Brand/IP Value. Hilco Streambank's David Peress is quoted hereindiscussing loans structured upon brands.
CDS. Given the comments about CDS by Jason Mudrick (see above) and the events emanating out of iHeartCommunications Inc., credit default swaps are coming back into focus. Here (part 1) and here (part 2), Kramer Levin Naftalis & Frankel LLP's Stephen Zide and colleagues provide a solid two-part summary of the CDS determination made in the iHeart matter.
Feasibility. In an attempt to overtake Jones Day as the winner of "Most Prolific Marketing" content supplier, Kramer Levin Naftalis & Frankel LLP's Stephen Zide and David Braun provide a summary of the Paragon Offshore matter which, from our perspective, has been wildly under-covered - other than by us.
Busted Tech. This is becoming a regular topic. After LivingSocial (remember LivingSocial?) and its $6b valuation sold for bupkis, serious doubts now surround its acquirer, the publicly-traded Groupon.
Lit. Google released the results of a survey showing what is currently considered "lit" (read: "cool") among the teen and millennial demographics. A few observations: 1) Ivanka Trump's brand was conspicuously missing and so clearly there is a high probability of this being "fake news" (yes, we're joking); 2) Netflix and YouTube are the two highest rated brands in both demographics which certainly raises questions about conventional media companies; 3) Tesla is considered the coolest auto company despite not necessarily having the highest brand awareness (nevertheless a positive leading indicator for electric vehicles assuming a) these idiots will drive, b) they'll have money to buy a Tesla, and c) Tesla can manufacture enough cars to meet the supposed demand); 4) Still, car brands across the board are cooler to millennials than teens which raises questions - in the face of autonomous cars - about what car ownership may look like in the next decade; and 5) there is little to no consumer products representation in the "cool" zone outside of footwear and electronics (gaming, Apple, GoPro) which speaks volumes about why we're seeing as much pain in the retail space as we have been. Notably, Uniqlo, Zara and H&M - favorite excuses for why conventional retail is, gulp, out of fashion, are all middling in the 6.5 area. Footnote: Quicksilver looks to have subpar awareness and "lit" ratings which begs the question: how long before Oaktree Capital Management flips it...?
Post-Reorg Equity. Apparently filing for bankruptcy hasn't turned out too badly for certain oil and gas executives who find that they're realizing a lot of upside value through the reorganized equity of their companies (WSJ firewall). Elsewhere, upon release back into the market, Peabody Energy's equity initially traded up 3.5% only to flip-flop and go negative by over 12% by market close on Tuesday. #MAGA baby! Coal is, uh...back??
Professional Fees. The American Lawyer seems to have it out for bankruptcy professionals these days as it seems freakishly obsessed with professional fees: in this instance, Weil's fees representing Westinghouse.
Restaurants. "There's been an oversupply for 10 years in our industry," says the Darden Restaurants CEO Gene Lene upon announcing the acquisition of Cheddar's Scratch Kitchen. Still, the fast casual space is showing signs of strength: most notably, Panera Bread's stock popped upon acquisition news earlier this week.
