Music Disruption (Short the Rock Star)

What do Paul McCartney, U2, the Rolling Stones and Eric Clapton Have in Common?

Music Disruption (Short the Rock Star). Many of you probably went to see Paul McCartney this week (jealous). The guy is 8394 years old and still touring. Why? Probably because there's no money in the music business other than touring. That might also explain why U2 - a classic Hall of Fame band that literally has to GIVE its album away - keeps touring (and ANOTHER tour is on the horizon). Rolling Stones? Check. Eric Clapton? Check. Meanwhile, Spotify is looking to circumvent an IPO, Tidal is looking for a buyer (while Kanye and Jay-Z sue each other), and Soundcloud needed a bailout. All of which is to say that Liam Gallagher is 100% right here - except the streamers are also making "nish" (amusing video). Which begs the question: is anyone winning in music today? Taylor Swift?
 

Fast Forward (Music, Music, Music)

More on Soundcloud: apparently the company only has runway through Q4 - though Chance the Rapper appears to havean opposing view. Did he put money in the company? May we now comfortably call him a distressed investor? WEST. COAST. Meanwhile, the fine folks at Reuters this week reported what many have known for a long time: Guitar Center Inc. is collapsing under the weight of its debt and may need to restructure its balance sheet. The Ares Management LP owned company has $1.3b of debt and consumers are increasingly purchasing their musical instruments on line. Tellingly, Fender Music released it's online music instruction platform this week in an effort to prevent aspiring guitar players from giving up so easily (and not spending money later on).

Jawbone Won't Be the First/Last in Busted Tech

Busted Tech. We're not in the business of saying "told you so," but, well...yeah, we told you so. We noted last year that Jawbone was likely effed. Sadly, we were right. Hardware is tough stuff. And so is the music streaming business: after taking on $70mm in venture debt back in March, Soundcloud is answering to its investor overlords - including Ares Capital - and slashing costs. It'll be toast soon. 

The Apple Effect - $P, $AAPL, $FOSL

As the markets wait to see what happens with Spotify, Pandora ($P) is now looking to explore strategic alternatives (and we're listening to"This House is on Fire" by AC/DC as we listen to this). Is this also Amazon Effect? The Apple Effect? After Rdio filed for bankruptcy not long ago and Soundcloud has taken on more debt, it's clear that the music space is still in flux with the big players crowding out the smaller guys. PS. Since we're so sick of hearing about the "Amazon Effect," we'll double down on the "Apple Effect": Fossil ($FOSL) watches appear to be feeling it.

News for the Week of 3/5/17

• Coal. Post-reorg players like Arch Coal are now trying to take advantage ofgovernment subsidy (which reeks of buyside "value-realization"): query what this means for alternative energy players who already receive such subsidies and are rumored to be under siege by the Trump administration...?
• Environment. We wrote a few months ago about Oklahoma and the apparent correlation between wastewater disposal and an uptick in seismic activity. The seismic-hazard warning for Oklahoma in 2017 is "still significantly elevated."
• Golf & Sexy Time. There's zero correlation: we just thought it was a funny combination. That said, tough times for TaylorMade (owned by Adidas and apparently being shopped by Guggenheim Securities). Meanwhile, Agent Provocateur sold while in UK "administration" to an affiliate of Sports Direct (which also recently surfaced as the stalking horse bidder in Eastern Outfitters). AlixPartners was the administrator.
• Legal Profession. Short big firm junior lawyers.
• Power. This is an odd report on Westinghouse. 
• Retail. We're getting a little sick of sounding like a broken record but Best Buy and Target reported numbers this past week and then saw massive stock drops due to weak guidance. And Barnes & Noble got DECIMATED after reporting numbers. The good news is that the coloring fad appears to be over. Meanwhile, the tech barrage shows no signs of abating: GameStop came under pressure this week after Microsoft announced its subscription gaming service. Is GameStop an immediate near term restructuring candidate? No, but part of the value we provide is highlighting for you where future pain points are hiding and without sounding TOO dramatic, this could be the beginning of the end.
• Retail II. We're nerds and so we found this analysis of when to close retail stores interesting. And we're curious to know if any of our advisory readers agree with this...LET US KNOW. Speaking of closing retail stores, Abercrombie will close 60 stores, Crocs will close 160 stores, and looming bankruptcy candidate hhgregg is closing 88 stores (which briefly sent Best Buy's stock north back up, despite earnings). Meanwhile, Neiman Marcus hired Lazard for balance sheet help and Radio Shack 2.0 (aka General Wireless Operations) is rumored to be Radio Shack chapter 22.0.  
• Tech. Rough week for Uber. Choice quote: "Before too long, Uber's cash will run out. And if Uber hasn't built a viable self-driving car by then, the results won't be pretty."
• Telecom. Wow, Intelsat, bailed out? 

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• Fast Forward: Seadrill Ltd. noted the possibility of a bankruptcy filing, sending the stock into a tizzy. Still, John Fredriksen quickly highlighted his history of no default. Related, Pacific Drilling also noted in its earnings call that Chapter 11 is possible. 
• Rewind I: A lot of folks have been sleeping on tech bankruptcies, but NJOY was a hardware bankruptcy from last year that now has a resolution: Mudrick Capital seeks to turn the company around, operating it like a PE-owned company rather than a VC-funded company. Speaking of which, Cirque du Soleil got a workover by TPG Capital (and AlixPartners) and now there's this YouTube promotional video to show for it. Speaking of purchases out of bankruptcy, it seems a Canadian retail player made the first move on Wet Seal only to be outflanked by Gordon Brothers.
• Rewind II: Soundcloud looks increasingly like it will be in the busted tech bankruptcy bucket. IP sale?
• Chart of the Week: 

• Tweet of the Week: This is great because it doubles as a second chart of the week: we're so creative. Anyway, we hate to say we told you so but, effectively,we told you so: we'd love to know why nearly 200 companies felt the need to reference AI in their earnings reports...

News for the Week of 01/15/17

• Canada. Predicting lots of doom and gloom.
• Covenants. Some developments in the capital markets thanks to recent activity with makewhole provisions - including "the end of covenants?". 
• 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, Soundcloud bankruptcy 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 Gal received 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.
• Rewind III: Jawbone continues to struggle as the wearables space continues to consolidate.
• Chart of the Week: 

• Tweet of the Week: