The Wall Street Journal - 23.10.2019

© 2019 Dow Jones & Company. All Rights Reserved. *** THE WALL STREET JOURNAL.** Wednesday, October 23, 2019 |B1

TECHNOLOGY: SNAP’S LOSSES NARROW AS REVENUE SOARS 50% B4

BUSINESS&FINANCE

our digital transformation.”

Mr. Donahoe has a back-

ground in the tech world rather

than in sportswear. He was the

CEO of ServiceNow Inc., a cloud

computing company, and is

chairman of PayPal Holdings

Inc. From 2008 until 2015, Mr.

Donahoe was eBay’s chief exec-

utive, where he stepped down

after overseeing the spinoff of

PayPal into a separate public

company.

Mr. Parker’s tenure has been

a financial success. Sales have

Please turn to page B2

S&P 2995.99g0.36% S&PFIN g0.28% S&PIT g1.37% DJTRANS À0.90% WSJ$IDX À0.13% LIBOR3M 1.936 NIKKEI (Midday) 22540.56g0.04% See more at WSJ.com/Markets

protection and another, Fron-

tier Communications Corp.,

into restructuring talks with

its creditors.

Meanwhile, competition

from cheap natural gas and

renewable-energy sources has

caused at least seven coal pro-

ducers to file for chapter 11

protection over the past year.

Opioid lawsuits and the threat

of legislation that would curb

surprise medical bills have ex-

posed vulnerabilities at some

highly leveraged health-care

companies. Retailers continue

to be pressured by the shift to

online shopping. And a wave

of financial distress has again

hit the oil patch due in part to

persistently low commodity

prices.

Taken together, these de-

velopments have caused

yields, which rise when bond

prices fall, to climb for

months on the lowest-rated

group of corporate bonds. Un-

usually, that has happened

even as yields have fallen on

higher-rated junk bonds.

Investors and analysts

closely watch junk bonds be-

cause companies with subpar

credit ratings tend to be af-

fected by economic problems

sooner than others. Right

now, many remain confident

that the problems befalling

certain companies aren’t

symptomatic of broader eco-

nomic challenges. Others

worry that cracks at the bot-

tom of the market shouldn’t

be taken lightly and could

spread to a larger group of as-

sets.

Please turn to page B12

An array of business chal-

lenges is hitting low-rated

companies across the U.S.

economy, driving selling in the

bottom tier of the corporate-

debt market that contrasts

with gains in stocks and other

riskier assets.

In recent months, consumer

demands for wireless phones

and high-speed internet have

helped push one landline tele-

com company, Windstream

Holdings Inc., into bankruptcy

BYSAMGOLDFARB

Major Car-Parts Supplier Initiates Reorganization

Continental AG, one of the world’s biggest auto-parts companies, said it would reorganize its

business and shelved plans for a partial initial public offering of stock in its powertrain division. B3

ALEX KRAUS/BLOOMBERG NEWS

Boeing Co. shuffled the

ranks of top management on

Tuesday, replacing the head of

its jetliner business as it strug-

gles to shore up confidence

among customers, investors

and lawmakers in the com-

pany’s handling of the 737 MAX

crisis.

The removal of Kevin McAl-

lister with immediate effect

marks the first high-level

ouster from Boeing since the

second crash of a MAX in

March triggered a global

grounding of its best-selling jet

and billions of dollars in losses

at the company.

Boeing, the nation’s largest

exporter, has already lost about

$40 billion in market value

since the crisis erupted, and

analysts expect it to take more

charges when it reports quar-

terly earnings on Wednesday.

Chief Executive Dennis Muilen-

burg, who was stripped of his

chairman’s role earlier this

month, will face investor ques-

tions as well as a grilling by

congressional lawmakers next

week.

The management change,

with Boeing services chief Stan

Deal succeeding Mr. McAllister,

comes just days after the dis-

closure of internal messages by

a former Boeing pilot that sug-

gested he unknowingly misled

regulators in his work on the

MAX. The messages angered

regulators and lawmakers, driv-

ing fresh calls for leadership

changes.

Boeing’s board met on Sun-

day and Monday as the pres-

sure intensified. The disclosure

of the internal messages sent

Boeing’s stock tumbling,

spurred analyst downgrades

and sparked a firestorm that

threatened to further delay the

grounded 737 MAX’s return to

passenger service.

