9.27.2022

Takeaway Tuesday #5

The sentiment out there is bad. One of my favorite Twitter accounts to follow for sentiment is Sentiment Trader (@sentimentrader). They posted this chart earlier this week:


but admittedly it feels like we are teetering on an edge. When its hard for me to call in buy orders I know we are getting closer to a bottom.



Reorg Content (subscription required)


Two Other Pieces of Content You May Find Interesting
Something I bet you didn't know you could do on Reorg.com

Our App is incredible. Here in the link: Reorg App on App Store. Look at that 4.9 rating. Beautiful...Seriously though I read all of our content on the app and I think you will too

Read more...

9.20.2022

Takeaway Tuesday #4

Don't look now - the 1 year T Bill is at 4% and banks are about to take a bath on everything from syndicated loans (Citrix...) to commercial real estate...everything is great out there...



Reorg Content (subscription required)


  • Performing / High Yield Credit - Petco / Lenders Object to Petco’s Effort to Transition Senior Secured Term Loan to SOFR From LIBOR Without Credit Spread Adjustment - given the underlying issues with the loan market its good to see the buyside work together to keep overall total return high for their own investors. We noted "The loan’s margin is currently L+325 bps. A transition to SOFR from LIBOR without a credit spread adjustment would have, in effect, lowered the coupon on the loan, given that one-month and three-month LIBOR indexes are currently 2.68% and 3.17%, respectively, while one-month SOFR is currently 2.28% and three-month is 1.92%."
  • Distressed Credit - U.S. Renal Care / Pimco, Other U.S. Renal Care Lenders Working With Milbank, Houlihan Lokey - We noted "Market participants are evaluating the possibility of certain lenders to the dialysis provider proposing and executing a transaction that involves funding new money to extend the company’s maturity runway while rolling up their debt holdings that would prime other lenders, known in recent years as creditor-on-creditor violence, the sources said." This is something I think we are going to see a continued massive increase over this cycle
Two Pieces of Content I Found Interesting


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

At Reorg, we very much built our business around distressed debt and bankruptcies in the early years. While we have continued to invest and deepen our expertise there, I believe we currently have the best covenant product combining deep editorial research and data in both the U.S. and Europe.

And I bet you didn't know we analyze every single primary issuance (bonds and loans) in a fashion that blows away the competition. We do this in the pre-marketing / pre-syndication phase as well. 

If you are looking for an analysis of a new loan in particular, you can reach out to our Covenants team at this email: CovenantLoanReport [at] reorg-research.com and request a review. We push these to the platform for topical credits to make people more aware of the service



Read more...

9.13.2022

Takeaway Tuesday #3 9/13/2022

After a lot of suggestion, we may be moving this to a substack of sorts. Apparently 2009 technology doesn't translate well to 2022...(yes the blog started 13 years ago - I had a lot more hair then)



Reorg Content (subscription required)

  • Performing / High Yield Credit: Veritas Technologies has been one of the most searched names on Reorg in September after they reported results with EBITDA down 50% y/y. While the company seemingly has a tremendous amount of liquidity, its capital structure has traded down past results.

Two Pieces of Content I Found Interesting


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

Given inflation is the talk of the town, I bet you didn't know you could compare what law firms are charging their clients on Reorg, by level. Lets compare associates Proskauer and Latham, both huge players across many aspects of credit 





What we did was index EVERY final fee application over the past 5-6 years by law firm by position utilizing data science to break down these comp numbers.

Why is this important: 
  • If you are a buysider and you are comparing pitches/engagement letters from law firms, you can use this data to keep law firms honest
  • If you are a law firm BD, you can use this data to build marketing materials, comp sheets, and generally be more aware of the market
  • And if you are a law firm recruiter: this has the data down to the named associate/counsel/partner which can be used for head hunting purposes.
Let us know if you have any questions!

Read more...

9.06.2022

Takeaway Tuesday #2 9/6/2022

I hope you all had a great LDW. As always, any feedback on the format as it begins to shape up, please let me know.



Reorg Content (subscription required)

  • Bausch Health's exchange offer was one of the most searched terms on Reorg last week. The Reorg analyst team put together an incredible exchange model that allows users to enter in their own assumptions. Our takeaway: "Assuming 100% participation...Reorg calculates that total debt would be reduced by $2.982 billion and that the net debt leverage ratio would decrease to 6.8x from 8x as of the end of the second quarter"
  • Cineworld continues to be topical and one of the most searched companies on Reorg. The team put together a detailed waterfall recovery analysis. We are assuming a bankruptcy filing could occur before the end of this month. Given the complexity of the situation (Cineplex litigation) and capital/corporate structure, this is going to be a fascinating case.

Two Pieces of Content I Found Interesting
  • The Humiliating History of the TSA - about 5 years ago, my oldest child had one of their toys taken away by a TSA officer in Chicago. In disgust, a letter was written to the TSA (utilizing the best 7 year old penmanship could offer). This article gives a detailed account of some of the crazy that goes on at the organization
Something I bet you didn't know you could do on Reorg

One thing that is just starting to get air in the mainstream media is spread widening of the direct lending market. New issues are coming much wider in terms of spread relative to this time last year - underwriting is tighter and its affecting everything from PE IRR calcs to cash flow to service debt etc. 

A couple years ago, Reorg built what I think is the best and most comprehensive database on the BDC market. We index every BDC that files with the SEC (both publicly traded and privately held) and updated their numbers and marks almost instantaneously when an SEC filing occurs.

On Reorg BDC's page, I can isolate all collateral in the BDCs that have been marked down or marked at a level that would signal distress. I could compare marks across various BDCs. I can see new loans coming in and loans that have exited to get a sense for how spreads have changed. And if I'm a lawyer or advisor, this helps me get in front of lenders / companies that may need an assist with liability management / formal restructuring. Or if I'm a lender, I can uncover companies that may need emergency capital to fend the current storm.

