Takeaway Tuesday #9

Happy Tuesday everyone. Its been a busy couple weeks post Reorg's FinDox announcement. Markets have been strange at best. I do think we are in an interesting period of alpha vs long risk. The Buffet 10 year bet (which Buffet won easily) could go the way of the active fund vs long S&P. Credit markets are still nearly closed, PE feels like its sitting on its hands and everyone is waiting for earnings estimates to come down. I would be remiss to not mention the absolute crazy of FTX and other crypto bankruptcies (there are more coming...). John Ray's declaration in FTX may be top 5 docket items I've seen in my career. FTX / Crypto were 9 out of Reorg's top 10 stories in the U.S. last week. Rightly so as this is this generation's Lehman / Enron and there are A LOT of claims out there for pennies on the dollar...

Reorg Content (subscription required):

  • Performing / High Yield Content: All the work on Tenneco and Nielsen the teams did last week. Obviously a big test for the health of market (some wins, some losses). Remains to be seen how this affects the forward calendar going into the holiday season
  • Distressed Coverage: Obviously FTX huge highlight last week. Removing that, the Copper Standard situation has fascinated me for the last couple of years. Its interesting to see and break down their TSA

Other Content You May Find Interesting

Only one link today because its one of the best reads in a long time: Notes from Todd Comb's conversation at the Graham & Dodd Annual Breakfast 2022. Run to read it...here are my four biggest takeaways:

  1. "Combs goes to Buffett’s house on many Saturdays to talk, and here’s a litmus test they frequently use. Warren asks “How many names in the S&P are going to be 15x earnings in the next 12 months? How many are going to earn more in five years (using a 90% confidence interval), and how many will compound at 7% (using a 50% confidence interval)?” In this exercise, you are solving for cyclicality, compounding, and initial price. Combs said that this rubric was used to find Apple, since at the time the same 3-5 names kept coming up."
  2. " Combs mentioned how his responsibilities are great, and his time is scarce, but if he was 150% dedicated to analyzing companies, he’d focus on delta reports, and see what management is changing from year to year. In 2005, Bear Stearns changed something very essential in their reports while saying something different to the street."
  3. "Put together your view without looking at the market cap. Limit the pollution. Then think about the future of the company and pressure test your assumptions. "
  4. "Combs focuses on fundamental unit economics. “First figure out CAC and LTV for GEICO. You know the data of where they live, the kind of car, and then there is the LTV of the customer. Combs thinks where people go wrong is where they think they know their CAC and LTV but it’s from too high a level. When you slice the data, there are really big pockets where the LTV is negative, and that is where the potential is to improve margins.”"
Something I Bet You Didn't Know You Could do on Reorg

Given the hyper focus this week on unsecured claimants, Reorg has definitively the best unsecured creditors database out there. You can pick ANY unsecured creditor and see what cases they are top claimants. 



Takeaway Tuesday - Findox Edition

Hey everyone, 

I am trilled to announce that Reorg and Findox are joining forces. I've known Tejs for over a decade and he and Brian, his CTO, and other have built an incredible organization - our goals have always been very similar: To delight our customers and help them solve the problem of information transparency. The transaction is expected to close in December.

Here is the press release:


I couldn't be more excited! Please reach out to me if you have any question. Takeaway Tuesday will be back next week!




Takeaway Tuesday #8

 An incredible chart from JPM below...

The news that banks will hold Twitter debt and sell at a later date and private equity firms doing equity only deals are emblematic of the times. And as expected more creditor on creditor violence and aggressive capital structure management is happening as we speak. I would guess we are just in the first innings of that.

Reorg Content (subscription required)
Other Content You Mind Find Interesting
  • The Crypto Story: Matt Levine comes out with a MONSTER piece (I'm only 1/2 done) on everything (and I mean everything) crypto. For people ultra familiar with the space I think you'll learn something new from all the anecdotes and missives
  • The $30 Million Lottery Scam: I think one thing people are underappreciating is how long it takes the excesses to unwind in the market. Yes the UK pension scheme sorta blew up and Madoff was uncovered months after Lehman filed - that said I think you are going to see many many more shoes to drop over the next two years
Something I Bet You Didn't Know You Could Do On Reorg

Lets say you are a lender to a company going through some challenges. And we know a lot of companies are going through challenges. There could be ideas on amendments floating around or an uptier exchange or covenant breaches etc. If lenders wanted to organize they may call a desk or speak to lawyers to see who else is involved. Well all that data is on Reorg. Lets use a topical one: Mitel:

We've recently rolled out some data initiatives to better display and link the data across Reorg's databases. You'll see more of this data in Reorg stories soon. To access the database you can go here: Reorg CLO Database



Takeaway Tuesday #7

A couple weeks I noted how bad sentiment was...this was posted by @jasongoepfert "Last week, retail traders bought $19.9 billion worth of puts to open. They bought only $6.5 billion in calls to open. This is the first time in history that puts were 3x calls."

My prediction: We are going to have a bad recession, and the market will start discounting that 6-9 months in advance just like every time in the future. Multiples still generally high, rates are going higher (market has never bottom when rates were rising), and the credit market is awful. Reorg usage is up dramatically versus last year and everyone is gearing up for a big restructuring cycle in 2023. No one can catch the bottom though...

Reorg Content (subscription required)

Other Content You May Find Interesting

Something I Bet You Didn't Know You Could Do On Reorg

Our Docket / PACER technology is still one of the most used features on the site with thousands of users getting alerted to docket updates in real time. We applied a data science model to our millions of dockets to parse them down into what the actual dockets point to. So for instance if you were looking for backstop motions you can do that:

What's great is that you can then filter by Judge, districts, industry, time, law firm etc. Its incredible. And lots of associates are using it to help with docket research, writing motions, getting comps etc.



Takeaway Tuesday #6

After last week's post and just limping in to what felt awfully bad Sunday night futures (Emergency Fed Meeting, rumors on CS, etc) the relief rally came right in the nick of time. Does anyone else feel like we are in the beginning of the beginning though? 

Reorg Content (subscription required)

Other Content You May Find Interesting

Something I bet you didn't know you could do on Reorg.com

We spent the last 18 months building the most comprehensive data lake for all things credit and restructuring related. Its the best thing we ever built.

Here is more information and awesome video: https://www.reorg.com/products/credit-cloud/

Want to know every time Kirkland and Evercore worked together and what DIP looked in terms of fees or carveouts or budget like or the KEIPs that got denied in Delaware or the companies whose loans dropped the most in the past month with the least amount of liquidity that is also more than 7x levered. Want to see dashboards that show what your competitors are advising or investing in or maybe the fees law firms are charging for pre-packs...its all there

Effectively what we are trying to build: If you can ask the question in credit, Credit Cloud can provide the answer.

Give it a try or reach out to me and I'll set you up with the right person.



hunter [at] distressed-debt-investing [dot] com

About Me

I have spent the majority of my career as a value investor. For the past 8 years, I have worked on the buy side as a distressed debt and high yield investor.