Independent Credit Research LLC - Investment Opinion On Distressed Securities

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News

  • 2016-10-11
  • A major blow to the CFPB
  • A federal appeals court on Tuesday ruled the structure of the Consumer Financial Protection Bureau is unconstitutional, setting aside a closely watched enforcement action against a mortgage lender and handing a considerable blow to the five-year-old agency. This is great news for investors in payday lenders…
    http://www.wsj.com/articles/federal-appeals-court-finds-structure-of-cfpb-unconstitutional-1476197389 « collapse
  • 2016-10-04
  • iHearrtMedia Consent Solicitation Approval
  • iHeartCommunications, Inc. yesterday announced the approval of its consent solicitation to holders of its 14% Senior Notes Due 2021, which now allows the company to borrow an additional $500 million of secured debt.  Consenting bondholders received their pro-rata share of the $8.6 million consent fee, set at 50 basis points if all bondholders voted affirmatively.  Moelis & Company, the solicitation agent, confirmed that the company can’t borrow additional monies unless the company gets approval from the secured debt holders, which in our view is very unlikely.
     
    The $500 million will be used to fill an approximately $300 million cash shortfall through the end of 2018, which we had forecast in our August report.  This action also potentially frees up assets at the unrestricted subsidiaries.  Our conclusion in the August report was that the company would attempt to buy the remaining 10% Senior Notes due 1/15/18 in the open market at a discount.  With the additional $500 million in financing, the company now has the option of paying the 10% bonds out at maturity in the normal course from the restricted subsidiaries and using the assets in the unrestricted subsidiary to solely take out the 14% Senior Notes due 2/1/21.   The unrestricted subsidiaries have approximately $680 million of asset value (110 million shares of CCO stock trading at around $6.00/share) which is comparable to the market value of approximately $680 million for the 14% unsecured notes ($1.712 billion face trading at 39.5% of par).   
     
    While adding slightly to secured debt leverage, this action is consistent with our thesis that the company will continue finding creative ways to enhance its liquidity to make it to the 2019 secured debt maturities.  We had assumed that the company would sell assets to meet the cash shortfall, which essentially has the same net effect as the debt raise.   It also increases the probability that the company will be successful in retiring all of the remaining unsecured debt (the 10% and 14% Senior Notes) prior to the secured debt maturities in 2019, flattening the capital structure and setting up a scenario where any future equity value accrues to the equity sponsors.  This scenario still remains a longshot with $14 billion of secured debt at iHeart and  $5.1 billion of secured debt at CCO, however, it remains a positive dynamic with the equity sponsors committed to working hard to create value for themselves, while in the meantime creating value for the Secured Debt.    
     
    We continue to recommend the purchase of all pre-2019 bond maturities and Secured Debt.  Specifically, the 10% Senior Notes offer a 48% YTM in January 2018 and the 6.875% Senior Notes offer a 20% YTM in June 2018.  Further, at current prices, investors are creating the Secured Debt at 7.3-8.0x iHeart’s LTM EBITDA (reference our August report for specifics as to how this is calculated).   We still believe this is very cheap relative to other radio station comparables given iHeart’s market leading position, advanced digital positioning and the company’s recent announcement of their entrée into the on-demand market for iHeart Radio.  
    Scott Stagg
    Independent Credit Research, Partner
    www.researchdistressed.com
     
    914-318-6651 « collapse
  • 2016-09-28
  • Important Developments on AOI and First Bank of Nigeria
  • 1.      African Development Bank will continue supporting Nigerian banking system http://www.bloomberg.com/news/articles/2016-09-27/african-development-bank-will-support-too-big-to-fail-nigeria
    (Too big to fail).
    This is an important and expected statement consistent with our conclusions related to the analysis of the subordinated notes of the First Bank of Nigeria. The story is interesting and attractive, since it is based on the fundamental alpha thesis completely different from ubiquitous, boring and ridiculous interest rate speculations. In the meantime, Nigerian currency keeps falling (as indicated in our report) , and Paris Club, IMF, World Bank want it to fall even more to facilitate reforms in the economy. For skeptics, refresh your memories on the success of similar situations in Hellenic Telecom in Greece, as well as Ukrainian banks Ukreximbank and Oschad. Unless you are absolutely not allowed to invest in emerging markets, please consider this story.
     
    2.      The recent roadshow of the AOI 1st-lien notes has pushed the price of the 2nd-lien notes down by 4 points. We believe that the refinancing is a positive development for the company and for the 2nd-lien bonds, since it will (a) reduce total cash interest expense by paying off expensive loans with local African and Latin American loans in local currencies (Interest rate in Malawi is 19%, in Nigeria – 14%, etc. versus 9.0% in USD for the 1st-lien bonds); and (b) provide the company with more liquidity to withstand potential working capital challenges. Historically, the 2nd-lien bonds have never stayed in the 70’s for a long time. We think that any fundamental stressed investor should consider accumulating them opportunistically on a market weakness and overreaction associated with the misperception of the new debt issuance.  
     
    Stan Manoukian
    www.researchdistressed.com
    818-614-7797
     
      « collapse
  • 2016-09-27
  • Barminco annual results
  • Barminco reported financial results for the year ended on June 30, 2016 and hosted a conference call. The bonds are 97.0 bid after these results, and we are recommending the current holders to hit this bid. At 10.5% yield,  I am no longer a buyer of this paper, and consequently, I am a seller. The 9.0% bonds have generated juicy return appreciating from 80.0 to 97.0 since the beginning of 2016.
    The company operates in a fairly small business niche of underground mining, predominantly in Australia, where it generates 80%+ of its sales. Within Australia, there are 72 underground mines (has not changed since 2013), of which 40 (37 in 2013) are owner-operated, meaning that they do not outsource mining to third parties. Barminco is the largest player in this niche. In the meantime, it gradually increases percentage of sales outside Australia.  
     
    There are USD $411.5mm of the outstanding bonds (USD $485mm before the company’s repurchases in the open market). LTM EBITDA is ~$104mm, expected 2017 Capex is ~$80mm, while the interest expense is around $45mm. The company expects to increase EBITDA to ~ $120mm in 2017. Management has not communicated with investors about specific plans of how it anticipates to refinance the bonds in June 2018.
    Bottom line, it is likely that the bonds will migrate up further, driven by the global yield hunger. However, we do not encourage investments in the market; instead we suggest attractive risk-adjusted investments in specific companies. At this point, risk-reward profile is no longer interesting to us. 
      « collapse
  • 2016-09-27
  • Alliance One International News
  • Alliance One International has announced two financial transactions and issued an 8-K with the EBITDA forecast for the fiscal year ending on March 31, 2017.
     1.    The Brazilian 2016 crop was impacted by heavy rain fall, resulting in 30% decline in yields for Virginia flue-cured and burley tobaccos, compared to the previous year. Clearly, this phenomena is not limited to AOI, but for all other tobacco growers. As a result, despite projected declines in the volume of tobacco brands mentioned above, we anticipate price increases to offset the revenue weakness associated with the volume drop. In the meantime, the 2017 season in Brazil is expected to be stronger. AOI expects improved sales during the year ending on March 31, 2017 and the range of EBITDA between $170mm and $185mm, compared to $190mm of EBITDA generated during the year ended on March 31, 2016. The company, in our view, is going through the final round of the global tobacco inventory normalization. The last several years have been painful, resulting in cash burn from operations. This burn was offset by improvements in the working capital management during the last quarter ended on June 30, 2016 ( see our most recent research update for more details at our website). Overall, the company is trying to strengthen its liquidity and balance sheet to be able withstand further market volatility. Investors have not lost patience, since the global market of tobacco products preserves the duopoly of Universal and AOI.
     
