Worries About New York City Grow

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Goldman Sachs ($GS) predicts that the proposed new tax law will spark some David Tepper-like rich flight out of New York and Connecticut. Choice quote, “These changes could create additional fiscal challenges for the high-tax areas, some of which already face structural pension funding issues,” the economists said. Luckily there are no services issues in the city like, we don't know, busted ferries, busted buses, or busted subways that will require vast amounts of capital to fix up to 1980s standards, let alone 2030. Go Yanks. 

Healthcare (Short Predictions, Long Distress)

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"What comes next?" we asked back in June. Looks like a lot of professionals are becoming increasingly convinced that '18 will be rife with healthcare activity as distress rises to "epidemic" levels. Hmmm. Okay. We'll see. Distress watchlists in the space DO seem to be expanding with names like HCR Manorcare, Genesis Healthcare Corporation ($GEN), Prime Healthcare Services Inc., Signature Healthcare LLC, and Community Health Systems ($CYH), among many others. Meanwhile, to the degree that healthcare providers are suffering from regulatory and other headwinds, management may want to move data security up higher on their list of priorities. After all, 21st Century Oncology Holdings and Morehead Memorial Hospital both serve as examples of what can happen when precautions aren't implemented early. One last note on healthcare distress, looks like biglaw attorneys aren't immune to increased healthcare spending. According to Abovethelaw.com, certain biglaw shops aresurreptitiously passing the cost of rising healthcare coverage costs to their associates. Living the dream.

Proctor & Gamble's Consumer Products (Long DNVB Disruption)

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Proctor & Gamble Co. ($PG)announced that its Gillette brand will be releasing new razors that, counter to previous new product launches, won't include another blade and a higher price point. Thank G-d. We're old enough to remember when the three-blade razor was a big deal, let alone the 179-blade razors that are in the market today. Clearly PG is yet another example of a large incumbent company suffering from Innovator's Dilemma while hungry nimble startups nip at its heels. Notably, Gillette's sales fell 6% in the current quarter and U.S. sales of razorblades fell 18% YOY in the TTM. Why? Well, we have Harry's and Dollar Shave Club product users here. The big innovation? A new five-blade razor that will cost "roughly the same" as those sold by the aforementioned up-and-comers. Who ship direct-to-consumer. So, hmmm. If the cost is "roughly the same" and one can just show up in my mailbox, why would we even bother with this new product? No wonder Nelson Peltz is up in arms. 

Fast Forward: Breitburn, Faraday Future, Patriot National Inc., Etc.

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Breitburn Energy Partners LP inches closer to the end of its bankruptcy. More noise around Faraday Future. Choice quote: "A convertible note of more than $400 million, with a 12 percent interest charge, becomes payable immediately if Faraday & Future Inc. can't raise the Series A round by December...." Well, it's December. Meanwhile, high level employees can't jump ship fast enough. Patriot National Inc. ($PN), a technology services provider for insurance companies, announced that it has a restructuring support agreement in place with major lenders Cerberus Business Finance LLC and TCW Asset Management Company LLC and the company will be filing for bankruptcy in the District of Delaware. Peace out Charming Charlie LLC. The J.G. Wentworth Company ($JGWE) will be filing its prepackaged bankruptcy on or around January 18. GNC Holdings Inc. continues to try and refinance its debt and is finding the capital markets aren't as forgiving as they once were on the heels of Vitamin World's liquidation and given Amazon's penchant for selling everything and anything, including meathead stuff. 

New York City in Trouble?

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We've been concerned about New York City since we started and it finally seems like others are coming around to realize how much this retail situation is affecting things. "One by one, cherished local shops are disappearing, replaced by national chains or, worse, nothing at all."  Welcome to the party pal. And so the New York Times proposes some solutions, including a "vacancy tax." Good luck with that. 

Mostly Non-Black-Friday Retail Report (Macy's, J.Crew, Signet Jewelers)

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A Week of Nonstop Retail

Don't worry: Macy's ($M) has a plan (must read) and it includes finally trying to address what competitors - not just Amazon ($AMZN) - have been doing for, literally, decades. Of course, maybe, just maybe, the first part of their plan should be to make sure they're able to collect payment from their customers. But, we're not #BlackFriday experts. Anyway, thanks, millennials, you're killing the mall-based low-cost jewelry sellers. This week, Signet Jewelers ($SIG) reported dogsh*t numbers with same-store sales down 5% and downward-adjusted guidance for 2018. J.Crew Group Inc. = 💩💩💩. The company reported revenue down 5%, and aggregate comp sales down 9% (JCrew down 12%, but Madewell up 13%); it reported an all-in $17.6mm net loss (driven, in part, by its restructuring efforts...FEES!). The company also announced plans to close more stores for a total '17 tally of 50 closures. Elsewhere, people are concerned about derivative effects of big box retail: here, what happens to Salvation Army? Finally, happy 10 year anniversary Circuit City.

Retail (Pop-Ups Abound - Even Porn Pop-Ups)

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Yup, You Read That Right

Last week we riffed on the need for a biglaw pop-up retail location which, if we do say so ourselves, is brilliant. But things are getting next level: Pornhub, "the premiere online destination for adult entertainment" is opening its first brick-and-mortar pop-up which is sure to get consumers excited enough to...uh, pop-up? (Yes, we hate ourselves for that). Anyway, the company opened locations in NYC and Paris on "Black Friday" in its first robust effort to expand into the retail vertical. And, naturally, they're offering an "experience" at their locations: there'll be a bed inside where people are invited to sit, interact with the camera and livestream! What could go wrong? (Uh, intentional and intentional indecent exposure, harassment, bed bugs, we could go on and on...).

Investment Banking: Restructuring Advisory

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We noted here, here and here that the investment banks have generally been reporting solid earnings of late. Restructuring advisory revenues, as far as we can tell from those that line-item the service, have been solid for the first three quarters of '17. Given the relative dearth of deal flow, however, the juicy debtor mandates are few and far between and seem to be increasingly allocated to the small subset of investment banking firms we noted in the links above. Considering this, it's interesting that a boutique investment bank with smaller market share like Millstein & Co. might look to diversify its business. This week, we noted an SEC filing for Mill Point Capital, a debut private equity fund headed up by Millstein & Co. Founder and CEO, Jim Millstein. The new fund will seek to raise $375mm to invest in control and turnaround deals in North American business services and industrial companies. 

Busted Tech: Synchronoss Technologies Inc. Selling for Liquidity

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Well, trying to avoid it at least. Synchronoss Technologies Inc. ($SNCR) this week offloaded Intralinks, a ubiquitous provider of data rooms to the industry's bankers, for approximately $1b to private equity firm, Siris Capital Group LLC, billed as specializing in, among other things, turnaround, special situations and distress. We hope those individual data rooms have some serious privacy safeguards built-in to them. Otherwise, you're about to see Siris Capital's sourcing apparatus on steroids. Yes, we're being cynically flip.