Join Reorg’s Magnus Scherman who’ll be moderating an expert panel to discuss credit considerations for Ukraine, one year after the beginning of the war.

Expert guests:

• Tim Ash, Senior EM Sovereign Strategist, BlueBay Asset Management
• Vitaliy Vavryshchuk, Head of Macroeconomic Research at ICU
• Tetyana Nesterchuk, Barrister at Fountain Court

The webinar included a discussion of the war’s impact on Ukraine’s economy and public finance so far, an overview of (the few) Ukrainian restructurings we saw in 2022, the SDR-backed debt proposal, the draft bill to confiscate Russian Central Bank assets in the U.K. and a look ahead at how Ukraine could emerge.

Watch the replay.

If you would like to be panelist on any upcoming webinars, please contact marketing@reorg.com, and if you would like to be notified for the upcoming webinars, sign up for Reorg on the Record.

The restructuring of U.K. retailer Matalan proposed by its first lien lenders will be implemented consensually, sources told Reorg. The first lien group will utilize the distressed disposal provisions (clause 14.2) contained in the intercreditor agreement, or ICA, to implement the transaction, which is due to close Jan. 26.

These clauses allow the security agent to release liabilities, guarantees and security provided the relevant criteria for a distressed disposal are met and any value protection safeguards are satisfied. Consequently, they are important contractual tools in helping to facilitate successful restructurings.

The group’s senior bondholders are resorting to their “fall back” option of taking over the group after second lien holders withdrew from the sales process and other bids fell short of expectations, as reported.

Reorg explains what the contractual tool entails and has run a cash flow and waterfall analysis with management’s business plan to test the sustainability of the post-restructuring capital structure.

To access Reorg’s legal and waterfall analyses on Matalan, request a trial.

Hear Reorg’s Europe team discussing Matalan’s recapitalization agreement in a recent podcast episode.

The wave of hard financial restructurings expected in Europe in 2022 to rival the 2008/9 crisis appears to have been mistimed. As a result of cheap debt and fiscal support available since the Covid-19 pandemic, stressed debtors have been able to avoid insolvency or restructuring.

In our 2022 European Restructuring Wrap, legal experts analyze the restructurings from 2022 and look ahead to 2023. Here’s a few key takeaways from 2022:

• Restructuring activity, defined by the occurrence of liability management exercises (LMEs), in 2022 has briefly returned to pre-pandemic levels, following a surge in 2020;

• During 2022, a higher proportion of restructuring transactions (63%) were implemented consensually compared with the previous two years;
• Restructuring transactions that introduced new money at a secured, senior secured or super senior secured level in 2022 were more likely (66%) than non new money deals to have been implemented using a restructuring tool, (non consensually);
• There has been a large uptick in restructuring advisor appointments over the last three months. Reorg is currently monitoring 45 debtors who have appointed advisors but not yet completed a restructuring. Consumer discretionary, energy and industrial sectors feature most prevalently in this list and further details on each name can be found on our EMEA Special Situations Tracker.

Examining our observations, and wary of the previously mistimed predictions of increased restructuring activity, we have the following outlook for 2023:

• Following a busy Q4’22, we expect to see a continued increase in restructuring activity in Europe throughout 2023.
• We also expect to see a high percentage of consensual LME exercises over the coming months. We could see the occurrence of LME exercises match the higher levels seen in 2020 and 2021 – marking an increase from 2022;
• English law tools (being the scheme of arrangement and restructuring plan) will continue to feature heavily in non-consensual European restructurings, in spite of the recent proliferation of new domestic restructuring tool in other European countries;
• We expect to continue to see amend and extend, or A&E, activity in the short term, with a lot of borrowers facing maturity issues in the coming years. A&Es offer an opportunity for lenders to reprice and avoid hard restructurings which could cause credit investors to prematurely realize losses

Data compiled by Reorg in our EMEA Restructuring Database, available exclusively through Credit Cloud, paints a fascinating picture, hinting at what we might see in the financial restructuring arena in 2023.

Read the full article written by Reorg’s Shan Qureshi or catch up on other recent intelligence articles published by Reorg.

For full access to Reorg’s platform of news, analysis and data built for financial and legal professionals, request a trial.

Reorg’s EMEA Middle Market team has published a Mid Market wrap that highlights debt capital markets, direct lending, debt and leverage data and more through 2022.

This year, disruptions in the debt capital market helped shine a brighter light on the expanding potential for private debt. Despite economic headwinds and uncertainty for M&A, direct lenders have sustained dealmaking, adapting and seizing opportunities such as large cap deals, public-to-private transactions, refinancings and add-ons.