Give it a try and if you have any questions please reach out to your CSM at Reorg.

Read more...

8.30.2022

Takeaway Tuesday #1 8/30/2022

Welcome to the inaugural Takeaway Tuesday (or Tuesday Takeaways...still haven't decided). As a reminder the format is:

  • Two Reorg articles, one performing credit/one non performing credit
  • Two articles I found interesting this week
  • One thing I bet you didn't know you could do on Reorg

Reorg Content (subscription required)
  • The incredible saga of 3M ($MMM) on both the combat litigation and the potential monsoon of issues from PFOA and PFOS designations...or how fast can $70B of market cap / or an IG rating get eliminated...
  • Diamond Sports, one of, if not the most topical name in stressed/distressed credit - Reorg penned a piece of hypothetical bankruptcy catalyst considerations. One takeaway we had: "If DSG were to reject certain unprofitable team rights contracts per section 365(d)(2), those teams would need to arrange for backup production capabilities, distributor relationships and advertisement deals. Such operational complexity while teams would need to fund their costs, such as payroll, might also place Diamond into a more favorable position to push back on its existing contract terms."
Two Pieces of Content You may Find Interesting

  1. China on the tightrope - I learned so much from this article and admittedly I don't think people are talking about this enough. Global demand destruction for everything could have serious deflationary consequences
  2. Google Doc on Conversation Starters - Put together by Rob Walker who writes The Art of Noticing. My favorite: If you did not have to sleep, how would you spend the extra 8 hours?

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

When I was an analyst I would run redlines on anything from 10Qs vs last quarter 10Qs, to amendments to other disclosures. On Reorg you can do this under our SEC Filings technology

First click on a 10-Q...then click Compare Documents



Pick the document you want to compare your document to....(I did the most recent Q versus same quarter last year Q) and boom....


If you have any questions, you can always reach out to your Customer Success Manager at Reorg.


If you guys have any ideas on how to improve this format, please hit me up on Twitter (@ddinvesting) or my email. In future, I'll try to incorporate some video here as well. Thanks all



Read more...

8.29.2022

Tuesday Takeaways Preview - we blast off tomorrow

The last couple of months have been busy. Feels like summer just getting started...



One thing I learned from the process (I'll figure out the best medium to discuss it at length in the future) is Reorg is still regarded as a stressed / distressed-only shop. While we built the company starting from hard core bankruptcies like Lehman, Madoff, etc, our coverage (and technology + product offering) now spans over 5,000 credits globally.



In other words, awareness is one of Reorg's biggest challenge. Not just coverage but technology and product wise as well.



And because I've never been more excited about the company or its prospects (no, I'm not riding off into the sunset), I thought I would work to bring that awareness to the forefront the good old fashion way: blogging. If my kids taught me to use TikTok I would do that too...



On most weeks I'll be posting "Tuesday Takeaways" (or Takeaway Tuesdays...?) - I'll post three things each week:

  1. Two Reorg article links (one performing, one non performing)
  2. Two non-Reorg articles I think you would find interesting
  3. Something you may or may not know you can do on Reorg with screenshots


If you have feedback on this format, let me know and I'll incorporate as much as I can. Honestly, if you told me 10 years ago when I was first showing people the Reorg docket technology, we'd be where we are today I'd call you crazy - I can't begin to express my appreciation and gratitude to everyone that has supported us along this journey. And I am ever grateful to my incredible team of nearly 300 Reorgers around the world that work tirelessly to put out the best product possible.

See you tomorrow

Kent

Read more...

4.04.2022

FTLive Reorg Global Alternative Credit Summit

Hey everyone - Wanted to keep you up on an exciting event Reorg is putting together with the FT on May 4th and 5th - I will be kicking off the NY event and hope to see you there!



As background on the idea: Private credit is booming with estimates suggesting the market is now worth more than US$1 trillion. Having moved to the mainstream, with many buyside firms establishing direct lending or private credit arms, this asset class is creating changes in the debt capital markets, as investors seek out steady and healthy returns, and borrowers opt for new non-bank sources of finance.

The market is already enormous and GROWING. There are interesting questions to consider though: Despite ample capital, there structures didn't really exist at scale during the GFC and as or if the global credit cycle turns what are the implications for recoveries and  how processes play out.

When thinking about the conference agenda, and speaking to participants, we wanted to tackle some of the below:

  •  To what extent has it matured to meet the risk and return profile of an increasingly sophisticated pool of global investors? 
  • Can current rates of return be sustained in developed markets, against a fast changing and uncertain macro-economic and geo-political background? 
  • To what extent will Asia follow a similar growth path?
  • As demand for direct lending, distressed debt, structured credit and leverage finance increases, where will new avenues for growth emerge?
  • How concerned should investors be about warnings around systemic risks, market opacity, standards and illiquidity issues? 
  • Where will the regulation of private credit come from?

In partnership with Reorg, FTLive's Global Alternative Credit Summit will tackle these and other major questions. The summit will bring together leading investors, borrowers, lenders, regulators and advisers from the US, EMEA and Asia. Our agenda looks at how private credit is evolving and shaking up debt markets, assessing the key drivers behind its current rate of growth, and where the industry will go from here within the backdrop of rising inflation, war in Europe and the aftermath of the global pandemic.


--------------------------------



When: Two days of streamed global content May 4-5, 2022, including in-person VIP sessions and networking in London and New York.




Register at https://alternativecredit.live.ft.com/home using the promotion code Reorg15 to access a 15% discount for all digital content.




I hope to see you all there!


Kent

Read more...

Email

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.