Credit Default Swaps (Short Windstream’s Management, Puffery & Stupid F*cking Ideas)

Here is a late-to-the-party rant by William D. Cohan in the New York Times about the deleterious effect of credit default swaps and how they caused Windstream Holdings to file for bankruptcy. Here’s Cohan’s prescription to cure CDS ails:

What can be done about these perverse incentives? First, the Securities and Exchange Commission should immediately require greater disclosure of credit-default swap positions held by creditors. It’s the only way for a company, its investors and its employees to have a transparent understanding of a creditor’s motivations.

Ok, sure. What form would this disclosure take? How often would it have to be made? To whom should it be made? Is there a distinction to be made between CDS to hedge a debt position or naked CDS? So many questions.

He continues:

Once those positions are disclosed, the S.E.C. should help companies protect themselves from hostile creditors. The agency could, for example, allow companies to revise the terms of their bond agreements so that creditors with credit-default swaps don’t have the same voting rights as creditors who want a company to succeed. The definition of “failure to pay” and other conditions that might set off a default could also be revised to make it harder for a hedge fund to push a company into technical default. Judges can also play an important role, by taking the creditors’ motivations into account as more of these cases inevitably wind up in the courts.

What. The. F*ck.

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Minimalistic Consumption by Inheritance

Much has been made about the death of retail and the "Amazon Effect." We mention it quite a bit in our awesome kick-a$$ weekly PETITION newsletters (which you can subscribe to here). But we are also on record as calling the Amazon narrative lazy. After all, there's a reason why resale apps are among the highest downloaded apps in the Itunes app store. We've noted this before: millennials have no problem buying, reselling, buying, and reselling. I mean, sh*t, we're now seeing commercials for OfferUp on television. We've noted the rise of Poshmark and other apps here and here. Perhaps there's more here than meets the eye.

Baby boomers are retiring in droves now and, along with retirement (and creaky knees), comes downsizing. Many are moving into retirement communities and ditching the two-story suburbian house they filled with decades worth of nonsense. As pointed out recently by the New York Times, millennials don't want a lot of their parents' hand-me-downs. So a lot of it is going to Goodwill. 

We expect this trend will continue for the short-term. That said, 90s clothing is back again and so it's only a matter of time before 60s and 70s vintage returns too. When that happens, those dumbass kids will regret turning away their parent's wares. 

Like #Tech, Corporate Restructuring Has a Gender Imbalance

Unless you've been hiding under a rock, you've probably noticed the controversy that embroiled Silicon Valley over the July 4th weekend. In a nutshell, some super brave and bada$$ women came forward and accused a variety of high-powered men of sexual harassment and improper behavior. First, The Information reported (firewall) a story backed by the accounts of six women recounting the behavior of Justin Caldbeck of Binary Capital. He soon stepped down (as did his two partners, thus thwarting the close of BC's second fund). Then The New York Times published a piece implicating Chris Sacca (of Shark Tank fame) and Dave McClure of the venture capital firm, 500 Startups. The former had already given up on investing (and Shark Tank); the latter first stepped down as CEO of the firm, then, in a matter of days, stepped down as General Partner as well. Silicon Valley's gender imbalance has been in the spotlight for some time now. Now we're learning more and more why that imbalance exists in the first place. 

Before we get ahead of ourselves, we'll be upfront here: what we're about to say is in no way meant to imply that sexual harassment and inappropriate behavior runs rampant in the restructuring community. But, let's be honest: there is a wild gender imbalance in firm partnership ranks, conference room negotiations, and bankruptcy courts. The industry's most lucrative and prolific restructuring law firm has exactly one woman partner. One of the industry's top restructuring advisory IBs has exactly zero women partners and, yet, that didn't stop the leader of that group from being honored by Her Justice, an organization that provides legal services to NYC women in need. And those are just two examples. Suffice it to say, there are many.

Now there are exceptions to the general rule: AlixPartners LLC, for one, and Greenberg Traurig LLP, for another (see below), in that they are led (or co-led as the case may be) by women. Weil Gotshal & Manges LLP, as another example, includes a number of women partners on its roster. But there should be more. Industry-wide. And charity honorees should be the women who have risen through the ranks - despite the odds - AND cultivated other women to follow in their footsteps. Overall, the industry can do much much better.

Want to tell us we're morons? Or praise us? Cool, either way: email us.