Excess Spread is our weekly newsletter, covering trends, deals and more in structured credit and ABF.

Welcoming Guelda

9fin’s asset-based finance team has now gone transatlantic — Guelda Voien has joined as US Asset-Based Finance editor. We’ve got big plans in the world’s biggest securitization market, stay tuned! She can be found here; we’re keen to hear about the smartest trades, the biggest trends, the good bad and ugly of asset-based transactions, wherever they happened in the world!

Have you seen the Muffin Man?

We spent a bit of time going through an investor letter from Diameter Capital Partners this week — publicly released, apparently, in response to a Bloomberg article which Diameter felt misrepresented the fund’s performance.

There’s a fascinating rundown on the firm’s process and approach to First Brands, beginning with the notably successful loan short (Diameter reassures non-fraudulent firms that it won’t short their loans) and then processing its far less successful participation in $100m of DIP financing.

The gist of it is that Diameter overestimated the value left in the business / underestimated the scale of the fraud, and jumped in too fast to pivot from short to long, but you should read it anyway. 9fin’s Will Macadam has a rundown of some of the other distressed debt nuggets discussed here.

But alongside the distressed situation, there was plenty to ponder on the asset-based finance market generally.

The thesis of the letter is basically that insurance capital in the IG part of the stack is encouraging overproduction of ABF exposure.