    2. AOI has announced its intention to issue $275mm of the 1st-lien notes to pay off the $210.3mm L +4.0% U.S. revolver maturing in April 2017 and to reduce amounts outstanding under its foreign credit revolvers. The company’s current capital structure is shown below. Security of the bonds is unclear at this point. However, it is obvious that the bonds will likely have the 2nd-lien on working capital assets for the U.S. – based subsidiaries behind the 1st-lien of the new ABL revolver that the company also has just announced the intention to secure. The new revolver is expected to be maturing in January 2021 and be priced at L+2.0%.  
    If both transactions come through successfully, the company will eliminate its exposure to the uncertainties associated with the interest rate volatility at foreign banks, specifically, the volatility related to currencies and interest rates in Latin America and Africa. AOI is capturing the favorable market momentum and the access to U.S. debt capital markets. We view these transactions favorably. While the timing of operating improvements is challenging to forecast, AOI is currently not burning cash, and we still view the $719.7mm of the 2nd-lien notes as a fulcrum security. At 13.6% YTW, the bonds are attractive, in our view, mostly due to the strategic importance of the company in the industry and the expected improvements in the tobacco inventory glut globally.
     
     
      « collapse
  • 2016-09-26
  • Best ideas in Stressed and Distressed - late September 2016
  • Everybody knows that the high yield market is rich but nobody has started selling yet. And when investors wake up, it will be too late, and all their juicy profits provided by the generous market this year will likely disappear. And neither Trump nor Clinton will help it. We believe in investment discipline, rather than in trading patterns. Statistics works for those who manage not to apply it blindly.
    Distressed names are slightly different, but just slightly. The concentration of non-professional distressed players in credits that will likely shortly file is still unusually high. That will still cause hyper volatility, which is likely going to be a surprise for distressed players.
    We believe that time has arrived to start increasing your hedges. In cases when the capital structure arbitrage is unavailable, there is no alternative except high yield ETFs that have been performing as if the global economy has been experiencing massive resurgence. Returns for most successful ETFs since January have been between 12% and 17%.     
    Our best ideas are:.....
    Call us at +1-818-614-7797 or send an e-mail for possible terms of cooperation at request@researchdistressed.com

    • Full-time global distressed analyst working for you for a fraction of regular cost
    • Tell us what you are interested in, and we will work on this name for you
    • Any portfolio manager can read our research, look at the Excel model, jump on the phone with our analyst, and in 30 minutes he/she will be able to make an investment decision
    • We are 100% independent - no affiliation with any financial institution; our client relationships are confidential
    • Supply of quality sell-side research by large banks is declining - the industry is rapidly migrating towards independent research model
    2010 - 48.1% - driven by performances of Compucredit ( new name Atlanticus), MSX International, Keystone Automotive; Delphi; Brookstone, Blockbuster; Remy International; FDC; Global Power Equipment.
    2011 - 8.2%  - driven by Delphi, Opti Canada long call, NCO Group, Istar, Alion Science & Technology, ATU Group, Compucredit, CEDC, bearish call on Compton Petroleum and long call on Cinram International.
    2012 - 25.7%  - driven by ATU Group, Alion Science, Brookstone, Dex One, Hellenic Telecom, Travelport, Yellow Media, offset by poor return of Cengage Learnings and China Medical Technologies.
    2013 - 28.5% -  driven by Valeo and Yellow Media stocks and Holdco notes of Affinion Group.
    2014 -  18.1% - driven by successes in Russian CDS, ATU, Codere, Alion Science, Exide Technology short but severely offset by poor calls on Midwest Vanadium, Molycorp and Southern Pacific Resources.
    2015 -  4.4% -driven by successes in Avaya, Ukrainian sovereigns, Eximuk, Oschad, but severely offset by poor performance of Molycorp and payday lenders.
    2016 through September 1, 2016 -  28.1%.
    Average annual return since January 2010 - 23.9% « collapse
  • 2016-09-22
  • S&P downgrades FBN Holdings
  • S&P has downgraded First Bank of Nigerial - FBN Holdings pls Term Loan to B-/Negative « collapse
  • 2016-09-22
  • Updated Investment Returns on Recommendations
  • 2010 – 48.1% - driven by performances of Compucredit ( new name Atlanticus), MSX International, Keystone Automotive; Delphi; Brookstone, Blockbuster; Remy International; FDC; Global Power Equipment.
    2011 – 8.2%  - driven by Delphi, Opti Canada long call, NCO Group, Istar, Alion Science & Technology, ATU Group, Compucredit, CEDC, bearish call on Compton Petroleum and long call on Cinram International.
    2012 – 25.7%  - driven by ATU Group, Alion Science, Brookstone, Dex One, Hellenic Telecom, Travelport, Yellow Media, offset by poor return of Cengage Learnings and China Medical Technologies.
    2013 – 28.5% -  driven by Valeo and Yellow Media stocks and Holdco notes of Affinion Group.
    2014 -  18.1% - driven by successes in Russian CDS, ATU, Codere, Alion Science, Exide Technology short but severely offset by poor calls on Midwest Vanadium, Molycorp and Southern Pacific Resources.
    2015 -  4.4% -driven by successes in Avaya, Ukrainian sovereigns, Eximuk, Oschad, but severely offset by poor performance of Molycorp and payday lenders.
    2016 through September 1, 2016 -  28.1%.
     
