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)

• Performing / High Yield Content: Conversations with Reorg: Changing Dynamics in The European Leveraged Loan Market And The Potential Impact of More Permissive Documentation On Restructurings: Reorg has been massively ramped up our Expert Views series. This was one of my favorites of recent past

• Stressed / Distressed Content: Mitel Executes Non-Pro-Rata Priming Exchange With $857M of New Debt Ahead of Existing Loans: And it begins. Given the amount of capital raised in drawn down structures from credit opportunity funds and the weakness of governing documents, there are going to be a lot of these

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

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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)

• Performing / High Yield Credit - Carnival’s New Notes Issued By NonGuarantor Subsidiary Suggests Focus on Structurally Senior Debt Over Additional 1L, 2L Debt; Unlimited Transfers Within Restricted Group Permitted by All Carnival Debt Documents - Hot off the presses...The best trade for a while in the past couple of years was top of capital cruise lines. Structure and seniority still matters...

• Stressed / Distressed - Lots of content related to Bed Bath and Beyond (especially with the news today) - We wrote before the announcement about the advisors circling the company and bondholders. 

Other Content You May Find Interesting

• @the_red_deer Aggregating a Series of Credit Interviews the Past Couple of Weeks: I especially liked Boaz Weinstein's selling protection to the banks on IGs the need hedging given revolver capacity / worries of the market. Generally speaking sentiment was neutral / opportunistic for most of these interviews.

• How a Chinese American Gangster Transformed Money Laundering for Drug Cartels: Holy hell this was a crazy read. The reporting was nuts. Incredible piece by ProPublican

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.

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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)

• Performing/High Yield Credit - Sector Insights: European Supermarkets, Food Retailers Wrestle With Inflation Hit on Customer Purchasing Power, Balance Passing on Food Inflation With Protecting Market Share, Focus on Cost Initiatives to Offset Margin Squeeze; No Significant Near-Term Maturities Except for Casino - The consumer is weak and inflation is skyrocketing not just on this side of the pond but in Europe as well. Across European food retailers margins are declining, leverage is increasing and liquidity is running tight. 

• Distressed Credit - LATAM Airlines - LATAM Airlines Anticipates Emerging From Bankruptcy in Q4; Proposed $1.5B Bond Debt Secured by Frequent Flier Program, Cargo Business, IP, Slots in US, UK - Feels like the end of an era on this one. I know its only been a couple lifetimes since the company filed but given where we thought we would be at petition data- its interesting to see this one come closer to exit

Other Content You May Find Interesting

• America's Throwaway Spies: How the CIA failed Iranian informants in its secret war with Tehran: This was a fascinating piece by Reuters Investigates. Given how much clandestine operations have been in the news combined with extraordinary reporting, I think you'll enjoy this one

• Mobile Homes, the Last Affordable Housing Option for Many California Residents, Are Going Up in Smoke (disclaimer: My wife works at Inside Climate News - you should read it!) - This is a harrowing piece and given our community and knowledge of PGE it sorta gave me the feels / anger

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.

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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)

• Performing / High Yield Credit - Reorg Covenants Weekly: Citrix LBO Notes Include Aggressive, Possibly Unprecedented Buildup Basket; NortonLifeLock’s Credit Agreement Expands Unused Carryforward Flexibility; Opendoor, LendingTree Initiation; Hersha Hospitality, Ultra Clean, StoneMor, Sylvamo Updates; CNX Resources, Citrix Primary Review - The feedback on my post last week on ability to submit documents for loan review was met with overwhelming response. As you can see we are covering a lot in the space and this content is absolutely incredible and best-in-class.

• Distressed Credit - Everything and all Puerto Rico. We wrote a litany of stories on Puerto Rico last week and with the island being super topical given the struggles at the island (and Luma featured on John Oliver). Our most popular story of the week: Oversight Board Files PREPA Bond Litigation Schedule With Call to Continue Talks; Latest Bondholder, Oversight Board Restructuring Proposals Disclosed

Two Other Pieces of Content You May Find Interesting

• The Sordid Saga of Hunter Biden’s Laptop - Given the House is most likely going to swing to Kevin McCarthy's leadership if I could buy mentions of Hunter Biden's laptop as a stock, it would be a screaming buy. As a don't like to get political here, this piece laid it all out there
• Has The Zodiac Killer Mystery Been Solved (Again)? - An incredible piece by LA Mag. I lvoe this random guy taking it to the next level...

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

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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

• The Great Buenos Aires Bank Heist - This is a WILD story. The article came out pre pandemic (so about 20 years ago) and is just a super fun / crazy read 

• AI Art: World’s First Bot-Generated Graphic Novel Hits the Market - My kids and I have spent far too much time on Midjourney. We are in the 1st inning of the application of AI Art and its absolutely incredible the progress in just a couple years

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

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