Winding Up — Let’s keep dancing

Will Macadam

27 September 2024•9 min read

Winding Up is 9fin's weekly newsletter, incorporating summaries and commentary from our European distressed coverage for the past week. Find out more about what we do for distressed here.

Conventional thinking suggests that the best, or at least most immediate, distressed investment opportunities will be those companies with maturities in the next two years.

Applying 9fin’s rubric for stressed/distressed debt (loans: price = ≤92; bonds: StW = ≥ 8) , we’ll look at the loan market and see what names come up. If you want to follow along, you can view our screener on the 9fin platform — you might have to adjust the latest price date, depending on when you read this.

There are currently 12 loans, issued by 9 companies, on 9fin’s platform trading at stressed or distressed levels and that mature on or before 31 December 2026. They belong to: Altice France, GHD GesundHeits, OQ Chemicals, McCarthy & Stone, Accolade Wines, Technicolor Creative Studios, NSO Group, Nep Group and Labeyrie. If you feel like you’ve seen most of those names before, congratulations you’re a scholar of 9fin’s distressed output.

Nep Group, GHD GesundHeits, McCarthy & Stone, and Labeyrie are the the only companies on that list that are not currently in some form of refinancing or restructuring process — or that have completed one in the last year. Isreal’s NSO Group is currently sanctioned by the US Department of Commerce for the use of its Pegasus spyware against US officials and citizens by foreign governments.

Peggy Lee sang it best: Is that all there is?

High-yields bonds are slightly more exciting — tell me you work in finance without telling me you work in finance. You can find our screener here.

There are currently 52 bonds, issued by 36 different companies, that are yielding in stressed/distressed territory and that mature on or before 31 December 2026. For brevity’s sake, we’ll refrain from listing them all here in this article. That list includes practically all the active situations we’ve been tracking and reporting on over the last few months.

Naturally, the more interesting names on the list are the ones not in active refinancing or restructuring discussions. To our knowledge, that limits us to 10 names: Maxeda, HSE24, The Very Group, Olympic Entertainment, Rekeep, Pizza Express, Graanul Invest, DDM Group, Standard Profil, and Nitrogenmuvek.

Last but not least, what about the floaters? You can find our screener here. We’re transposing the same criteria we use for loans to indicate stress/distressed bond prices.

There are currently 18 floating rate bonds, issued by 10 different companies, that are trading in stressed/distressed territory and that mature on or before 31 December 2026. The results are (un)surprising — Swedish outsourcing group Transcom (which is already on our watchlist) is the only issuer not in the middle of refinancing or restructuring negotiations.

The other floating rate name we haven’t covered in much detail, Spanish construction group Obrascon Huarte Lain, is in the middle of restructuring negotiations. Expect coverage on the name in short order.

Bringing both loan and bond names together, what trends can we glean from this odd collection?

Well, it almost reads like a greatest hits of sectors hit hardest by the current distressed cycle: care home providers (GHD GesundHeits and McCarthy & Stone), a chemical producer (Nitrogenmuvek), a debt purchaser (DDM Group), and retail names (Pizza Express, Maxeda, The Very Group, and HSE24).

Labeyrie has been on 9fin’s radar for some time. So it’s likely a name you, dear reader, are already intimately familiar with.

That leaves us with four names operating in sectors we haven’t seen as much distressed activity in. They are: Italian office support services provider Rekeep, Estonian wood pellet producer Graanul Invest, Estonian gaming group Olympic Entertainment, and German automotive parts supplier Standard Profil.

Do what you will with this information.

This week’s news

Adler Group — The German landlord closed its second restructuring on 19 September 2024, prompting us to look at potential outcomes and recoveries for legacy bondholders and new money providers across the cap stack. Adler RE bondholders were the clear winners, owing to their structural seniority, and temporal seniority also played a key role for legacy Adler Group 2024 SUN holders. Check out our Restructuring QuickTake for all of the details and background to the second restructuring.

Altice France — Elliott Investment Management is not aligned with the rest of the French Telco’s secured creditor group’s plans to extend the co-op agreement until February 2026, sources told 9fin. This means the New York-based hedge fund would have the ability to provide its own proposal to Altice France after the final extension built into the co-op that doesn’t require unanimous consent expires in February 2025.

