Leveraged Finance


Coverage of issuances, leveraged financing and recapitalizations across the US, EMEA and Asia from leveraged finance and legal experts. Our coverage includes news, data and analysis on leveraged loans, the leveraged loan and finance market as a whole, leveraged finance transactions and more.

Analyze and Forecast Cash Flow with Aggredium

To analyze and forecast cash flow, you normally need to manually aggregate data points including cash flow from operations, cash flow from investing, and cash flow from financing. These data points are fundamental for both private and public sub-investment grade companies and they may be difficult to find without a proper aggregation tool. Accrual accounting and cash accounting, plus a company’s operations/net sales ratio, free cash flow, and comprehensive free cash flow coverage are all necessary statistics and figures used in determining your ability to analyze and forecast cash flow. Recently, Reorg acquired Aggredium which provides our subscribers with fundamental data on high-yield bonds and leveraged loans through a searchable database. This comprehensive database features high-speed scraping and updating tools used for gathering and publishing changes to loan and bond data.


Aggredium’s standardized, aggregated, proprietary data enables subscribers to analyze and forecast cash flow and screen a company’s universe using financial data. Founded in 2017 and acquired by Reorg in 2021, Aggredium was designed and built by experienced international analysts whose shared goal was to deliver accurate financial data combined with state-of-the-art technology and analytics to empower business professionals to make superior investment decisions. The Aggredium calendar, available only to Reorg subscribers, enables users to view upcoming events by working day, as well as click into event details and add them to their own calendar. Another important feature in the Aggredium database that helps users analyze and forecast cash flow is our reported view and standard view. The reported view allows users to access complete data as reported with direct traceable links to all source information whereas the standard view provides users with a unified list of metrics shown in a standardized format with transparent links to each source. To learn more about how to analyze and forecast cash flow with Aggredium download our brochure here and visit our product page here. Also feel free to request a trial here to experience the power of our platform.

 

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Chapter 11 filings are picking up…

On the Reorg Americas team, we’ve seen a pickup in chapter 11 filings in the past few weeks. Notable new filers include mall REIT Washington Prime and SoftBank-backed tech-oriented construction company Katerra. Another new filer – Krygyz gold miner Kumptor – is bringing fascinating questions of international comity and the reach of bankruptcy court powers to Judge Judge Lisa G. Beckerman in New York.

Reorg continues its expansion into municipals coverage, and there we’ve seen some recent chapter 9 filings from Western Community Energy and the Texas Student Housing Authority. Meanwhile the endgame for Puerto Rico’s long-running Title III proceedings is coming into view, with battle lines being drawn for a confirmation hearing, the timing of which is not pinned down but looks to be late this year. (more…)

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Cruise Shutdown Litigation Coverage (June 2021)

Discussing the cruise shutdown litigation situation between the CDC and 3 states including Florida, Alaska and Texas, our Americas Core Credit experts dive deep into the Conditional Sailing Order, or CSO, where states are comparing the cruise shutdown to a ban on all ‘sexual intercourse’. Our Americas Core Credit team also discusses the mandatory limits for cruises being lifted on July 18th absent further ‘scientific evidence’. The CSO and related orders will become “non-binding,” according to direction from Judge Merryday, like CDC Covid-19 “guidance” aimed at other similar industries including the airline, railroad and hotel industries. The cruising halt caused major financial complications for the state of Florida as well as residents of the state including the necessity of approximately $20M in unemployment benefits to cruise industry workers, the loss of over $100M in income for the state’s ports and a loss of approximately $82M in sales tax revenue.


To read our Americas Core Credit team’s full analysis of the cruise shutdown litigation click through here: https://reorg.com/cruise-litigation-coverage/

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Iconix Brands Going Private Acquisition (Americas Podcast)

On this week’s Americas Core Credit weekly podcast our expert team of covenants analysts, including Richard Barbour and Julian Bulaon, discuss Iconix Brands going private acquisition in detail.  Iconix Brands’ recently announced going private acquisition by Lancer Capital and the change of control implications under their debt docs is being structured as a two step merger. In broad strokes, the purchaser commences a tender offer to acquire all outstanding shares of Iconix’s common stock, and in this case that’s for $3.15 per share in cash. Assuming that the shares that are tendered in the offer and those held by the company constitute a majority, the remaining shares are acquired in a backed-in merger at the same cash price as the initial tender offer. The Iconix Brands going private acquisition, in terms of the shareholder vote, is implicitly the same as the initial tender offer in this case. 