“Direct lenders can provide higher visibility and certainty of execution without any caveats. Sponsors are now prioritizing such certainty over other elements that in the past were considered more important.” Leticia Ruenes, managing director and head of Spain at Pemberton, said.

Dry powder available for the asset class has increased 4% year over year amounting to $198.5 billion as of Wednesday, Dec. 14, according to research from Preqin. In 2023, market participants said they expect a slow start and an increase of activity from the second quarter mainly driven by leveraged buyouts.

Key Trends in 2022

One trend from 2022 is the amount of club deals that have arisen to satisfy the increasing average deal size, which is more than $1 billion for reported deals in 2022, according to Preqin. Rather than individual funds being sole underwriters, some sponsors are preferring optionality and a diversification of lenders because of the difficult economic climate.

In the first half of the year, various large direct lenders took a higher amount of debt financing deals and benefited from large cap borrowers’ inability to use a shut leveraged loan market due to macro uncertainties including the war in Ukraine.

In the second half of the year, club deals have allowed direct lenders to remain active, even as capacity declined due to heavy deployment at the start of the year and funds showed caution in a more challenging macro environment.

“Club deals are becoming more and more the norm in Europe and we have experienced this trend in our last recent transactions.” Luis Mayans, partner and deputy head, private debt for Europe at CDPQ, said. “There is an acceptance among lenders that club deals are the way forward.”

He cautioned that in a less certain market “some lenders, which would have done €500 million to €600 million deals six months ago, are now taking tickets a third of that size.”

A club deal structure isn’t yet a practice that all European funds are prepared to embrace. “Europe is about 10 years behind the U.S. in terms of club deals,” Stuart Hawkins, managing director in private credit at Ardian, said.

Access our EMEA Mid Market Debt Origination tracker, a monthly tracker capturing debt and leverage data from Reorg’s coverage, by requesting a trial.

To keep up to date on the EMEA credit market, subscribe to our weekly podcast and check our events page regularly for upcoming EMEA webinars.

What lies ahead in 2023 in Asian restructuring and where are the opportunities for investors?

Asia’s high-yield market in 2022 was hit by multiple defaults in China’s real estate sector. “Three Red Lines”, frozen escrow accounts, follow-on LMEs, and opaque onshore restructuring processes, all contributed to substantial losses in Asian high-yield markets.

But the world’s second-largest economy is now emerging from a three-year Covid lockdown, with the government hinting at business-friendly policies, and greater support for the property market. Will it stem fund outflows from the region? Will high-yield bond markets ever return to their previous size? What are the restructuring trends, and where are the next set of credit opportunities in Asia?

Join Reorg – along with a panel of expert guests from Dechert, Latham & Watkins and Rothschild & Co – for a discussion of what we can expect this coming year in the Asian credit markets. 

Panelists:

• Stephen Aldred, Reorg, (moderator) 
• Benjamin Fang, Rothschild & Co
• Howard Lam, Latham & Watkins
• Yang Zhao, Dechert

Webinar details:

• When:  Wednesday, Jan. 11, 4 p.m. HKT / 8 a.m. GMT
• Registration: To register for the webinar, click HERE.

If you’re not already receiving Reorg on the Record, sign up here: https://reorg.com/resources/reorg-on-the-record/

Credit market participants enter 2023 after a tumultuous year that saw junk bond yields increase to almost 9% as the market continues adjusting to a higher rate environment.

Reorg has invested in tools that will enable clients to analyze performing and distressed markets. OurCLO data set provides access to CLO information from almost 200 managers, which clients can use to screen for lending opportunities.

For the cinema industry, drama is building off-screen, with London-based cinema operator Cineworld saying on Tuesday, Jan. 3, that neither the company nor its advisors have participated in discussions with AMC Entertainment regarding the sale of any of AMC’s cinema assets. The disclosure followed a Dec. 21 release from operator AMC that it discussed with Cineworld lenders a potential strategic acquisition of AMC through Cineworld’s chapter 11.

Puerto Rico Electric Power Authority remains under a debt restructuring process in the Title III court. The PROMESA oversight board filed a proposed plan of adjustment for PREPA in mid December of 2022, which is tracking for a disclosure statement hearing in late February and a confirmation hearing in July. 

