The Hunt For Data: Middle Market and Illiquid Loan Valuation

Posted by Alex Buzby on Sep 25, 2018 12:41:53 PM

Even in markets where established data infrastructure is limited, such as syndicated loans, reliable sources of data that are indicative of a liquid security’s value are available through market data vendors and broker quotes. When evaluating illiquid securities like middle market or directly originated loans, the effort of data aggregation becomes much more difficult and is often assumed to be an exercise in futility. We would disagree.

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Topics: syndicated, Loans, Direct Lending, download, illiquid, Fixed Income, Valuation, BDC, business development company, Middle Market

The Coupon Spread Increase: An Early Warning

Posted by David Diggins on Aug 21, 2018 2:06:02 PM

A quarter over quarter coupon spread increase can be an early warning sign for investors and restructuring advisors that the issuer may be facing financial troubles.

What do we mean by “coupon spread increase”? First, the coupon is simply the annual interest payment paid by the issuer relative to the loan or bond's face or par value. Coupon spreads compare the interest rate differential between two loans or bonds. Say the coupon rate is 5% in the first quarter of the year, and then changes to 7% the next quarter. This would cause a coupon spread increase between it and the coupon of a comparable loan or bond. [source]

An increased coupon spread from one quarter to another is an indicator that something happened – it does not mean there is imminent risk of default. If a company does not meet its obligation to its lenders, it may be required to take some sort of action to make good on its promises of repayment or otherwise remain in good faith. One such action could be an increase of the coupon payment.

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Topics: Restructuring, Distressed Debt, BDC, download, Loans

Q2 2018 BDC Non-Accruals: Medley Capital Corp No Longer Worst Performer

Posted by David Diggins on Aug 15, 2018 5:24:17 PM

Last month we shared a list of the top 10 BDC non-accruals based on first quarter 2018 SEC filings. Now that we are mid-way through August and second quarter filings are readily available, let’s take a fresh look at the first quarter’s worst performer.

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Topics: News, download, portfolio, fair value, Fixed Income, Default Rate, BDC Filings, Loan Default Rate, Second Lien, Restructuring, Non-accruals, Distressed Debt, First Lien, BDC

Newly Distressed Loans: Anchor Glass Container Corporation

Posted by David Diggins on Aug 14, 2018 10:20:48 AM

We all know that companies in distress tend to have a harder time meeting their financial obligations, which translates to a higher probability that they will default. A company in this position has pretty straightforward options: either raise enough cash through asset sales, operating improvements, and new financing, or reduce or postpone interest and principal payments on the debt by negotiating with creditors.  

For restructuring or turnaround experts, identifying distressed companies is the first hurdle to deal sourcing and business development. Using the AdvantageData workstation, we’ve compiled a list of distressed loans that you might want to be aware of.

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Topics: download, Fixed Income, Default Rate, Loan Default Rate, Second Lien, Restructuring, Distressed Debt, Distress, market analytics, First Lien, Loans

Wildfires don't translate to fire sales for PG&E

Posted by David Diggins on Aug 9, 2018 2:42:35 PM

Restructuring is often driven by market rhythms, or quantifiable circumstances like the decline of shopping at brick-and-mortar stores in favor of online shopping. An easy example of the latter is the rise in eCommerce at online stores like Amazon, resulting in the bankruptcy and liquidation of Toys R Us. Another, less common circumstance can be natural (or unnatural) disasters.

It has been reported that Pacific Gas & Electric (PG&E), a California based utility, has brought in law firm Weil Gotshal & Manges LLP to explore restructuring options after California officials found the company responsible for the deadliest wildfires in the state’s history in the fall of 2017. One option the firm is said to be exploring is breaking up PG&E and filing bankruptcy for one of the units. For companies struggling financially, sacrificing one area of a business to protect the rest from liabilities is a popular strategy. [source]

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Topics: Restructuring, Distressed Debt, Distressed Investments, download, Fixed Income, default

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