Reorg Covenants is Hiring! Looking for Fantastic Legal Analysts to Join the Team

As some of you know, Reorg launched Reorg Covenants earlier this year. We cover companies across the credit spectrum ranging from crossover to distressed debt and focus on the weaknesses of companies' various debt instruments and capital/corporate structure. We've had tremendous success year building not just the what I think is the best editorial product on the market but also launching a number of amazing technologies that make the analysis of indentures and credit agreements a much more efficient and effective exercise. We have big plans for the product as we expand into a Primary Issuance and European offering!

The Reorg Covenants team is hiring! We are looking to add a number of legal analysts to our already amazing group of talent. Your job will be to research and analyze companies' debt documents and write content for our subscribers highlighting the risks, opportunities, pitfalls of various instruments. Our analysts speak to clients often and you will have the opportunity to speak to some of the brightest minds out there on the buy side, sell side and legal communities. This is a perfect opportunity for a lawyer that has experience working around and crafting debt instruments to take their career to the next level in anticipation to a potential move to the buy side.

For more information or to apply you can go here: Reorg Covenants Job Posting

If you have any questions, feel free to reach out to me. Thanks!



Puerto Rico Benefit: Join Reorg Research and the Distressed Debt Community Tuesday Oct 24th in NYC

Hey everyone - Like all of you, I have watched in horror as Hurricane Maria has devastated Puerto Rico. This disaster and its aftermath hits particularly close to home, as Reorg has two employees and numerous colleagues and friends who live on the island with their families and face a long journey back to normalcy.

Next week Reorg Research as well as a number of sponsors are hosting a benefit to raise funds for Puerto Rico. We are inviting our friends and colleagues across the industry to come out for this amazing cause next week, Oct 24th in New York City. Myself and most of the Reorg Research team will be out and we would love if you would consider attending. Will be an amazing event!

Here is where you can register / sign up: Puerto Rico Hurricane Relief Benefit

All proceeds will be donated to United for Puerto Rico. We really hope to see you there!




Did You Know? Reorg Launched an M&A / Special Sits Product

Over the past four years Reorg has launched a number of products in the credit space. We have big plans to launch more in the future. With that said, we saw an opportunity to launch a product around M&A, antitrust and special situations using Reorg's formula of amazing reporters, analysts and lawyers combined with innovative technology. 

You can learn more about the new product at: Event-Driven.com. You can request a trial here: Event Driven Trial Sign Up

I produced a sample of a story we wrote yesterday below - if you have any questions feel free to reach out to me or your Reorg sales contact. Thanks! - Kent

COL/UTX Ability to Provide Integrated Systems May be Crucial Distinction for Regulators

Event Driven Takeaways
  • The COL/UTX divestiture package will most likely be in the range of $300M as United CEO Gregory Hayes stated in an interview with CNBC and the $850M divestiture limit in the merger agreement.  While this is small relative to the $30B deal value, the product lines involved will most likely touch DoD contracts raising single source supplier concerns for critical systems.
  • The antitrust/contracting concerns will be seen across a number of small verticals within the aircraft system software space, specifically “flight bags”, that aggregate system data for flight crews. These antitrust concerns will come down to issues of substitutable competitive products and how important system integration is to the final customer.
  • Honeywell is the primary competitor for United Technologies across all verticals including the verticals that overlap with Rockwell. There are also smaller component manufacturers that compete for government contracts, and should reduce antitrust concerns on overlap.
  • The termination date for the deal is September 4, 2018, which can be extended by six months to March 2019. Projected close for the transaction is 3Q2018. Regulatory scrutiny around the divestiture package could extend the review timeline past the 3Q projected close.

Avionics systems appear to be the primary overlapping verticals, specifically electronic flight bag systems, for the combined COL/UTX. While there are many substitutable components among these systems, there are limited fully integrated systems available that cover the entire aircraft the way the United systems do. This will raise both competition concerns and defense readiness concerns, which will be complicated to mitigate, and could extend the review timeline.