Regards, 
Kyle Owusu

---

Our Americas teams are working tirelessly to bring subscribers the most in-depth data, analysis and reporting on more than 3,000 performing and distressed credits. A glimpse into our offering is shown below:

BlockFi

At a hearing Wednesday, Dec. 28, Judge Michael Kaplan declined to postpone the Monday, Jan. 9, hearing on the BlockFi debtors’ turnover motion in their adversary proceeding against Emergent Fidelity Technologies Ltd. and ED&F Man Capital Markets Inc., or EDFM (nka Marex Capital Markets). However, the court approved a consensual extension of the defendants’ deadline to answer the underlying adversary complaint and a corresponding continuance of a Feb. 2 pretrial conference to dates to be agreed by the parties. » Continue Reading

Puerto Rico

On Thursday, Dec. 29, 13 banks and 10 “John Doe” entities that served as underwriters for Puerto Rico municipal bonds or interest rate swaps moved to dismiss commonwealth avoidance action trustee Drivetrain LLC’s action to claw back various payments on the bonds, which Drivetrain asserts were illegally issued. The defendants argue that Drivetrain’s complaint should be dismissed because all of the challenged transfers were ordinary-course transactions made under valid and enforceable agreements.» Continue Reading

Municipals

The Twin Cities German Immersion School, a charter school in St. Paul, Minn., which is the obligor of $15.13 million in lease revenue bonds, posted its debt service coverage covenant certification for the 2022 fiscal year. The school had a debt service coverage ratio, or DSCR, of 0.92x, falling below its covenant requirement, though the school did meet its liquidity covenant. According to an end-of-year disclosure call, failure to meet the covenant was unexpected, as the school had budgeted a 1.01x DSCR and did not anticipate missing it when it was doing monthly reviews during the fiscal year. » Continue Reading

Cineworld

Judge Marvin Isgur granted the Cineworld Group debtors’ emergency motion to exercise certain equity redemption rights in National CineMedia LLC, or NCM LLC, at a hearing this morning after resolving a limited objection by NCM LLC and its publicly traded parent NCM Inc. According to the debtors’ motion, the request arises in light of NCM LLC’s “burdensome debt load” and the potential that it will restructure in the near-term, resulting in cancellation of debt income that might flow up to Cineworld, as debtors Regal CineMedia Holdings LLC and Regal Cinemas Inc. own 23.7% of NCM LLC, an operating partnership in an “Up-C” structure. » Continue Reading

---

CLO Data Set

Analyze loan ownership profiles with the CLO data set, which gives you access to detailed CLO information from more than 3.2 million rows of data from nearly 200 managers. Easily filter though issuers, loans, maturity, spread, GICS sector and more to screen for lending opportunities in both performing and distressed. Contact: sales@reorg.com

Webinar:

Is Asia’s credit market permanently broken? “Three red lines,” multiple defaults, frozen escrow accounts, follow-on liability management exercises and opaque onshore restructuring processes are just some of the factors that have hit or continue to affect the high-yield market, and have contributed to massive losses in Asian high-yield markets. What will stem fund outflows from the region? Will high-yield bond markets ever return to their previous size? What will markets look like in the year ahead? In 2024 or 2025?

Amid a backdrop of slowing economic growth exacerbated by Covid-19 lockdowns and still-slow contracted sales, join Reorg — along with a panel of expert guests from Rothschild & Co., Latham & Watkins and Dechert –– for a discussion of what we can expect this coming year in the Asian credit markets. » Register now.

Podcast:

Each episode of Reorg’s weekly Americas Core Credit podcast series features detailed discussion on issues and companies across the credit lifecycle. In the last podcast of 2022, the team discussed AIG Financial Products Corp., FTX, Avaya and Clovis Oncology. » Listen now.

Throughout the year, Reorg hosts webinars bringing together industry professionals to discuss themes in the performing, distressed, restructuring and post-reorg credit markets. Reorg’s webinars cover topical credits and industry updates. They’re produced by our reporters and analysts with selected external guests.

Americas Webinars from 2022:

1. Primary in the Eye of the Storm: Challenges and Opportunities in Leveraged Finance in a Downturn
2. Hot Topics in Crypto Winter
3. Winter Came for Covid-Era Darlings? – Distress in Crypto and Tech
4. Bausch’s Remedies for Potential Patent Defeat & Creditor Angst Over B+L Spin
5. Puerto Rico’s Restructuring Endgame and Beyond
6. Revlon – Chapter 11 Cases and Creditor Disputes
7. CLO Considerations for Distressed Investors
8. Diebold Nixdorf: Can Significant Unencumbered Assets Overcome Massive Maturity Wall?
9. Talen Energy Chapter 11 Filing
10. The Texas Two-Step: LTL J&J Chapter 11 and Likely Future Filings
11. Samarco – Testing Brazil’s Bankruptcy Reform
12. Loan Market Trends in 2021 from Americas Covenants
13. No Surprises Act Rollout: Implementation and Litigation Challenges Ahead

If you would like to be panelist on our upcoming webinars, please contact marketing@reorg.com, and if you would like to be notified for the upcoming webinars, sign up for Reorg on the Record.