    Average annual return since January 2010 – 23.9% « collapse
  • 2016-09-21
  • ICR Stressed and Distressed News September 2016
  • Despite the festive mood of equity and high yield traders spurred by the sanguine market sentiment, we encourage professional stressed and distressed investors to be disciplined in their strategies and to stay away of those bonds trading at yields not compensating investors for the risk taken. The usual willingness to believe in fairy tales – this time it will be different – typically ends up in huge redemptions next year and fund closures. Despite the unquestionable at this point superiority of the quality of U.S. economy and the market conditions, compared to the rest of the world, markets are actually fairly fragile, and any unexpected bad news can turn the cheerful sentiment into a massive selloff. The mere fact that credit managers are selling bonds to buy stocks is one the first signs of the forthcoming disaster. The question is only if this selloff will arrive after the elections in the U.S. The fact, however, is that credit investors are selling their credit exposure disappointed in the risk/return to seek more upside in equity markets, which is a heavily troublesome sign – it implies the turn of attention from the conservative fundamentalism to the aggressive volatility-based flirting with the interest rate game. Whenever stressed and distressed credit managers do this, we expect the selloff around the corner.
    That said, please see some set of news important to our covered names.. « collapse
  • 2016-09-20
  • First Bank of Nigeria
  • We initiate research coverage on two issues of subordinated notes of First Bank of Nigeria in the consolidated amount of $750mm.  The issuer is the largest commercial bank in Nigeria.
    Nigeria is the largest country and economy in Africa. It is the OPEC member. We believe that most of investors have seen news of the deteriorating economy fundamentals of this country. Oil is the main economy driver, which has been the main reason of our attention to the name and to the country. We have been following deteriorating credit fundamentals of all countries with economies closely correlated to the price of oil. Currencies, sovereign and corporate credit fundamentals or both have struggled in Saudi Arabia, Russia, Iran and all other countries where oil and gas production is controlled by the government.
     
    We believe that given the direction of the country news vector, the existing holders of the bonds are mostly holding  them because nothing in the near-term should create a liquidity trigger, while on the other hand, everyone realizes that there is no positive macro news on the horizon for the bonds. In addition, the bank has been surrounded by various stories of financing of government-related fraud transactions in oil and gas industry.
     
    We have performed a long and deep analysis of the story. Black box for you is a subject of the serious fundamental analysis for us.
     
