Fashion (DNVBs = Distressed Opportunity?)

Look for Our Launch of New 'Lit' Brand "Unicorn & Bankruptcy" 

Why is that so many brands now are named "Something + Something"? Are we the only one's who've noticed that trend? Anyway, Bonobos is a failure because it sold(out?) for 3x its venture capital investment to Walmart Inc. ($WMT) - or so the narrative now goes. Curious. Walmart, after all, reflected the makings of a resurgence this week with a blockbuster earnings report that many largely attribute to's Marc Lore and the e-commerce expertise he's assembled around him. Like BonobosAndy Dunn, for example. Nasty Gal, however, is an entirely different story; it didn't sell for 3x. It sold for parts in bankruptcy court. Its ubiquitous founder, Sophia Amoruso, now runs a, gulp, digital media company (see above). Seeing Bonobos mentioned in the same breath as Nasty Gal must have Mr. Dunn questioning life's fairness. Anyway, read between the lines in the piece and it sure sounds like there could be a waive of would-be digitally-native disrupters disrupting themselves all the way to bankruptcy court (or an assignment for the benefit of creditors). Choice quote,"'We’re seeing that some of the same brands that get celebrated for raising $10M, or hitting $100M in revenue, are gone a few years later or eek out a distressed sale.'" You're damn right they do. Who wants to start the latest hot DNVB called "Unicorn & Bankruptcy"?

Sophia Amoruso's Nasty Gal Failure = Trite Lessons

Short Puffery

We love how entrepreneurs are all about "move fast and break things" and "don't be afraid to fail" but then when they do, and do so badly, there is barely anything that really provides an in-depth post-mortem (frankly, the aboveCaesars-piece notwithstanding, the same can be said for restructuring deals). Take, for instance, this piece of puffy garbage about Sophia Amoruso, which purports to inform readers about what Ms. Amoruso learned from Nasty Gal's rapid decline into bankruptcy. Instead it provides some evergreen inspirational advice that applies to virtually...well...everything and anything. TOTALLY USELESS. 

News for the Week of 2/12/17

  • Coal. Prices have risen and Trump is promising assistance. Is this enough to offset sagging demand? China's new measures aren't helping. But the capital markets are, as Peabody EnergyArch Coal, and Contura Energy are all taking advantage of cheap financing/refinancing options. Peabody shopped an upsized term loan (by $450mm) with revised company-favorable pricing; it also issued new notes and bonds. Amazing how quickly things changed with coal.
  • Chicago. S&P is making threats. 
  • Electric Vehicles. Something tells us that oil and gas management teams and their wildly astute restructuring bankers and advisors neglected to bake this element into their business plans. 
  • European DebtIncreasing concerns about Italy and Greece. Meanwhile, in France, CVC Capital Partners' owned vehicle leasing firm Fraikin has hired Rothschild to restructure its 1.4 billion Euro debt. Lazard will represent the mezz debt.
  • Moelis & Co. & Aramco"Ken of Arabia"? C'mon, that's just dumb.
  • Power. California has more power plants than it needs. After a slate of power-related bankruptcies, it looks like there is more hurt to come in this space. And big developments on the storage side probably won't help. And this new cooling tech won't help either - if it's legit.
  • Retail. And people wonder why private equity is and point: Rackspace. Speaking of private equity, Canada Goose's proposed IPO reeks of a dump-and-run on greater fools. Millennials don't spend money, but Bain Capital will have us believe that $900 fur-lined jackets are the exception to the rule. Riiiight. 
  • Retail Part IIOrganized Retail Crime = massive problem. 
  • Retail Part IIIGander Mountain = toast.
  • Retail Part IVAmazon announced that the number of third-party sellers on its B2B site has reached 45k, up about 50% from the approx 30k sellers it had at the end of Q2...IN JUNE.
  • Return of the Maturity Wall. Nothing gets restructuring professionals' juices flowing like sexy maturity stats. So, here it is: $2 trillion of corporate debt comes due in five years. And this is, in part, because the capital markets are definitely wide open right now in the face of soon-to-be rising interest rates. Take THAT wall, President Trump! 
  • Sears. Everyone is looking at this oncoming trainwreck and wondering "when?", not "if." Nice recent CDS movements on it but then the company unearthed a remarkable $1b in cost savings. Like, out of nowhere. And, naturally, the stock soared 25+%.
  • Spotify. Typically there are tremors before the earthquake. Perhaps Filip TechnologiesViolin Memory, and Nasty Gal are the tremors foreshadowing a venture debt-backed reckoning on the horizon. It's unclear. But, in Spotify's case, the interest ratchets attached to $1b of debt get more and more expensive with each consecutive quarter sans IPO. A big "unicorn" is going to fail and fail big. Spotify may not be the one, but it ain't looking great. But that one IS coming (Zenefits anyone?). Along these lines, how the eff is Theranos not bankrupt yet
  • Takata. Inching towards bankruptcy.
  • Fast Forward: Most retail-focused restructuring pros emphasize "omni-channel," the latest retail buzzword that, practically speaking, means basically nothing in today's climate. Case and point: Neiman Marcus, which was downgraded this week with projected 10x leverage on $4.77b of debt. Most of the cap stack traded at new lows this week. Omni-channel ain't a panacea, it appears.
  • Rewind IThis result for Relativity Media sure sounds positive.
  • Rewind II: The grocery space is getting hammered so badly that now even Whole Foods is retrenching, shutting more stores than it's opening go-forward.
  • Chart of the Week
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News for the Week of 01/15/17