Mr. McAllister had enjoyed

the support of the board’s new

chairman, fellow General Elec-

tric Co. alumnus Dave Calhoun,

people familiar with the matter

said. But as the crisis deepened

over the weekend, board mem-

bers realized that the removal

of Mr. Muilenburg as chairman

wouldn’t be enough to stem the

fallout, one of these people

said. The board isn’t ruling out

other high-profile personnel

changes, this person said.

Boeing has repeatedly

pushed back the expected re-

turn of the MAX, as airlines

and passengers count the cost

of delays in the company’s de-

livery of a backlog of more than

4,500 planes. Most carriers

don’t expect the aircraft to re-

turn to service until early next

Please turn to page B2

BYANDREWTANGEL

ANDDOUGCAMERON

Boeing

Replaces

Head of

Jetliner

Division

A Nike spokesman said Mr.

Salazar was concerned Nike

runners could be sabotaged by

people rubbing the cream on

them.

Mr. Parker initially sent a

memo emphasizing his support

for Mr. Salazar. The following

week, he sent a memo to em-

ployees saying the Nike Oregon

Project, an elite running group

coached by Mr. Salazar, was be-

ing shut down.

A Nike spokesman said the

search for a new CEO began

months ago and wasn’t trig-

gered by the Oregon Project is-

sue. The board considered sev-

eral candidates but landed on

Mr. Donahoe because of his fa-

miliarity with Nike and experi-

ence running e-commerce and

tech companies, the spokesman

said: “John is the right leader, a

proven CEO, who is no stranger

to Nike and will help accelerate

earlier reported that Nike was

investigating allegations of in-

appropriate behavior after a

group of women at the com-

pany circulated a survey that

reached Mr. Parker.

This month, the Journal re-

ported that Nike-backed run-

ning coach Alberto Salazar

briefed Mr. Parker on several

occasions about his experi-

ments using a testosterone

cream, according to emails re-

vealed by the U.S. Anti-Doping

Agency.

ning coach amid doping allega-

tions and concerns about the

company’s workplace culture.

In a memo sent to Nike staff

Tuesday, Mr. Parker said he

told the board he wanted to

find a new CEO so he could

work alongside them before re-

tiring. “To be clear, I’m not go-

ing anywhere. I’m not sick.

There are no issues I’m not

sharing,” Mr. Parker wrote.

Last year, Mr. Parker apolo-

gized for allowing a corporate

culture that excluded some

staff and failed to take seri-

ously complaints about work-

place issues. The apology fol-

lowed weeks of turmoil and the

departures of several senior ex-

ecutives, including Mr. Parker’s

top lieutenant. In response, Mr.

Parker said he would remain

chairman and CEO beyond

2020.

The Wall Street Journal had

Nike Inc.’s longtime leader
Mark Parker will step aside as
chief executive and be suc-
ceeded by a technology indus-
try veteran, marking a strategic
shift atop the world’s biggest
sportswear brand.
John Donahoe, 59 years old,
a former eBay Inc. chief execu-
tive and a current member of
Nike’s board, will take over as
CEO in January. Mr. Parker, 64,
will become Nike’s executive
chairman. The four-decade Nike
veteran took over the top job in
2006, inheriting a global brand
built by co-founder Phil Knight.
The CEO change comes at a
time when Nike’s sneaker and
apparel business has been log-
ging strong sales, but the brand
has also faced a series of public
relations crises, including the
recent ban of Nike’s top run-