     
    Stan Manoukian
    www.researchdistressed.com
    +1-818-614-7797
     
      « collapse
  • 2016-08-23
  • Distressed Review August 2016
  • We have published review of our investment recommendations in 2016. Please click here to see the results of our recommendations.
    Also contact us at
    MANR on Bloomberg; request@researchdistressed.com or +1-818-614-7797 to access the full version iof our review that includes updated recommendations. « collapse
  • 2016-08-22
  • Ace Cash Express and CCFI
  • We have published research updates on securities of both payday lenders. 
    MANR on Bloomberg
    request@researchdistressed.com
    +1-818-614-7797
      « collapse
  • 2016-08-15
  • Algeco Q2 2016 Research Update
  • Algeco Scotsman has reported Q2 2016 results that were generally stronger that expected due to improvements in EMEA.....
    The idea to merge with Modular Space was the major catalyst for prices of the unsecured notes to appreciate during the spring-summer of 2016. Indeed, the price of the 10.75% unsecured bonds has jumped from 27 in April 2016 to 62 in August 2016. The reason for this miraculous transformation was related to the speculation that the proposed merger will deliver $400mm of fresh investable capital to the consolidated company and that Algeco would have a clear path to finally outgrow its over-leveraged balance sheet. Moreover, there was a clear path to invest this $400mm in new business opportunities related to the incursion of Middle-Eastern refugees to Western Europe. The merger with the proposed refinancing of the 2017 maturities seemed to be a reasonably priced hope certificate for the unsecured notes....
    For detailed update and access to our global distressed research, please refer to MANR on Bloomberg.
    Call us at +1-818-614-7797 for more information or send an e-mail at request@researchdistressed.com for terms.
      « collapse
  • 2016-08-11
  • Q2 2016 Hexion Update
  • Sales of the company's epoxy segment have been mainly suffering from the pricing challenge during Q2 2016. The $61mm pricing decline during Q2 2016 included $2mm Forex increase. This is fundamentally different from the Q1 2016 results, when $88mm of pricing decline included $65mm of the negative currency impact. The decline of the pricing is the direct impact of the lower raw materials and the industry overcapacity. Total gross margins have declined to 10.3%, and we had to change our projections for 2016 and 2017, commensurate to the recent developments. Unfortunately, even the forest products segment has been suffering from both the volume and pricing declines.
    Having said this, the company has been continuously buying the 2018 notes in the open market; sold some assets to generate liquidity to help the capital structure remain sustainable. The pool of the 1.5-lien debt has been shrinking, in direct correlation with the looming 2018 maturity and the sponsor's desire to preserve its equity optionality, helped by weak debt covenants and some other issues...
    To read the entire report, please send us an email at 
    request@researchdistressed.com or call us at +1-818-614-7797 « collapse
  • 2016-08-11
  • iHeartMedia Initiation of Research
  • We are initiating coverage on iHeartMedia, Inc.
    iHeartMedia is a diversified media company involved in the radio broadcasting and outdoor media markets, and is the largest radio station owner by a wide margin with 861 radio stations domestically. iHeart has been burdened with over $20 billion of debt since private equity firms Bain Capital Partners and Thomas H. Lee Partners purchased them in 2008 in one of the largest and last leveraged buyouts prior to the financial crisis.
    While the name is widely known and covered in the high yield and distressed universes, we believe that we have provided a fresh, comprehensive and unique perspective that will be of great value to investors. We welcome new and existing clients to contact us for further information.
    Please call me personally or Scott Stagg – the analyst on the name –directly with all questions.
    sstagg@researchdistressed.com


    Stan Manoukian
    MANR on Bloomberg
    request@researchdistressed.com
    +1-818-614-7797 « collapse
  • 2016-08-11
  • SGMS Q2 2016
  • SGMS has recently reported strong Q2 2016 results. We are holding our general recommendation to long the 10.0% notes. In addition, we continue to recommend a less liquid long-short trade between the subordinated notes and the equity – admittedly on a smaller scale, due to limited liquidity. Overall, you should consider being long in this trade during the quarter - the company has repurchased an aggregate amount of $65.9mm of the subordinated notes for $39.9mm in cash. Liquidity to address the 2018 $250mm maturity is sufficient, and at this point the story is becoming generally less appealing. We would hold the 10.0% notes for another 3-4 points and consider taking profits thereafter. At this point, it is unclear if SGMS will ever be able to become an equity story by outgrowing its capital structure. SGMS with the help of equity traders has been trying to position itself as a technology stock trading in a different universe from traditional valuation metrics. SGMS has been helped by weak covenants, and in the mid-90s, I will not be a holder of the 10% notes – not enough compensation for risk taken. The beauty of SGMS story is related to its low correlation with the economy conditions – it is mainly related to some specific drivers of the gaming industry. However, all bonds of SGMS are highly sensitive to the market volatility, specifically to the volatility of the high yield market. ETFs have taken the volatility of the high yield market to a completely different level, even further from the burden of traditional fundamental investment metrics. Be careful with any unhedged exposure to the subordinated notes – you will be hurt immediately when the market turns around – despite some recent meaningful operating progress, the company's capital structure is still severely over-levered, and the recent net debt reduction of $66.7mm through the first 6 months of 2016 represent a tiny drop compared to the overall $7.9bn net debt ocean.