Click through to listen to the full podcast on Spotify, iTunes or SoundCloud for our discussion between Reorg Covenants analysts Julian Bulaon and Richard Barbour on Iconix Brands, including their recently announced going-private acquisition by Lancer Capital and the change of control implications under their debt docs as well as our viewpoints on Washington Prime Group, Mallinckrodt, Dawn Acquisitions, and Puerto Rico.

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Chinese Borrowers Hidden Liabilities Loom Large

Staggering amounts of maturing debt owed by Chinese borrowers are common headlines for generalist newswires.

But those numbers do not include off-balance-sheet borrowings and other liabilities, which increasingly exasperate investors, and increase volatility in Chinese issuers’ bonds.

Yuzhou Group recently sounded out market interest in a third private bond deal in recent months. As Reorg revealed, the last private issue – a $100 million 6% 361-day issue priced at 98.12% in September – was marketed with an ISIN code and a private page on Bloomberg. The issuer was a BVI-incorporated SPV.

These off-balance sheet deals create volatility in bond prices – despite company denials – due to concerns about significant exposure to non-controlling interests.

Onshore, problems caused by non-standard debt such as trust loans and leasing liabilities loom large. China Fortune Land Development, one of the most high-profile defaults by Chinese corporate borrowers to date, had received roughly RMB 40 billion ($6.189 billion) non-standard debt from Ping An Life Insurance, its second-largest shareholder and largest creditor, via various trust companies, as we reported. Sign up for weekly updates here

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Part 26A Recognition Issues in Europe in 2021

The U.K. applied to join the Lugano Convention in April 2020, a time when the Brexit deadline was fast approaching. The convention governs the jurisdiction and the enforcement of judgments in civil and commercial matters between EU member states and Norway, Iceland and Switzerland. If Britain were allowed to join, a Part 26A restructuring would gain automatic recognition across EU member states. However the European Commission has stated that it is of the view that the U.K. should not be able to join the Lugano Convention, following Brexit.


The English court, in Gategroup’s Part 26A plan, held that the Part 26A plan falls within the remit of Article 1(1) of the EU’s Recast Insolvency Regulation (RIR), meaning it does not fall under the Recast Brussels Regulation (RBR) and, by extension, under the Lugano Convention or Hague Convention.


Prior to the Gategroup judgement, English restructuring lawyers argued that English law schemes of arrangement and Part 26A plans would be able to gain automatic recognition under either the Lugano Convention, the Hague Convention or the Rome I Regulation. Following the judgment, only the latter remains available. A company using the Part 26A plan will have to rely on Rome I, the UNCITRAL Model Law, bilateral treaties or any domestic comity regimes in each individual member state for recognition.


As the U.K. courts act as a restructuring hub for European companies, the effectiveness of the Part 26A plan throughout the EU has been compromised, and the new Dutch scheme may be well placed to attract restructurings away from London. The Dutch scheme is broadly similar in its features to the Part 26A plan; however, given that the Netherlands remains a member of the EU, the Dutch scheme falls under the remit of the RIR and will be given automatic recognition across the EU.


It is clear that the market sees a certain amount of parity between the two regimes. In a recent case, Jain International Trading BV’s (JITBV) proposed restructuring of its $200 million 7.125% senior notes due 2022 – which are guaranteed by Jain Irrigation Systems Ltd. – is structured as an exchange offer, with the proposed implementation of the transaction via either an English or Dutch scheme. The group eventually settled on the English tool, suggesting that London’s primacy as a restructuring hub is intact for now, but time will tell which forum ultimately wins out.


Read more from our EMEA team here

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Part 26A European Restructuring Regime

At the outbreak of the Covid-19 pandemic, European lawmakers raced to modify their restructuring regime in response to the crisis. On March 20, 2020, independent research group the Conference of European Restructuring and Insolvency Law (CERIL) called on all EU member states to suspend the duty of directors to file for insolvency proceedings based on over-indebtedness and inability to pay. It also urged governments to offer interim financing to struggling businesses, “hibernation” periods for small businesses and support for entrepreneurs and their staff.


