Winding Up — Don’t fear the seeker

Will Macadam

31 January 2025•6 min read

Winding Up is 9fin's weekly newsletter, incorporating summaries and commentary from our European distressed coverage for the past week. Sign up for this newsletter here.

What does the stock market have in-common with West Ham fans? They both love bubbles.

This week, much of the financial world has been occupied with the consequences of what some have called AI’s “Sputnik moment”.

Indeed, Chinese research firm DeepSeek’s has prompted some soul-searching in the tech sector and the financial markets, with the recent release of its“DeepSeek-R1” large language model (LLM).

Not only was DeepSeek able to boast about creating and releasing an open-source LLM model with comparable performance to that of the US-developed OpenAI-o1 (which was released at the end of last year and can cost users up to $200 per-month), it reportedly did so on a budget of less than $6m and without the latest and greatest hardware.

DeepSeek’s claims are subject to enormous scepticism from both governments and competitors. But whether the firm’s claims are truthful or not is irrelevant for the time being; investors were spooked enough to wipe nearly $600bn off of American chipmaker Nvidea’s market valuation on Monday.

Reaction in the credit markets has been much more muted.

We opined on the topic of AI-affected credits in a Winding Up back in October, and included a list of at-risk bond names and loan names with maturities before 2027. When filtering those names by price change over the prior week, we see relatively little change.

Translating the impact of heightened competition between LLM research firms to high-yield credits will always be a tricky business. But DeepSeek’s debut does warrant a revaluation of the perceived barrier to entry for companies of all stripes.

What it tells us is that hardware isn’t as important as we think and that competition in the tech sector could drive down costs to the point where even stressed/distressed credits can afford to adopt LLMs — or simply can’t afford not to.

That could create a sticky situation for anyone hoping to analyse the relative merits of businesses in certain sectors where AI-technology is widely adopted. Customer service providers such as Transcom, Foundever and KronosNet could be an instructive example.

If all three companies adopt LLMs with similar capabilities, how would an analyst form a view on which company had the better product? Would it be based strictly on the quality of responses? The speed with which each company’s model reacts?

These aren’t necessarily new challenges when it comes to evaluating credits, but it certainly could add another layer of complexity to understanding and valuing certain businesses.

Anyway, onto….

This week’s news

Altice France — The French telco’s latest proposal to lenders sees secured creditors’ recoveries rise compared to one from November last year, according to a 9fin’s analysis. While discussions are still slowly going on, things have been now started to move “in the right direction”.

BayWa — The German agriculture group has initiated restructuring proceedings under the StaRUG framework at a Munich court, to bypass the resistance of one creditor who blocked the plan.

Cision — The Platinum Equity-backed media analytics and newswire company has ended confidential debt talks with lenders. It posted cleansing materials suggesting a disconnect between what the company is willing to offer and what the lenders would accept in any liability management transaction.

CLN Coils Lamiere Nastri — The Italian automotive component manufacturer plans to sell assets in Italy and abroad and asked creditors — banks holding around €300m of unsecured loans — to write down around 90% of their debt.

Fortra — Lenders to this provider of cybersecurity services are seeking advice from Gibson Dunn to assist with debt talks with the company and its sponsors, according to 9fin sources.

Huf Group — The German automotive supplier is aiming to complete its second debt restructuring early this year. The group has around €400m of debt. Options for creditors include an extension or taking a haircut.

Just Eat Takeaway — An ad hoc group of the food delivery company’s bondholders signed a cooperation agreement — which is currently effective — in opposition of the sale of its US subsidiary GrubHub.

Kloeckner Pentaplast — The German plastic packager is preparing an A&E proposal to address its debt maturing in 2026, according to 9fin sources. Goldman Sachs, PJT, and Kirkland & Ellis are advising the company.

KTM (Pierer Mobility) — The Austrian sport motorcycle manufacturer was approached by a strategic buyer, while some of the company’s creditors are trying to put forward a lender-led restructuring plan.

Lycra — The US spandex manufacturer announced it has agreed to be taken over by a Chinese state-owned company. The proceeds from the sale will be used to pay down around $1bn of outstanding debt.

Medical Properties Trust — Near-dated bonds of the healthcare-focused REIT have ticked up after the announced launch of $2.5bn in new secured notes that will help pay down its near-term maturities.

Northvolt — The Swedish EV battery maker gained approval for its divestiture of shares in Hydrovolt on 28 January before Judge Alfredo Perez of the US Bankruptcy Court in the Southern District of Texas.

Prosafe — The Norwegian accommodation vessel provider’s refinancing will likely include an equity component in the form of a debt for equity conversion or equity injection, the company stated in its Q4 24 earnings presentation today (31 January). The deal is expected to be completed within H1 25.

Standard Profil — The German automotive supplier’s sponsor Actera has put forward a restructuring proposal to an ad hoc group of creditors, according to 9fin sources. The proposal includes an equity injection from the sponsor.

Stenn International — Interpath, administrator for the collapsed fintech has laid out its proposals for the company, which involve running off a trade receivables securitisation of nearly $1bn, and then likely liquidating what remains — which will amount to almost nothing.

Thames Water — Senior noteholders launched an alternative restructuring plan in the event that the distressed water company’s current one is rejected by the High Court. On Friday 31 January, the High Court “provisionally” adopted a timetable put forward by the company for its sanction hearing next week, sidelining an application from junior creditor to extend the trial.