    Debt needs to be reduced significantly faster, and we have low confidence that this challenging mission is actually achievable at all.
    Having said this, Q2 2016 sales grew by 5.5% yoy, or by $37.7mm. The problem is that $31.8mm of this sales increase accounted for increase in sales of the interactive segment – still a small portion of the overall business generating only $60.3mm of the LTM EBITDA. All other businesses have been just stable – without delivering any major breakthroughs. As such, all efforts of reputable bankers trying to position SGMS as a company with the significantly above-average sales increase potential should be treated highly skeptically. We strongly recommend that seekers of fairy tale stories refer to their long list available at 
    instead of aggressively getting involved in the lower part of SGMS balance sheet. SGMS is a typical example of the excellent company with the egregiously over-leveraged capital structure.
    MANR on Bloomberg
    request@researchdistressed.com
    for full research or call us at +1-818-614-7797
    « collapse
  • 2016-08-09
  • Calumet Q2 2016
  • We have published research update the capital structure of Calumet Specialty Products. We have made some changes to our initial conclusions fueled by several conversations with the company's management. We believe that CLMT is an intriguing story that should be considered atypical for distressed market.
    As projected, Q2 2016 has delivered better operating performance for Calumet, compared to devastating Q4 2015 and Q1 2016. Overall, the macro fundamentals of the industry remain challenging, with crack spreads consistently lower, compared to those of 2015. However, the company has been able to partially offset weak crack spreads by increased production volumes and improved cost structure. Sales volumes have increased yoy, although sales price per barrel has not...
    Sales volume for specialty products has reached historically high levels, increasing 2.8% yoy, while average price per barrel of specialty production has declined by 12.8% yoy. The company has announced price increases in the segment effective Q3 2016. The right way to judge prices per barrel is to look at those of the last 2 quarters, rather than yoy...
    The pricing mechanism includes a typical 30-45 days lag related to oil prices. Prices per barrel of essentially all products have increased in Q2 2016, compared to previous two quarters.
    Fuel segment daily volumes have increased by 19.1% yoy, followed by average price per barrel decline of 27.3% yoy. During Q2 2016, 2:1:1 Gulf Coast crack spread was substantially lower, compared to Q2 2015. As a result, CLMT gross margins per barrel were lower, compared to the same period of 2015. Looking at the graph below, investors can see that gross margins in the segment are moving together with crack spreads. However, the comp. chart at the next page also shows that the performance of the fuel segment remains inferior to the one of other companies in the industry segment. More detailed information on comparable companies is presented at the end of this document.