The DOJ and DoD reviews of the Rockwell/United deal will scrutinize narrow individual product markets, but importantly, may hinge on the combined companies’ ability to provide integrated systems for planes, something that vastly narrows the list of alternative providers. When a product is part of an integrated system so that a non-integrated component does not have the full functionality of the system, the product is not a full substitute.  

As we discussed in our previous report, DoD single source supplier review could be a sticking point in the regulatory review of the Rockwell/United deal. Civilian antitrust regulators have the final say, but the DoD’s analysis on the competitive effects of the transaction will carry significant weight. Both agencies will look at the competitive overlaps among the companies’ product lines, and the DoD will specifically look at readiness concerns around single source suppliers.

Both Rockwell and United offer electronic flight bag, or EFB, products that aggregate avionics data for flight crews. Rockwell’s SSR-7000 Secure Server Router “combines the capabilities of traditional wireless data transfer and avionics interface devices with ultra-secure EFB and crew wireless access.” United’s Tablet Electronic Flight Bag platform “enables real-time data exchange between [EFBs], aircraft avionics and airline operations while lowering costs and securely protecting data.”

Similarly, both companies offer aircraft data management solutions for route tracking and optimization. Rockwell’s ADS-3000 Air Data System “computes and displays all parameters essential to flight,” including airspeed and altitude. Rockwell also touts its products’ compliance with Automatic Dependent Surveillance-Broadcast (ADS-B) regulations, which cover traffic, weather, and flight information. United’s Aircraft Data Management (ADM) solution offers “continuous in-flight position monitoring and aircraft health reporting.” Furthermore, United’s aircraft interface device (AID) includes the ability to access “key aircraft avionics data such as GPS position, ground speed and aircraft heading,” and also facilitates transmission of weather information and flight performance tracking.

There are many small component manufacturers that make substitutable parts of the EFB system, including: Adobe, Advanced Data Research (ADR), Airbus, Air Data Solutions, Aircraft Data Fusion, Aircraft Management Technologies (AMT), Astoria Software, Approach View, ARINC, Astronautics, Avrotec (In Development) Boeing/Jeppesen/Astronautics, CMS Electronics, Control Vision, Echo Flight, Eflightsystems, LLC, Flight Deck Resources, Flight Explorer, GSCS, Hangar B-17, Hewlett-Packard, Honeywell, ION Systems, Jeppesen, LIDO, Maestro Aviation Limited, NavAero, On Board Data Systems, Panasonic, Paperless Cockpit,  RMS Technology, Rockwell Collins, Sporty’s Pilot Shop, Stenbock & Everson, Teledyne Controls, Ultra-Nav Universal Avionics, WSI, WxWorx.

However, the true value of the proforma United EFB system will be that the analytics are integrated from the tail to the nose of an aircraft. The regulators will determine the degree to which a product must substitute for the original product's functionality. This is a central principle of regulatory analysis of product substitution.

While many of these manufacturers make individually substitutable systems, very few offer full integration. Honeywell is the only competitor with a fully integrated system of equivalent quality. For antitrust purposes this is an important distinction, because regulators may be concerned with full system functionality in which case substituting an individual system will not alleviate competitive concerns. This is even more true for DoD review, as United makes EFB systems tailored to defense purposes such as EFB integration with night-vision, and weapons systems. The issue of integration could be a problem if there is a custom system for defense purposes that only works with the larger EFB system provided by United.

The EFB systems are also important for defense efforts relating to autonomous flight systems.  In the current form EFB systems collect and analyze data from an aircraft for human consumption. EFB systems are made up of sensors, analysis, and user interface. As more flight systems move toward autonomous systems, the user interface will become less important, and the integrated system analysis will grow in importance. This transition from manned flight systems to autonomous flight systems will increase the importance of integration, and make the issue of substitutable components more prominent.



Appellate Division Confirms Reorg Research Journalists Have Benefit of Shield Law

You may have heard about an important case between Reorg Research and Murray Energy. The case was a potential landmark for journalists and media organizations in New York and beyond. We fought like hell to protect what we knew was right.

Today, we won. 

Here is a link to the opinion: Reorg Murray Decision.