  • Canada. Predicting lots of doom and gloom.
  • CovenantsSome developments in the capital markets thanks to recent activity with makewhole provisions - including "the end of covenants?". 
  • Fees. It was only a matter of time before there was a new chapter in the always inevitable vilification of restructuring professionals due to fees. Instead of a front page story about Lehman or TXU in the WSJ, here the Houston Chronicle highlights oil and gas cases.
  • Fund Performance. Bloomberg does IR work for Brigade Capital Management, highlighting the asset management company's purported big '16. And for Mudrick Capitalnoting the fund's turnaround after a period of high profile poor performance.
  • Let's Get Technical. For you geeks who love worrying about CDS, high yield bonds and liquidity, this report is for you.
  • Municipal Trouble: we've talked about Dallas in the past and now Providenceis in the crosshairs.
  • North Dakota: In a shocking development, the state's forecasts did not account for the upheaval in the energy space: just a mere billion short.
  • Radio. Pros focused on radio-based media situations ought to take note of what is happening in Norway, which is now the first country to completely switch off its FM radio network and convert entirely to digital. Meanwhile, in the streaming music space, Soundcloud bankruptcy rumors continue to increase (we called it).
  • Sears. We're tempted to run a pool to gauge when this sucker FINALLY files for bankruptcy but like the villain in Die Hard, Lampert will probably find a way to keep the thing coming back.
  • Rewind IGarden Fresh Restaurant has sold to Cerberus Capital Management in bankruptcy. Sun Capital's pain is Cerberus' gain. Speaking of Sun Capital, it seems they made out okay with their Limited investment thanks to distributions and dividends. To summarize, they made 1.8x their initial $50mm investment. And 4000 people are losing jobs.
  • Rewind IIGilden Activewear Inc. will acquire American Apparel for $88mm, a premium to the original stalking horse bid. Meanwhile, Nasty Gal received approval to sell its brand and customer information for $20mm. Wet Seal, meanwhile, looks headed towards a Chapter 22 at best and a liquidation at worst - not long after Versa Capital bought it out of bankruptcy for $7.5mm.
  • Rewind IIIJawbone continues to struggle as the wearables space continues to consolidate.
  • Chart of the Week
  • Tweet of the Week

News for the Week of 12/04/16

Filings down this week so packing in the news...

  • Aeropostale. Cascading effect. American Eagle Outfitters blames Aeropostale's going-out-of-business sales for same store sales declines and lowered forward guidance. Seems, however, that the pain is more widespread than that: this week mall retailer Express Inc.'s stock got trounced after reporting YOY net and comp sales declines (silver lining: e-commerce sales were up 15%). E-commerce isn't immune to downtrends either: laid off 90 workers this week with minority owner Ryan DeLuca stating the VERY obvious, "E-commerce is tough and getting tougher with competition from Amazon and thousands of others." 
  • Salus Capital. The zombie that was once Salus Capital is in the news again as it funds the Chapter 11 wind-down of Hampshire Group.
  • Sobey's. Another deadbeat (Canadian) grocer. Apparently the synergies expected from buying Safeway's Canadian stores haven't come to fruition.
  • Solar. A synopsis of the industry's convergence with restructuring and challenges that lay ahead.
  • Fast Forward: Many are now starting to call Uber's business model into question: an argument made easier by a $1.2b cash burn loss in the first six months of '16. 
  • Rewind I: Cosi Inc. was unable to find a new buyer, settling, in the end, on a $10mm sale to the original stalking horse bidder (including a credit bid).
  • Rewind II: Nasty Gal. If this report is true, there is something strangely disturbing about a company called "Boohoo" buying another called "Nasty Gal." 
  • Rewind III: Bennu Oil & Gas, LLC filed for Chapter 7 weeks after the involuntary chapter 11 filing against its subsidiary, Bennu Titan. Last week we discussed feasibility and the (seeming) proliferation of Chapter 22s. This story is too brutal to even be a 22.  
  • Chart of the Week: This International Energy Agency chart forecasts that we've reached peak oil demand. Still, tepid interest in Verengo Inc.'s SoCal solar assets (no bid topping stalking horse: effectively sold for credit bid).

Chart of the Week IINike. The sneaker manufacturer announced this week that it would skip conventional wholesale channels like Dicks Sporting Goods, Foot Locker and others and sell its self-tying $720 HyperAdapt sneakers BtoC via its Nike+ app and at the NYC retail store. Clearly, Nike is paying attention to these recent consumer trends:

News for the Week of 11/20/16

  • Alberta, Canada. Steps needed to weather the oil downturn. In the US, some claim that oil-related job loss is bottoming.
  • Coal. Restructuring professionals have made millions in Arch Coal, Alpha Natural Resources, and Peabody Energy. But there's real pain out there in coal country - pain that Trump has promised to assuage by bringing back jobs. With that in mind, "Blood on the Mountain" looks like required viewing. This preview is compelling: we urge you to watch it. Even if others are more realistic about those job prospects.
  • Sears. The retailer's issues accelerate as suppliers get increasingly nervous and some predict this will be its last Christmas. Retail, generally, looks set to bludgeon private equity.
  • Fast Forward: Nuverra discloses restructuring talks, UCI International DS approved and marching towards confirmation, Stone Energy launches solicitation and filing in early December, JCrew hires Lazard, Homer City forbearance extended to 11/21, Paragon Offshore back to drawing board with cram-up attempt thwarted, Energy XXI announces PSA.  
  • Rewind I: An in-depth discussion of the Nasty Gal collapse.
  • Rewind II: Steinway Musical Instruments. Is apparently not a restructuring target yet. The company received an equity cure from Paulson & Co., pushing any potential restructuring activity deeper into 2017. 4th Quarter sales will be critical to avoid covenant pressure in '17.
  • Chart of the Week