š„Drama-ramaš„
23andMe Holding Co. ($ME), Forever 22, Nikola Corp., FRG + Prospect Healthcare
This week we geek the eff out on a bunch of ongoing RX situations (as we await others to hit, e.g., Rite-Aid 2.0, WeightWatchers, At Home Group, Sunnova, Solo Brands, Claireās, etc.) so weāll let Apollo Global Managementās Torsten Slok do the geeking out on macro trends. You can read his 40-page slide presentation titled āHow are US Consumers and firms responding to tariffs?ā here:
The TL;DR: heās predicting stagflation (āSince the trade war began in March, consensus expectations for growth have been revised down, and consensus expectations for inflation have been revised up ā¦ [t]his is the definition of stagflation: higher inflation and lower growth.ā) š³
Heās not alone to suggest tougher times lay ahead.
On April 30, 2025, Fitch Ratings released its āU.S. Distressed and Default Monitor: April2025ā and (its AI) had this to say:
āFitch Ratings has revised its 2025 US default rate forecasts for leveraged loans to 5.5%-6.0% and high-yield to 4.0%-4.5%, driven by higher-than-anticipated tariffs, resulting in a projected GDP growth of 1.2% for 2025, increased inflation, and a single 25 basis points Fed rate cut expected in 4Q25, which will continue to pressure highly leveraged corporate issuers, particularly in sectors like automotive, retail, and technology, leading to increased distressed debt exchange activity and defaults.ā
Consistent with that forecast, agency downgrades are on the upswing:
Not that you can tell that thereās trouble brewing, really, from the equity markets: weāve recovered from the āLiberation Dayā doom and gloom and weāre ā¦ gulp ā¦ risk on all over again ā¦ ?
The S&P 500 is only down 3.1% YTD after ripping for nine consecutive days ā something that is great! And simultaneously terribleš!!?
But itās not just the S&P 500 that turned around. BTC hit $100k at one point on Friday. And the broadly syndicated leveraged loan market is rebounding (ok, fine, weāre being generous when we say āreboundingā but in contrast to most of April, thereās actually some new issue out in the market ā and from Dr. Slokās Apollo!).
Where things go from here is anybodyās guess, š¤·āāļø, but weāre sure thereāll be all kinds of notions swirling around on the RX-charity circuit these coming weeks, š. For now, letās brush aside the future and focus on the present. Letās dig in.
š§¬Update: 23andMe Holding Co. ($ME)š§¬
Yāall will recall that 23andMe Holding Co. ($ME) and 11 affiliates (collectively, the ādebtorsā) filed chapter 11 bankruptcy cases in the Eastern District of Missouri (Judge Walsh) back on March 23, 2025.
Since then, bureaucracy has been the name of the game: itās a good 90% of whatās happened. But before we turn to that, letās discuss the 10%: restructuring matters that have nothing to do with an ombudsman.
First up, on April 3, 2025, the US trustee (the āUSTā) appointed a 5-member official committee of unsecured creditors (the āUCCā),* represented by Kelley Drye & Warren LLP (Jason Adams, Eric Wilson, Maeghan McLoughlin, Steven Yachik) and Stinson LLP (Nicholas Zluticky, Zachary Hemenway, Miranda Swift), and as far as we can tell, things are relatively drama-free between those folks and the debtors because the second-day hearing was unremarkable. The court entered final orders on all of the relief it approved on an interim basis back in late March and that was that ā truthfully not too surprising an outcome given that the debtors didnāt have any prepetition funded debt.
Second, on April 14, 2025, the debtors filed a motion to have the debtorsā CRO Matthew Kvarda (of Alvarez & Marsal North America, LLC) serve as their foreign representative in Canada. Or at least until itās no longer foreign and folded in as the 51st state.**