Procter & Gamble Co.
posted another quarter of
strong sales of household sta-
ples and said it was well posi-
tioned to ride out any pull-
back in consumer spending.
Helped by price increases,
the maker of Tide laundry de-
tergent and Pampers diapers
said revenue rose across all of
its business lines, including its
beleaguered Gillette shaving
unit. P&G is now growing at a
faster pace than competitors
such as Unilever PLC and Kim-
berly-Clark Corp.
The Cincinnati company
said organic sales, a measure
that excludes currency moves
and deals, rose 7% from a year
ago. Kimberly-Clark, maker of
Huggies diapers and Kleenex
tissues, on Tuesday said or-
ganic sales rose 4%. Unilever,
with brands including Dove
soap, last week reported or-
ganic sales growth of 2.9%
P&G’s growth sputtered in
the years following the 2008 fi-
nancial crisis and only last year
returned to levels seen before
the economy soured. Its turn-
around has been driven by
higher prices, new products and
a leaner portfolio of brands.
“We are better positioned
now than in 2008 to handle a
downturn,” P&G finance chief
Jon Moeller said in a call with
analysts who questioned
whether the company’s results
would hold up should consum-
ers curtail spending. He said
the company sees “no signs of
weakness, but that can
change.”
Economies have been slow-
ing around the globe recently.
Household spending in the
U.S. ticked up 0.1% on a sea-
sonally adjusted basis in Au-
gust compared with July,
lower than the average gains
during the first seven months
of the year. Last week, the In-
ternational Monetary Fund cut
its forecast for global eco-
nomic growth this year to 3%.
Mr. Moeller said P&G has
largely stopped selling prod-
ucts that suffer amid con-
sumer belt-tightening, such as
makeup and perfume. Instead,
the company has focused on
developing pricier offerings in
essential products such as
laundry soap and toothpaste.
Consumers’ willingness to
pay higher prices for house-
hold staples, with increases
driven largely by P&G as the
industry’s biggest player, has
fueled the company’s growth.
This summer, P&G reported its
strongest fiscal year since be-
fore the recession. It was a re-
versal from the previous year,
when P&G was lagging rivals
and the company was growing
1% to 2% a quarter.
Consumer-products execu-
tives have said they expect
higher pricing to abate in
coming quarters. That has al-
Please turn to page B2

BYSHARONTERLEP

P&G Adds

To Streak

Of Sales

Increases

Lowest-Rated Bonds Under Duress

BYKHADEEJASAFDAR

Longtime Nike CEO to Step Down

cash, luxury watches, hotel

rooms and dinners, prosecu-

tors alleged. Mr. Taylor used

burner phones and encrypted

apps to conceal his actions,

while Ms. Windsor created a

spreadsheet to divvy up the

spoils with one of the traders,

prosecutors alleged.

The alleged scheme has en-

snared securities traders, the

son of a pharmaceutical execu-

tive, bankers and others in a

wide-ranging federal investi-

gation outlined Tuesday by

federal prosecutors and agents

in New York.

Ms. Windsor, 32 years old,

and Mr. Taylor, 35, were

among six people charged in

four separate indictments,

which together laid out sev-

eral interconnected alleged

conspiracies in which insiders

at multiple banks obtained

nonpublic information about

Please turn to page B12

They were young lovers in

London, working as junior in-

vestment bankers at Moelis &

Co. and Centerview Partners

LLC. They had affectionate

nicknames for each other:

Pops and Popsy.

From that unlikely perch,

federal prosecutors allege,

Darina Windsor and Benjamin

Taylor orchestrated a years-

long global insider trading

ring. They stole confidential

bank documents about im-

pending corporate transac-

tions and shared them with

middlemen who handed the

information to traders—yield-

ing tens of millions of dollars

in allegedly illegal profits,

prosecutors said.

In return, the middlemen

provided Ms. Windsor and Mr.

Taylor with more than $1 mil-

lion in benefits, including

BYREBECCADAVISO’BRIEN

Bankers Are Charged in

Insider Trading Scheme

Averagecorporatebondyields,byrating

12

4

6

8

10

%

2017 ’18 ’19

Brated

5.73%

BBrated

3.82%

CCCrated

10.96%

Yieldsonthe

lowest-rated

corporate

bondshave

climbedas

pricesfell,

diverging

from

higher-rated

junkbonds.

Sources: Bloomberg Barclays (bond yield); MarketAxess (volume of bonds trading at distressed levels); LCD, a unit of S&P Global Market Intelligence (ratio of downgrades to upgrades)

*Based on bonds that have traded in October and last traded below 80 cents †Other than food and drugs ‡Rolling three-month ratio of downgrades to upgrades, S&P/LSTA Leveraged Loan Index

Ratioofloandowngradestoupgrades‡

Volumeofbondspriced

below80centsonthedollar*

$0billion 25 50 75

Energy

Healthcare

Telecommedia

andtechnology

Finance

Retail†

Consumer

Products

Other

8

0

2

4

6

times

2007 ’19

FederalReserve

hintsatratecuts.

John Donahoe

will succeed

Mark Parker

as the

company’s

chief executive

in January.

Under Armour

Founder Quits

Kevin Plank is leaving the

task of turning around the

company to a lieutenant... B2