    MANR on Bloomberg
    www.researchdistressed.com
    +1-818-614-7797
    request@researchdistressed.com
    « collapse
  • 2016-07-29
  • AOI Q2 2016 Research Update
  • We continue believe that the worst is likely over for AOI – and therefore, we believe that the bonds have another 6-7 points of the short-term upside before investors should consider cashing out. Despite the recent poor credit metrics, cash flow generation is expected to improve during the next several quarters, fueled by the beginning of the normalization of the industry oversupply of tobacco and by the fact that the company will no longer need to pay extra professional fees related to the closure of its Kenyan subsidiary. We have reasonably strong confidence that AOI will actually start repurchasing $30mm -$35mm of the face value of its bonds in the opening market shortly. This development will likely push the bonds higher within the next couple of quarters.
    Despite the fact that the global cigarette consumption declined last year by 2% and is likely to decline in 2016 as well, China, consuming over 40% of the world tobacco, is also adjusting its domestic crop size to take into account this decline. On the other hand, the rest of the world growing higher end tobacco brands unavailable in China has been enjoying growing demand from China, fueled by the switch to higher tobacco quality in China.
    Overall, the AOI bonds are attractive and need to be acquired by both stressed and distressed investors, in our view. The bonds have been up by 15 points since the beginning of the year.
    Please contact us for subscription terms to access full research document.
    MANR on Bloomberg
    request@researchdistressed.com
    +1-818-614-7797
  • 2016-08-01
  • Affinion and Bank of America
  • Last Friday, the arbitration between Bank of America and Affinion was resolved resulting in the total claim of only $4.3mm. The arbitrator overseeing the foregoing arbitration proceeding denied Trilegiant's (subsidiary of the company) claims, and denied Bank of America's claims for indemnification related to the consent orders entered into with the OCC and CFPB, but awarded monetary damages to Bank of America and FIA Card Services in the amount of $4.3 million on other claims (unrelated to their indemnification claims) asserted by Bank of America in the arbitration proceeding. The parties have until August 12, 2016 to give notice of their intent to seek reconsideration of the award by the arbitrator. If either party provides such notice, the award will not be final until any motions for reconsideration have been resolved by the arbitrator.
    This result should be a solid catalyst for the capital structure pricing to elevate in the near-term, in our view. For more details, please see our recent research report ("Topology of Affinion”) published last Friday.
    MANR on Bloomberg
    request@researchdistressed.com
    +1-818-614-7797 « collapse
  • 2016-07-29
  • The topology of Affinion
  • Affinion is the rare case when investors actually want the company to restructure - they want to fight for the fulcrum security status, since they have a limited downside at the current market price and an unusually high for this market upside. Please read carefully the entire report available at the website for detailed explanation of why we actually like the business and the capital structure. It is all about topology...
    MANR on Bloomberg
    request@researchdistressed.com
    +1-818-614-7797 « collapse
  • 2016-07-21
  • Calumet Specialty Products Research Initiation
  • We have initiated research coverage of Calumet Specialty Products. It is an unusually interesting story of the poor refineries' assets utilization and weak management ability to integrate close to $1.9bn of acquired and added assets through the last 8 years.
    he story is generally uncorrelated with the general condition of capital markets, tight spreads, the legend of strong capital markets during election years and other rubbish considerations. A typical distressed investor will be surprised to read our conclusion. However, the truth is that close to 50% of investors have stopped reading research reports and financial documents diligently. We encourage you to take advantage of this fact and to avoid dropping into this category of investors. Read this research and call us with questions.
    MANR on Bloomberg
    request@researchdistressed.com
    +1-818-614-7797

    « collapse
  • 2016-08-12
  • Avaya Q2 2016 results
  • Continuously weakening results are reducing chances of the company's sponsors to preserve any equity optionality in the company without either a meaningful equity infusion or a proof that certain assets can be monetized at an accretive to debt holders EBITDA multiples. On an LTM basis, Avaya has generated ~$640mm of EBITDA and spent ~$110m of Capex. That values the company's net debt at ~8.3x multiple of EBITDA minus Capex, which is essentially a representation of the company's cash flow to equity. This multiple is cheap and along with 25%+ yield to the next trigger event - October 2017 - continues to compensate holders of the 1st-lien debt for the uncertainties associated with the restructuring. We suspect that the 2nd-lien notes will likely represent a trading token in the restructuring negotiations, since the level of cross-ownership between the 1st-lien and the 2nd-lien debt is substantial. We continue to recommend the 1st-lien as a Buy. We change the recommendation for the 2nd-lien to Sell. We suspect the 1st-lien debt to be partially equitized, while the 2nd-lien debt will get some warrants' optionality as a result of restructuring. The future of equity sponsors at this point is uncertain to us.

    The bonds have delivered 10 points through the last 3 months to those willing to follow or most recent Avaya call.

    Full research is available at our websites.


    MANR on Bloomberg

    request@researchdistressed.com
    +1-818-614-7797 « collapse
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