In a unanimous 5-0 decision, the First Department Appellate Division of the New York Supreme Court ruled that Reorg Research’s editorial team is protected by New York’s Shield Law from being compelled to disclose the identities of its confidential sources.

The court held that “because it is a ‘professional medium or agency which has as one of its main functions the dissemination of news to the public,’” Reorg has the benefit of the shield law and is exempt from having to comply with Murray Energy’s request that it reveal its sources.

The decision arose from a “pre-action disclosure petition” that Murray Energy filed with the New York Supreme Court in September after Reorg Research published two stories that reported Murray’s financial results and an agreement between the company and one of its labor unions.

The court noted that while Reorg has a “relatively limited subscriber base” that pays “relatively high” subscription fees and agrees to limited restrictions on further dissemination of its stories, these features are “not uncommon” in today’s media landscape and that the result of ruling in Murray’s favor “is not broader coverage but no coverage at all.”

In a coda likely to resonate far beyond the distressed debt community, the court ended its opinion by noting that “[e]xtending protection to [Reorg] under the Shield Law is consistent with New York’s ‘long tradition...of providing the utmost protection of freedom of the press’” and “[t]o condition coverage on a fact-intensive inquiry analyzing a publication’s number of subscribers, subscription fees, and the extent to which it allows further dissemination of information is unworkable and would create substantial prospective uncertainty, leading to a potential “chilling” effect.”

I want to thank our amazing team at Davis Wright Tremaine, the amici, our general counsel Jude Gorman and finally, the amazing team of journalists and contributors at Reorg who day in and day out, provide the world's most comprehensive and in-depth coverage of the high yield and distressed debt market.




A Better Way to Read SEC Filings on Reorg Research

One thing that we constantly try to do at Reorg Research is look at how the buy side, bankers, traders and lawyers are consuming source information through other channels, platforms and mediums and improve upon those functionalities. We started in 2013 doing this around legal and bankruptcy filings. We now do it across a wide variety of data sets. For instance, this week we released a new and improved way for our subscribers to access SEC filings on Reorg:

You can access any SEC filing on Reorg Research and get instant alerts on any company out there (distressed or not distressed). You can run a full text search across all our data sets to find the information you need faster.

If you are a subscriber, you can access the SEC Filings portal here: SEC Filings on Reorg Research. If you aren't a subscriber and want to learn more, you can request a trial for the product here: Reorg Research Trial Request



Official Launch of Reorg Covenants

As many of you know, last year we rolled out a beta of Reorg Covenants. We saw a void in the market for a product that combined subject matter expertise around complex capital structures, whether it be a high yield or investment grade credits, along with innovative technologies that would make the analysis of indentures, credit agreements and other debt documents more efficient, effective and intuitive.  

After amazing feedback from our beta participants, I believe we have built the best product on the market so market participants and their advisers can better know and understand the inherent risks and pitfalls of a particular credit or debt instrument. Names (and links to some our recent coverage) include: 
If you are interested in trying out the product, please fill out the trial request form here: Reorg Covenants Trial Request

In addition, here is a press release with the official announcement: Reorg Covenants Press Release

As always, if you have any questions on the product or Reorg in general, feel free to reach out.



Join Reorg Research at the 13th Annual Wharton Restructuring and Distressed Investing Conference

As in years past, Reorg Research will be acting as a Media Sponsor at this year’s Annual Wharton Restructuring and Distressed Investing Conference, which will take place at New York City’s Plaza Hotel on Friday, February 24.

The schedule is jam-packed with exciting restructuring panels, case study presentations and keynote speaker discussions including appearances from James G. Dinan, Founder, Chairman and CEO of York Capital Management and Glenn R. August, Founder and CEO of Oak Hill Advisors. Lastly, we can expect a final keynote interview of the day between Millstein & Co.’s Jim Millstein and Former Governor of Puerto Rico, Alejandro GarcĂ­a Padilla.

We hope to see you at the 13th Annual Wharton Restructuring and Distressed Investing Conference. Please use Reorg’s discount code “WRDIC2017MEDIA” to receive 15% off your registration fee.



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.