Global Credit Highlights by Reorg
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 firstname.lastname@example.org.
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 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 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 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:
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’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.
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:
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.
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.
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