Retail. We really tried to stay away from retail this week because, like you, we're just tired of the story. But, here (video), Jason Mudrick of Mudrick Capital Management provides some interesting thoughts on how to trade the space. This isn't new ground, necessarily, but for the less-initiated, his comments on the difficulty of shorting retail debt may be educational. Note, however, that his views are disputed by analysts at Citi who claim the CMBX trade is over-crowded and that CDS is, in fact, the way to go. Either way, his overall thesis seems a bit inconsistent to us. On one hand, he indicates that the "Amazon effect" (lazy) is leading to a secular decline in retail, generally, but on the other hand he leaves us with the impression that only the lower tier malls will be affected. If the "Amazon effect" is what it is and our parents will die and our kids only shop online (paraphrasing here), why isn't he mentioning the A tier malls as well? This seems to be a blind spot within the restructuring space generally. As we've noted, General Growth Properties and Simon Properties are appearing in the vast majority of these retail cases - even the little ones that nobody appears to have heard of prior to the last few months. Now, granted, there's something to be said for the "replacement value" argument: but are these mall operators really filling vacancies fast enough to maintain revenue and, if so, who is filling the void? Warby Parker currently has 47 "retail locations" (a term we use loosely because this includes small kiosks like the one in the Los Angeles Standard Hotel - basically a cart). Bonobos has 31 locations. Cuyana has three locations (one a pop-up). Birchbox has one location. And most of these are in major cities so not even necessarily in malls. And, directing you back to "Lit" above: we don't see much mall-based retail on that survey - "A" mall-based retail included. So then what? Chiropractors, dentists and clinics? Seems thin. All of this said, the WSJ reported that "the national retail-property market is holding steady," using flat vacancy rates as its measure across shopping centers, regional malls and neighborhood and open-air shopping centers. And mall operators, naturally, are talking a big game. Curious. (*Note: if anyone is interested, we do have a 50+ page hedge fund presentation outlining the CMBX thesis. Let us know).
Retail II. DAMN IT, retail, we just can't quit you. More from this past week: 1) Citi cut both L Brands and Urban Outfitters from buy to neutral, 2) Ralph Laurenannounced the closure of its Fifth Avenue flagship store (with additional closures to come), 3) Bebe Stores announced the closure of its 34th Street store (great quotes within) and 4) the discount space saw some consolidation as Dollar General scooped up Charlotte-based Dollar Express, a Sycamore Partners company. We can therefore add this to our #MAGA! sub-category given the 2700 jobs slated to be cut. SO. MANY. JOBS. LIKE. REMARKABLE.
Second Order Effects....of advancing car tech. We previously covered Benedict Evans' presentation on the rise of mobile and made some abstract statements relating to second order effects of mobile phones and electric/autonomous cars then. Here, Evans goes a bit further in what makes for a long but interesting read about industries that ought to brace for change (thanks to our friends at Hilco for forwarding to us). TL;DR: car suppliers, machine tooling, car repair, gas stations, convenience store retailers (and, by extension, snack & tobacco providers), building power generation providers, safety equipment manufacturers (i.e., airbags - this is thin, we think, and airbags will probably still be in cars for the foreseeable future), parking operators, truck stops, etc. Of course, this all presumes mass adoption in the time frame the herd generally suggests: 5-10 years. There are notable naysayers.
Sungevity, a Piece of the Solar Story & Real World Ramifications. Yikes. This is a STINGING synopsis of the downfall of Sungevity, a solar company that recently filed for bankruptcy (our summary and case roster is here). To be fair, the writer seems to have some sort of ax to grind with the company but the comments taken from Glassdoor are, in many respects, heart-breaking and serve as a real-world reminder that while they may line your pockets and juice your bonuses, these cases hurt people. Remember that.
Venezuela. With a state oil company debt payment of $2b looming on the horizon, investors are speculating about the likelihood of default.
Fast Forward: Someone just please put Seadrill Ltd.out of its misery. Per Bloomberg, rue21 is due any day now. Sequa Corp....finally. And metals/mining looks like its back on the map with the announcement thatA&M Castle & Co. will be filing a prepackaged bankruptcy shortly.
Rewind I: We've been spending a good amount of time highlighting busted tech lately and so we'll add another (per Fortune): Yik Yak. For the uninitiated, Yik Yak was a high-flying anonymous social media app that garnered $73.5mm of VC from Sequoia Capital at a valuation over $400mm. Now it is effectively selling for parts (to Square?) in a manner that likely won't even cover the VC. Ouch. I suppose we can call this the "Snapchat Effect."
Rewind II: Ashley Stewart, a plus-size retailer that was in bankruptcy in 2014 opened its first new store last weekend, a counter-narrative to the doom-and-gloom otherwise hanging over retail.
