in industrial power storage alongside its electric cars.
• “Our ultimate aim is to accelerate adoption of the electricity network of the future,” AES chief executive Andres Gluski said, “and we think energy storage will be a very big part of that.”
• Gluski declined to say exactly how much the two companies are investing at the outset, but said the venture will be “fully funded for the next five years.”

(Business Wire) Dynegy Reaches Agreement to Sell Three Power Generating Assets

• Dynegy Inc. has reached agreement to sell three of its generating plants for approximately $300 million. Combined with the previously announced LS Power transaction, a total of approximately $780 million in aggregate sales proceeds will be used primarily for debt reduction.
• Dynegy reached an agreement to sell its Lee Energy Facility, a 625 MW (summer capacity rating) gas-fueled peaking asset in the PJM ComEd region to an affiliate of Rockland Capital.
• Dynegy will receive $180 million in cash and avoid the incremental capital investment necessary to convert the plant to dual fuel status in order to meet PJM capacity performance obligations. The sale allows the Company to crystallize value in the ComEd region and generate additional cash proceeds for debt repayment.
• Dynegy has also signed a purchase and sales agreement with Starwood Energy Group Global for two assets totaling $119 million. The combined 310 MW (summer rating) of assets to be sold include two intermediate gas-fueled plants located in Dighton and Milford, Massachusetts. The Company anticipates allocating the cash proceeds to debt reduction.