šŸ”„The "Weil Bankruptcy Blog Index," CMBS and how Nine West is the Gift that Keeps on GivingšŸ”„

Weā€™re still clearing through some year-end stuff here at PETITION. This edition will conclude our review of 2020 (parts I and II here and here). Before we get there, this was obviously a momentous week. The Democrats took Georgia and by extension the Senate, the Capitol fell to a siege, unemployment figures underwhelmed (140k job losses with leisure and hospitality getting f*cking napalmed), Saudi Arabia unexpectedly cut oil output, and a new virulent COVID strain is now apparently running wild within our borders. Good times. Itā€™s almost enough, all in, to make us nostalgic for 2020.

Oddly, the stock market took in all of the above and be like šŸ¤·ā€ā™€ļø: it had an up week! Mania is sweeping the markets to the point of Elon Musk becoming the richest man on the planet, Bitcoin breaching $40k, sponsors issuing SPACS called Queenā€™s Gambit Growth Capital (sounds fake: itā€™s not), and corporatesā€¦wellā€¦

Maybe. Probably not. More likely? Theyā€™re seeing the market swallow up ridiculously low rates. This week US high yield rates hit a fresh all-time low. Spreads are back near pre-crisis levels:

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Demand is insatiable.

Back in October the PETITION team took a look at (but ultimately opted not to write about) Urban One Inc. ($UONE), a Maryland-based media operator focused on the African-American community. Our interest derived from an 8-K indicating that UONE (a) anticipated COVID-19-induced revenue decreases might trip financial covenants, (b) initiated wholesale cost-cutting initiatives, and (c) drew down $27.5mm on its ABL facility. Thereafter, the company commenced an exchange offer and consent solicitation pursuant to which it exchanged $347mm 7.375% senior secured notes due 2022 for new 8.75% senior secured notes due 2022. The company also pulled off a $25mm at-the-market equity offering. In other words, both the debt and equity markets were willing to play ball and play for some sort of social justice-driven pull-through of demand that would improve business fundamentals.

And as it turns out, the company did pull forward demand ā€” more election related than anything:

"The radio segment benefited from unprecedented levels of political advertising spending targeting African American voters.  Bolstered by this revenue, we expect our radio segment fourth quarter revenue to be down a low single-digits percentage year over year, a material improvement from second quarter's decline of -58.4% and third quarter's decline of -31.9%," says CEO Alfred C. Liggins III.

In a pre-market announcement on Thursday, the company indicated that consolidated net revenues for FY20 would be down roughly 13.7-14.6%. But Q420? They reported a net revenue increase of between 3.9-7.7% and adjusted EBITDA up 49-56.2%. Thatā€™s all the capital markets needed to see.

On Thursday the company also announced a private offering of $825mm 2028 notes to pay off the relatively new 8.75% ā€˜22s, the stub 7.375% 22s, and loans outstanding under two separate credit agreements. The issuance priced inside of initial 7.5% talk and got done at 7.375%. Notably, the 8.75% ā€˜22s were trading below par as long ago as, uh, *checks calendar*, Tuesday (theyā€™re now above 100). This is not the most, uh, optimistic issuance weā€™ve seen of late ā€” weā€™ll leave that to the airlines and movie theater chains ā€” but it does highlight the forgiving nature of capital markets: thatā€™s quite a dramatic drop in rate mere months after a previous issuance. And letā€™s be clear: weā€™re talking about a company that is, in part, a radio station operator coming off a significant uptick due to election-related ads. But šŸ¤·ā€ā™€ļø. That really is the best way to describe all markets these days.


How about the bankruptcy market? Epiq Systems Inc. released its 2020 bankruptcy filing statistics this week and ā€œ2020 had the lowest number in bankruptcy filings since 1986 with a total of 529,068 filings across all chapters.ā€ Commercial chapter 11 filings were up 29% YOY but chapter 13 and chapter 7 filings decreased by 46% and 22%, respectively.

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