Avon — The Anglo-American cosmetics producer held a CDS auction on Tuesday, 24 September. Protection holders of Avon Products CDSs secured a payout of 66 cents on the dollar when the bidding process had completed.

BayWa — The German agriculture conglomerate has ramped up talks with creditors after the first draft of the IDW S6 report commissioned to Roland Berger was distributed to lenders. According to the report’s findings, the restructuring for the German agriculture conglomerate, which has over €5bn in debt, will require a timeframe of several years and will include operational cuts and the disposal of assets.

Cineworld — The cinema chain returned to the High Court of England and Wales to ask for sanction of its four interconditional restructuring plans. Mr Justice Miles reserved his judgment, telling counsel that he might be able to hand down his decision on Monday, 30 September. The delay is a consequence of opposition from two landlords whose leases the business agreed not to compromise last year.

Medical Properties Trust — 9fin published a deep-dive report on the troubled US-based healthcare REIT embroiled in the Steward bankruptcy. The report explores MPT’s aggressive nine-year expansion strategy that has seen it amass substantial balance sheet assets, which are now under scrutiny as a result of questionable financings or transactions and the financial distress of some key tenants.

Northvolt — The Swedish electric battery maker could be near insolvency, local papers reported, after 9fin was first to report the Swedish debt office had not disbursed $1.5b of a $5b non resource loan this week and its consortium of bank lenders and the company hired advisors. Both parties are meeting on Friday to negotiate next steps.

OQ Chemicals — German chemicals producer has received the required consent to implement its restructuring out of court, a source close to the company told 9fin. The sanction hearing scheduled for 2 October has therefore been cancelled. The maturities on its term loans and RCF have now been extended from 12 October 2024 until 31 December 2026, the source added, without a change in margin.

Peach Property — The DACH-based REIT and an ad hoc group of its creditors have each selected legal advisors, as refinancing negotiations intensify. Peach Property Group selected advisors from Latham & Watkins, while creditors have appointed Milbank.

Petrofac — The UK-listed energy services firm extended its forbearance agreement with ad hoc group of noteholders representing nearly half of its outstanding senior secured, according to an announcement released on Monday. This is Petrofac’s third such extension to its forbearance agreement after the group defaulted on an interest payment on its $600m 9.75% SSNs due 2026 back in June.

Pizza Express — Top-line pressure, squeezed margins and increased rents are making the refinancing of the UK-pizza chain’s £335m SSNs due July 2026 look challenging. This week 9fin took a closer look at the credit and its options for its upcoming maturity wall.

OQ Chemicals — German chemicals producer has received the required consent to implement its restructuring out of court, a source close to the company told 9fin. A sanction hearing scheduled for 2 October has therefore been cancelled.

SBB — The real estate company announced it would list on Sweden’s First North exchange this week which is part of NASDAQ for its spinoff IPO of residential properties. 9fin reported valuation estimates of the IPO as bondholders are closely watching how much money the IPO could bring in to paydown debt. One of SBB’s board member sold 6.4mn shares of the parent company this week.

Steward — The sale of Wadley hospital was approved without any allocation of funds going to MPT. Additionally, $17m of proceeds from the group of Massachusetts hospitals sold is still being disputed between Apollo and the FILO lenders with a hearing on the issue to be decided on Sunday.

Talk Talk — Fitch downgraded the UK-based telco group to restricted default from C, in-light of the group’s on-going restructuring process.

Thames Water — The troubled UK utility company was hit with more negative ratings action from S&P on Wednesday, 25 September. The ratings agency downgraded Thames’ Class A debt to CCC+ and Class B debt to CCC-, from BB and B respectively.

Victoria — The UK flooring company bonds took a huge slide down after 9fin was first to report the company had been pitching a drop-down transaction to third-party lenders. According to 9fin’s covenant analysis here, there is sufficient capacity to accommodate such a transaction. Current holders however followed with with angry letters to the company calling the idea nonsense and are working on their own refi plan.