Request a trial here.

Reorg’s unique editorial approach combines legal and financial analysis with reporting for a holistic view on thousands of sub-investment grade credits from more than 100 countries.

Reorg’s editorial leadership has selected the following list of the most compelling and topical situations on distressed debt, restructuring, leveraged finance, and more across our global coverage universe. For any suggestions, please email us at questions@reorg.com.

In the Americas, markets ended the last week before Christmas in an unsettled state, with stocks falling and Treasury yields rising as market participants increasingly discounted the arrival of a recession in 2023 and the Federal Reserve’s aggressive rate hikes begin to take hold. Policymakers this week raised the fed funds rate by 50 bps compared with 75 bps at the previous four meetings; however, investors focused on the central bank’s “dot plot,” which indicated a terminal rate of 5.1% at the end of next year. The Fed’s action comes even as consumer prices have eased lower in each of the past two months; even so, companies in earnings reports are increasingly highlighting the effect of cost and labor inflation on financial results, as well as a growing tendency by consumers to reel in spending in the face of higher prices.

Highlights from Reorg’s Americas Core Credit team:

AMC Entertainment

AMC Entertainment Holdings Inc. lenders have organized again as the movie theater chain continues to burn a significant amount of cash and its liquidity runway comes into question. The company burned $278 million of cash in the third quarter, bringing its year-to-date free cash burn to $725 million. Reorg estimates pro forma liquidity of $767 million as of Sept. 30, down $1 billion from $1.8 billion at the beginning of the year. AMC’s LTM adjusted EBITDA through Sept. 30 of $191 million is only 25% of 2019 levels. Even if this number improves materially, AMC could still burn cash in 2023 unless box office performance exceeds expectations. Reorg’s AMC coverage.

Revlon

Revlon is in discussions with creditors to issue new reorganized common shares and warrants, whose terms must be acceptable to BrandCo lenders, to exit its bankruptcy proceedings. No strong bids have emerged – hence a sale is not a likely path for the cosmetics retailer to emerge from chapter 11, at least from where things stand now. The company is also working on a global settlement to resolve intercreditor issues. Access Reorg’s Revlon coverage.

Party City

Party City is exploring options to boost liquidity, including upsizing its first-in, last-out facility, as the party supplies store chain burns cash because of stubbornly high helium, freight and labor costs. Certain holders of Party City’s first lien notes, including Silver Point Capital and Capital Group, have organized with Davis Polk as counsel and Lazard as financial advisor. The company has received inbounds from investors that are interested in providing financing in the form of FILO. Party City is permitted to upsize its existing ABL or FILO by $200 million under the existing credit agreement, according to Americas Covenants by Reorg. Following an amendment to the ABL agreement in July, the company had $17.1 million outstanding on the FILO tranche. Reorg’s Party City coverage.

---

In Europe, the leveraged loan market sprung back to life with banks offloading high-yield debt with lumpy OIDs in companies that had previously pulled issuances. Short-seller Muddy Waters launched a campaign against German real estate group Vivion questioning some of its shareholder loans and challenging its reported occupancy rates. The company responded that the report is inaccurate and flawed but that did not stop the bonds from losing 10 points to yield almost 20%.

Highlights from Reorg’s EMEA Core Credit team:

Vivion

The United Kingdom-and-Germany-focused real estate group Vivion’s bonds dropped more than 10 points this week after hedge fund Muddy Waters announced a short position in the debt and released a research report focusing on doubts over some shareholder loans, the reported occupancy rates in Germany and a potential inflation of the value of the U.K. hotel portfolio. The company rejects the allegations as inaccurate. Access Reorg’s coverage of Vivion.

DOF ASA

DOF ASA’s three-year debt restructuring process took another turn this week when shareholders in the Norwegian offshore service company voted to sack the company’s long-time board of directors and install a new team of candidates pitched by two activist shareholders opposing the company’s restructuring plan. The new chairman told Reorg that DOF will continue to pursue its in-court reconstruction plan but added that the new directors will form their own view on how to proceed. The consortium of lenders and bondholders backing the debt-for-equity swap plan immediately sent a letter reminding the company of its agreement to implement the terms agreed in June. Access Reorg’s coverage of DOF.

