Recapping past featured credits

It has been 18 weeks since I began writing the weekly Distressed Digest. My primary focus each week is remain somewhat in touch with the general distressed market. Recording my thoughts on this blog has been helpful for me and hopefully given some insight for others.


4 min read
Recapping past featured credits

Distressed Digest

September 13th 2020

Currently tracking 209 credits from 120 companies.

If you wish to view the Distressed Watchlist within Google Sheets, please request access to it and I will shortly grant you access to it.

https://docs.google.com/spreadsheets/d/17CE82ulzQX9KuRBMBeWXdyyx6LSjXqdaTepEc27A-8s/edit#gid=1148751060

Leaders for the Week

Laggards for the Week

Highlights

  • GTT Communications (GTT 7.875 '24) were active as reports surfaced that it is in advanced talks to sell its European fiber assets for over $2B. The bonds ended the week higher by 14pts to 51.00 yielding 28.6%.

  • Staples (SPLS) reported better than expected earnings sending its bonds higher. SPLS 10.75 '27 traded up 10.50pts to 83.50 yielding 14.8% while the SPLS 7.50 '26 traded up 4.75pts to 94.75 yielding 8.7%.

  • GameStop (GME 6.75 '21) traded up 6pts to 98.50 yielding 10.1%.

  • JC Penny (JCP 5.875 '23) traded down 7pts to 32.00 as mall owners Simon (SPG) and Brookfield (BPY) finalize a deal to purchase JCP's operations out of bankruptcy.

  • Energy credits were weaker last week with QEP Resource (QEP 5.25 '23) down 5pts to 79, Laredo Petroleum (LPI 10.125 '28) down 4pts to 67, and Antero Resources (AR 5.00 '24).

  • Peabody Energy (BTU 6.00 '22) moved higher by 4.5pts to 55.50.

  • Golden Nugget (LNY 8.75 '25) traded up 9pts to 85.00 yielding 12.9%. The bonds have rallied 35pts since the start of August.


It has been 18 weeks since I began writing the weekly Distressed Digest. My primary focus each week is remain somewhat in touch with the general distressed market. Recording my thoughts on this blog has been helpful for me and hopefully given some insight for others.

When I write a feature post, I try to remain unbiased as possible since it is my intent to make observations not recommendations. This week feels like a good time to stop and reflect on how some of these distressed situations have panned out.

The Sea is Calling. Answer it “with more debt”.

May 4, 2020

Since May, cruise stocks and credits have rallied so much they only Viking Cruises remains on the distressed watchlist. The best performing credit out of the group was Royal Caribbean Cruises (RCL) with 30% gains.

Please remain seated as we begin our descent.

May 11, 2020

My quick airline credit review back in May seemed to be the bottom for airliners. American Airlines (AAL) and United Airlines (UAL) were the hardest hit credits in March/April but reversed course since.

Hertz puts you in the bankruptcy seat… Investors Hertz.

May 24, 2020

One of the best performing credit for the past few months has been Hertz (HTZ). Since filing for bankruptcy, the unsecured credits traded nearly 300% higher.

“Nobody Has More Party for Less” than Party City bondholders

May 31, 2020

Another great performing credit has been Party City (PRTY). Since filing to exchange their unsecured notes, the remaining non-exchanged unsecured bonds have been higher by 300%+. The holders who participated in the exchange have done well as the new notes is trading in the low 60s and the stock is now trading 150% higher at $2.58.

AMC Entertainment – The Final Showing?

June 14, 2020

AMC Entertainment (AMC) saw its capital structure first move lower as the subordinated exchange was reworked. The capital structure struggled in the beginning of the summer losses but recoup those losses by Labor Day. The whole capital structure remained relatively unchanged since.

Profit Engine Stalls at Briggs & Stratton

June 21, 2020

After skipping its interest payment, Briggs & Stratton (BGG) entered bankruptcy with the intent to sell all its operations. They started the process with a stalking horse bid of $550M from KPS Capital Partners. It quickly ended this past week as no alternative buyer emerged, leaving the unsecured notes to negotiate with KPS for a very small, if any, recovery.

Recovery Valuation for Chesapeake Energy Creditors

July 12, 2020

Chesapeake Energy (CHK) entered bankruptcy with reorganization plan in place. So far it has been too early to tell how CHK lenders will fare. Later this year, will be a good time to revisit this situation.

Cooper-Standard continues to underperform

July 26, 2020

Cooper-Standard (CPS) has been quiet over the past month and half. The unsecured notes only recently traded higher 8-9pts to the low 60s while the secured notes have been moved up 2.25pts to 107.25 from 105.00.

Conclusion

It is always good to a step back and review past observations. The high-yield distressed market has been very strong and active the past few months. It has attributed to some excellent gains for many of the previously mentioned credits (without Briggs & Stratton of course).  As the fourth quarter is approaching quickly, it will be interesting to see how the remainder of the year plays out for the distressed market.


Written By
Rich Meatto

Co-founder of Koyfin. Former distressed high-yield trader now creating, designing, and developing a financial platform you desire. During my trading days, I would share a daily distressed digest with clients containing trading color and news. I share them with everyone in my spare time. Feel free to follow me on Twitter and my DMs are always open.