Rewind III: We've covered Spotify at length and this week's news of a potential direct listing rather than an IPO is interesting. And goes to show what we've been saying: that convertible venture debt it took on is getting expensive.
European Retail. It seems the bloody retail phenomenon isn't exclusive to US retailers. Jack Wolfskin, a German producer of outdoor wear and equipment, is in the midst of a restructuring of its $365mm of debt. The Blackstone Group is the company's sponsor and PJT Partners is shopping the company. Meanwhile, Jaeger, a UK-based clothier is also on the block, with an administration within the bounds of possibility. AlixPartners is advising the company.
High Yield. Valeant Pharmaceuticals, Foresight Energy and Community Health Systems all issued new high yield debt this past week and what screams of a massive yield grab. No, we're not joking: this actually happened. And demand was so strong that upsizing took place. We repeat: "demand was so strong that upsizing took place."
Oil & Gas Fallout. Like we said last week, we're crushing Ramen so it's hard to feel sorry for a man pulling in $2mm and a $50k/month consulting fee, but its interesting to see some of the effects of the energy downturn - here, relating to Energy XXI's former CEO.
Private Equity History Lesson. A review of J.Crew's take-private transaction and private equity's affinity for dividends, long-term viability be-damned.
Television. Netflix is going after unscripted reality TV. Choice quote: "The competition should be scared out of their minds. These guys are monsters — they're coming in to play and play hard."
Rewind I: Five weeks ago we reported the following: "The Finish Line Inc. announced its sale of Jack Rabbit Sports this week (66 locations) for undisclosed terms. "Undisclosed terms" = GU gels and a jock-strap." Apparently, we were too generous with our characterization of the financial consideration. Something tells us this won't stop Peter J. Soloman from dutifully and opportunistically noting the tombstone on its pitch materials for the next big retail mandate. See, also, this.
Rewind II: Looks like Avaya Inc. has a potential buyer in publicly-traded Extreme Networks Inc. for its networking business (for $100mm).
Rewind III: Store closures. Add Staples to the list (70 locations) and Signet Jewelers (165 stores). And here is one report on the failure of BCBG.
Fees. It was only a matter of time before there was a new chapter in the always inevitable vilification of restructuring professionals due to fees. Instead of a front page story about Lehman or TXU in the WSJ, here the Houston Chronicle highlights oil and gas cases.
Fund Performance. Bloomberg does IR work for Brigade Capital Management, highlighting the asset management company's purported big '16. And for Mudrick Capital, noting the fund's turnaround after a period of high profile poor performance.
Let's Get Technical. For you geeks who love worrying about CDS, high yield bonds and liquidity, this report is for you.
Municipal Trouble: we've talked about Dallas in the past and now Providenceis in the crosshairs.
North Dakota: In a shocking development, the state's forecasts did not account for the upheaval in the energy space: just a mere billion short.
Radio. Pros focused on radio-based media situations ought to take note of what is happening in Norway, which is now the first country to completely switch off its FM radio network and convert entirely to digital. Meanwhile, in the streaming music space, Soundcloudbankruptcy rumors continue to increase (we called it).
Sears. We're tempted to run a pool to gauge when this sucker FINALLY files for bankruptcy but like the villain in Die Hard, Lampert will probably find a way to keep the thing coming back.
Rewind I: Garden Fresh Restaurant has sold to Cerberus Capital Management in bankruptcy. Sun Capital's pain is Cerberus' gain. Speaking of Sun Capital, it seems they made out okay with their Limited investment thanks to distributions and dividends. To summarize, they made 1.8x their initial $50mm investment. And 4000 people are losing jobs.
Rewind II: Gilden Activewear Inc. will acquire American Apparel for $88mm, a premium to the original stalking horse bid. Meanwhile, Nasty Galreceived approval to sell its brand and customer information for $20mm. Wet Seal, meanwhile, looks headed towards a Chapter 22 at best and a liquidation at worst - not long after Versa Capital bought it out of bankruptcy for $7.5mm.