Veon

Global telecoms group Veon has added a number of sweeteners to its proposed English scheme of arrangement after receiving feedback from certain investors holding its $529.3 million 5.95% notes due February 2023 and $700 million 7.25% notes due April 2023 that are being extended by eight months. Veon will enhance the proposed maturity extension with an increased amendment fee of 200 bps, up from 75 bps under the Nov. 24 proposal, payable on the maturity dates of the new 2023 notes. Veon is also offering creditors a put right, requiring Veon to buy back up to $600 million of the $1.229 billion of outstanding bond principal at 101. Access Reorg’s coverage of Veon.

---

Over in China, the nation is headed for another Covid-19-ravaged winter, this time after China largely lifted quarantine requirements and travel restrictions in part in response to public protests. iQIYI, China’s answer to YouTube and Netflix combined, has engaged Kirkland & Ellis and Houlihan Lokey as legal and financial advisors, respectively, to explore financial options.

Highlights from Reorg’s Asia Core Credit team:

iQIYI

This Chinese online video platform has engaged Kirkland & Ellis and Houlihan Lokey as legal and financial advisors, respectively, to explore financial options. Access Reorg’s coverage of iQIYI.

Yuhua Education

Linklaters, financial advisor to an ad hoc group of holders of Yuhua’s HKD 2.088 billion 0.9% convertible bonds due 2024, said in a statement that the ad hoc group has exercised their rights to require early redemption of the outstanding convertible bonds on Dec. 27. The group also detailed progress and terms agreed to so far during restructuring negotiations with the company. Reorg’s coverage of Yuhua Education.

New Coverage: Goodpack

Reorg on Dec. 9 initiated coverage on Singapore-headquartered container-maker Goodpack. The KKR-backed company is close to finalizing a fully committed refinancing of its U.S. term loan B debt through an Asian bank club and a fully subordinated mezzanine piece, according to sources. Reorg’s coverage of Goodpack.

To read more intelligence articles, breaking news alerts and in-depth analyses on companies across the Americas, Asia and EMEA regions, click here.

Access all of Reorg’s coverage on thousands of distressed, stressed and performing credits: request a trial.

Since the second week of November, the Chinese government has released a slew of new policies and initiatives aimed at expanding access to financing for privately held real estate developers. Policy highlights include the so-called Second Arrow program to provide up to RMB 250 billion total financing and 16 measures from the central bank and the China Banking and Insurance Regulatory Commission for supporting real estate companies. Asia’s high-yield market rallied following the unveiling of the policies, with China real estate bonds leading the rise.

Will the new policies end China’s real estate crisis? How much will they help lift the industry out of its recession? Could this be the turning point people were hoping for? And how long will the exuberance last? In this webinar, Reorg’s China editorial team shared their take on the situation. 

Panelists:

• Katherine Shi, Reorg China Editor
• Anna Zhang, Reorg Senior China Reporter

Shasha Dai, Reorg Managing Editor, China (Moderator)

Watch the replay here.

Other Asia Webinars from 2022:
1) Legal Considerations for Garudas Potential Restructuring

2) What Would a Sovereign Debt Restructuring Look Like For Sri Lanka?

3) Liability Management Exercises by Chinese Real Estate Companies

4) Shanghai Reopening: View From Front Lines; Update on China Property Sector

5) Macau Gaming – An Overview of Upcoming Regulatory Changes

More information on our latest events and webinars.

Sign up to Reorg on the Record here, and request a trial.

RCF Tracker

This tracker provides an overview of performing, stressed and distressed companies which have RCFs in their capital structure with high-yield bonds. The tracker includes the committed and drawn amounts of RCFs, the corresponding financial covenants, covenant waivers and suspensions and if the company is in debt negotiations or refinancing

EMEA Mid Market Deal Pipeline Tracker

The growing macroeconomic uncertainties in Europe are creating a lenders’ market in which direct lenders are increasingly clubbing together to mitigate risk. Meanwhile, private equity investors are wary of committing to companies which have to pass on inflation-linked price hikes to clients, creating a slowdown in European M&A activity.

EMEA Special Situations Tracker

Reorg Europe’s updated special situations tracker is available to all EMEA clients. The tracker includes selected debt and leverage data taken from the capital structures on our website. The tracker provides an overview of stressed and distressed situations that Reorg is following in Europe and CEEMEA and is updated every two weeks. 

Ukraine Invasion Impact Tracker

Ukraine will need significant financial support to fund the reconstruction effort once stability has been restored and the EU and US have already lined up multi-billion support packages for 2023. Ukraine’s own 2023 budget estimates a $38 billion deficit. In this tracker we are looking at companies impacted by the Russian invasion of Ukraine.