In the months that followed, jurisdictions across the Continent mobilized practitioners, academics and legislators to introduce a host of innovative changes to their restructuring regimes, the impact of which are now beginning to be seen in the decisions being handed down by European courts. We have also seen early indications of the types of challenges that could face the cross-border recognition of English law decisions in a post-Brexit world.


Read our series of Part26A posts here:

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Sanchez Energy Contract Rejection, Trend of Midstream Decisions

Analyzing the Sanchez Energy contract rejection based on a recent decision in the bankruptcy case for the privately held oil and natural gas company, our most recent Americas Core Credit podcast features Reorg legal analysts Mike Legge and Sean Daly as they discuss the first in a recent trend of midstream contract rejection decisions to move beyond hypothesizing in dicta and to actually authorize the rejection of a midstream agreement despite the presence of a covenant running with the land. Bankruptcy professionals with an interest in midstream rejection issues saw notable debtor friendly trends in 2020 case law weakening both of the levers that midstream counter parties would traditionally pull for leverage in countering the rejection of agreements in bankruptcy. The Sanchez Energy contract rejection in particular was interesting because of its novelty in effectively authorizing the rejection where previous midstream rejection decisions incorporating real property covenants had not been able to. 


Click through to listen to the full podcast on Spotify, iTunes or SoundCloud for our discussion on the Sanchez Energy contract rejection decision as well as our deep dive on the prominent high yield and distressed litigations from the week of May 17, 2021.  

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Direct Lending in India Webinar: Challenges, Risks and Rewards

Join Reorg’s Asia Core Credit team on Thursday, May 20 for a discussion on direct lending in India; the challenges, risks and rewards. Our senior reporters for Asia, Nidhi Pandurangi and Rajhkumar Shaaw will be joined by industry guest Eshwar Karra from Kotak Special Situations Fund.


In India, private investors have plugged the gap left by traditional funding avenues such as banks and non-banking financial companies (or NBFCs). However, with central banks worldwide opting to keep the liquidity flowing to tackle the pandemic, the spreads narrowed while the risks increased. This webinar will examine the challenges investors face investing in the Covid era and where the opportunities lie for direct lending in India. There will be an opportunity for attendees to ask our experts questions at the end of the webinar. Register here: https://reorg.zoom.us/webinar/register/1316197768139/WN_hoFTRvHNQ3ePvwj0XaznTQ 


If you’re already a subscriber, view our ever expanding coverage of market intelligence and expert analysis for high-yield and distressed debt investors, lawyers and restructuring professionals across Asia here: https://app.reorg.com/v3#/items/intel?products=10 


If you’re not a subscriber learn more about Asia Core Credit here and request a trial for access to our coverage of direct lending in India as well as the other 470+ companies we cover.

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Offshore Drilling News, Commodity Pricing and Capital Markets

Brent crude oil is up about 9% from one month ago and is hovering around $68 per barrel, setting the backdrop for what should be a healthier market for exploration and production companies as well as offshore drillers. Within offshore drilling, signs of highly anticipated industry consolidation are starting to emerge. For example, Noble reportedly made a bid for certain Seadrill assets. Seadrill Partners secured a four-well contract plus an option for up to seven additional wells for the West Capella drillship in Malaysia. Vantage Drilling will provide services for the West Capella, pursuant to a management services agreement between Vantage and Seadrill Partners.


Commodity prices in general have been on a tear, with iron ore prices spiking. The price movement creates an interesting dynamic for iron ore producer Samarco, which resumed operations in December 2020 and is proceeding with what will probably be a very contentious recuperação judicial bankruptcy proceeding.


Meanwhile, the capital markets are open for many companies that need funding. Brazilian airline Gol reopened its outstanding 8% senior secured 2026 bonds for an additional $300 million at 8%, in a deal that was upsized due to very strong demand. Blue Ribbon LLC, via lead arranger JPMorgan, priced its $368 million senior secured term loan B. However, after investor pushback, the company ultimately priced at L+600 bps, 75 bps LIBOR floor and 97.5 OID, at the wider end of revised guidance of L+575 to L+600 bps.


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