1.21 Gigawatts (What is Dead May Never Die)

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All Herald the Inglorious Return...

What a strange week.

Henrik Fisker of once-bankrupt Fisker Automotive unveiled the Fisker Inc. EMotion this week at the Consumer Electronics Show in Las Vegas in a dramatic attempt to compete with Elon Musk and Tesla's ($TSLA) Model S. Or, more accurately put, he unveiled a pre-production model, because, well, it's CES and that's what people do: build shiny models to show off with bold statements and abstract availability dates. Just ask Faraday Future. Target price for the EMotion? $130k. "With a target price of $130,000, the EMotion won't be a mass-market car, and suggests that Fisker Inc. could go the way of Fisker Automotive." Right. Good luck with that. 

Thank you Disney ($DIS) and Netflix ($NFLX): the two are largely to credit (blame?) for the recent resurgence in...wait for it...cassette tapes. Yup, you read that right. Thanks to Guardians of the Galaxy, Stranger Things and 13 Reasons Why, cassettes enjoyed a 74% increase in sales in '17. While this may be hipsterific AF, we don't expect to see this "growth" listed as a "risk factor" in Spotify's coming direct listing. 

The resurgence of Nintendo.

Finally, we'd be remiss if we didn't mention once-bankrupt Kodak's ($KODK) foray into cryptocurrency (KODAKCoin). Because the more we read about it, the dumber it sounds and the more the company seems screwed, term loan rally be damned. But, hell, why not? Coming soon to Coinbase account near you: iHeartCoin, JCrewCoin, CenveoCoin, SearsCoin, Bi-LoCoin, etc. After all, there's THIS CHART (followed by a chart of blockchain-related stocks)...

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Fast Forward: Breitburn, Faraday Future, Patriot National Inc., Etc.

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Breitburn Energy Partners LP inches closer to the end of its bankruptcy. More noise around Faraday Future. Choice quote: "A convertible note of more than $400 million, with a 12 percent interest charge, becomes payable immediately if Faraday & Future Inc. can't raise the Series A round by December...." Well, it's December. Meanwhile, high level employees can't jump ship fast enough. Patriot National Inc. ($PN), a technology services provider for insurance companies, announced that it has a restructuring support agreement in place with major lenders Cerberus Business Finance LLC and TCW Asset Management Company LLC and the company will be filing for bankruptcy in the District of Delaware. Peace out Charming Charlie LLC. The J.G. Wentworth Company ($JGWE) will be filing its prepackaged bankruptcy on or around January 18. GNC Holdings Inc. continues to try and refinance its debt and is finding the capital markets aren't as forgiving as they once were on the heels of Vitamin World's liquidation and given Amazon's penchant for selling everything and anything, including meathead stuff. 

Automotive & "Talking Your Book"

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Faraday Future Keeps the Drama Coming

The New York Times Magazine does a deep-dive this week into the future. One of the reporters says about self-driving cars, "...I think we're all radically underestimating how much will change once they arrive." On the road to this radically transformational future, there'll surely be winners and losers. We've talked about this before. Faraday Future, the would-be challenger toTesla, looks more and more like a loser every time we read something about it. But let's take a step back: we're wildly aware of investors talking their book, so to speak, in an effort to affect bond pricing, bond trading, or management behavior in the midst of restructuring discussions. They may plant something fundamentally untrue in, say, Debtwire, with the hope that the market will read it and market forces will bend to their benefit. Oldest trick in the book. But we're not sure we've ever seen the next-level sh*t reported here: that is, that someone purportedly created a fake FF powerpoint presentation to suggest an imminent bankruptcy and force out the company's main financier. Choice response: “These documents were not created by Faraday Future, nor were they created on behalf of Faraday Future or at Faraday Future’s request,” said a spokesperson. Interesting. Was this the work of some sloppy lawyer or banker who left a pitch-book sitting around? (Haha, probably yes). Inquiring minds want to know.

Interesting Restructuring News

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  • Busted Tech. Ok, not yet. But soon. Faraday Future has cancelled its plans to build a Vallejo California assembly factory - shortly after scaling back its original Nevada facility. This Techcrunch piece says that "it's unclear where the future will lead for Faraday." Seems pretty clear to us that it will lead to bankruptcy court. And, quietly, a number of (once) high-flying startups are laying people off including, notably, Postmates and Zozi ($60mm VC - Richard Branson and others). Finally, Munchery, often hailed as a top food-delivery startup, required a recap this week to survive.
  • Grocery & Sun Capital Partners. We SWEAR we are not picking on SCP here but c'mon already: now it looks like Marsh Supermarkets is in trouble as the company falls behind on rent and quietly - well, not so quietly anymore - shuts locations. So, let's recap: in the past 6 months, SCP has seen the following portfolio companies file for bankruptcy: Garden Fresh Restaurant Intermediate Holdings LLC, Limited Stores Company LLC, Gordman Stores Inc. Maybe this will be the next?
  • High Yield. Remember a few years ago when Chobani was distressed? Now you can get in on a new offering at a premium to par, it seems. Semi-related, the bidding to lend to Westinghouse in bankruptcy was reportedly pretty intense, with Apollo Investment Corporation duking it out with Goldman Sachs, Highbridge Capital, and Silver Point Finance for the privilege to finance the nuclear power company while it figures out how to restructure its business and address two incomplete installations in Georgia in South Carolina. Yield, baby, yield. 
  • Oil&Gas. That was fast. Like super fast. Seems the new owners of Samson Resources II, LLC don't share a very "long" view of the oil and gas space - despite "having discharged approximately $4 billion of debt and nearly $300 million of annual interest expense from Samson Resources Corporation," aka the previously bankrupt entity that filed in mid-2015. And distressed investors wonder where the term "vulture" comes from. PJT Partners LP was the previous banker for the company but with the Board being what it is, there's no surprise Houlihan Lokey has a piece of the action.
  • Retail. Finish Line added itself to the long line of retailers that reported dogsh*t numbers with earnings down, same store sales down, blah blah blah. Right, and approximately 40 store closures. Naturally. Also, David's Bridal was downgraded this week. The CD&R LLC owned retailer has a $520mm term loan due in 2019 and if millennials continue to flick off conventional marriage, there's no way they'll be able to sell enough gaudy wedding dresses to manage the interest expense. And, uh oh, now there appears to be a glaring hole in the "fast fashion" narrative as H&M missed expectations with declining net profit.
  • Rewind I: 3-D Printing. Not to be a broken record about this, but it is totally real. Last week we noted Adidas' plans for it and this week Under Armour followed suit. The implications for those in the supply chain can't be underestimated.
  • Rewind II: Glass Half Full. Looks like Gordmans Stores won't be a complete liquidation after all: Stage Stores stepped up and, as part of a joint venture with Tiger Capital Group and Great American Group, will acquire roughly 50 stores with an option for a handful of others. The remainder will be liquidated but this presumably means that, for now, a couple of dozen will continue to operate. At least until the inevitable Chapter 22 that occurs after next holiday season. Kidding! (Or are we?)
  • Chart of the Week: