Masters of the Universe (Long Certain Investment Bankers)

in

Houlihan Lokey Delivered "Closed Transactions"

Houlihan Lokey Inc.($HLI) reported numbers this past week and knocked it out of the park showing solid revenue and net income growth. In its Financial Restructuring segment, revenue grew 11% to $33mm in Q2 '17 compared to Q2 '16, led by a +2 increase in "closed transactions." Segment profit, however, was down $6mm. Wait, what? What does that mean? "Segment profitability decreased as a result of an increase in employee compensation and benefits expenses as a percentage of revenues...." In summary, homeboys got PAID. Drinks on them this bonus season. 

Chart: Masters of the Universe 2.0 (Evercore/Moelis/Houlihan)

in

Evercore Partners & Moelis & Co. Show Increased Advisory Revenue

Like Houlihan Lokey, Moelis & Company Inc. ($MC) also reported earnings this week and revenues were up 13% in Q3 '17 relative to Q3 '16. Unfortunately, the bank doesn't break out restructuring revenue but the company noted that it expects restructuring activity to be"flattish." Evercore Partners ($EVR) also reported record revenue and a strong earnings rise; it didn't parse out restructuring revenue. Advisory fees, generally, however, seem on the rise. Read: it's a good time to be banker. That is, unless you're a junior banker and the group is led by a 45 year-old with no plans to retire for another 35 years. Or you work at Rothschild & Co., and, if rumors are to be believed, the restructuring group is on the verge of a massive splintering. You heard it here first. 

Source: Thomson Reuters, Moelis & Co. 

Source: Thomson Reuters, Moelis & Co. 

Interesting Restructuring News

in
  • Busted Tech. Ok, not yet. But soon. Faraday Future has cancelled its plans to build a Vallejo California assembly factory - shortly after scaling back its original Nevada facility. This Techcrunch piece says that "it's unclear where the future will lead for Faraday." Seems pretty clear to us that it will lead to bankruptcy court. And, quietly, a number of (once) high-flying startups are laying people off including, notably, Postmates and Zozi ($60mm VC - Richard Branson and others). Finally, Munchery, often hailed as a top food-delivery startup, required a recap this week to survive.
  • Grocery & Sun Capital Partners. We SWEAR we are not picking on SCP here but c'mon already: now it looks like Marsh Supermarkets is in trouble as the company falls behind on rent and quietly - well, not so quietly anymore - shuts locations. So, let's recap: in the past 6 months, SCP has seen the following portfolio companies file for bankruptcy: Garden Fresh Restaurant Intermediate Holdings LLC, Limited Stores Company LLC, Gordman Stores Inc. Maybe this will be the next?
  • High Yield. Remember a few years ago when Chobani was distressed? Now you can get in on a new offering at a premium to par, it seems. Semi-related, the bidding to lend to Westinghouse in bankruptcy was reportedly pretty intense, with Apollo Investment Corporation duking it out with Goldman Sachs, Highbridge Capital, and Silver Point Finance for the privilege to finance the nuclear power company while it figures out how to restructure its business and address two incomplete installations in Georgia in South Carolina. Yield, baby, yield. 
  • Oil&Gas. That was fast. Like super fast. Seems the new owners of Samson Resources II, LLC don't share a very "long" view of the oil and gas space - despite "having discharged approximately $4 billion of debt and nearly $300 million of annual interest expense from Samson Resources Corporation," aka the previously bankrupt entity that filed in mid-2015. And distressed investors wonder where the term "vulture" comes from. PJT Partners LP was the previous banker for the company but with the Board being what it is, there's no surprise Houlihan Lokey has a piece of the action.
  • Retail. Finish Line added itself to the long line of retailers that reported dogsh*t numbers with earnings down, same store sales down, blah blah blah. Right, and approximately 40 store closures. Naturally. Also, David's Bridal was downgraded this week. The CD&R LLC owned retailer has a $520mm term loan due in 2019 and if millennials continue to flick off conventional marriage, there's no way they'll be able to sell enough gaudy wedding dresses to manage the interest expense. And, uh oh, now there appears to be a glaring hole in the "fast fashion" narrative as H&M missed expectations with declining net profit.
  • Rewind I: 3-D Printing. Not to be a broken record about this, but it is totally real. Last week we noted Adidas' plans for it and this week Under Armour followed suit. The implications for those in the supply chain can't be underestimated.
  • Rewind II: Glass Half Full. Looks like Gordmans Stores won't be a complete liquidation after all: Stage Stores stepped up and, as part of a joint venture with Tiger Capital Group and Great American Group, will acquire roughly 50 stores with an option for a handful of others. The remainder will be liquidated but this presumably means that, for now, a couple of dozen will continue to operate. At least until the inevitable Chapter 22 that occurs after next holiday season. Kidding! (Or are we?)
  • Chart of the Week: 

What the Pros Say (Week of 01/08/17)

in
  • Death Traps. Katharina Earle of Cole Schotz PC discusses the risks of proposing death traps in a plan.
  • Energy. The US Energy Information Administration has released its annual energy outlook with forecasts through 2050.
  • Lease Rejections. Kenneth Rosen of Lowenstein Sandler LLP articulates that BC 365(d)(4) is causing retail liquidations.
  • Makewhole. Gregory Horowitz of Kramer Levin reviews the EFIH decision.
  • Privacy. Shmuel Vasser of Dechert LLP discusses internet privacy issues in the context of international bankruptcies.
  • Professional Fees. Michael Cook of Schulte Roth & Zabel summarizes the recent In re Relativity Fashion LLC case relating to objections to investment banking transaction fees. In this instance, attempts to revisit 328-approved fees failed. For some inexplicable reason, Cook doesn't indicate whose applications were at risk - to the point of blatantly avoiding it even though the court makes no attempt to hide it. To spare you the suspense, it was Houlihan Lokey and PJT Partners LP that were attacked. 
  • Takata. Brendan Best of Varnum LLP writes about the implications of a Takata bankruptcy for trade creditors.