What We’re Reading This Week [October 26, 2020]
The Wall Street Journal reports that the trailing 12-month default rate for U.S. corporate issuers of speculative-grade bonds and loans was 8.5% in September of 2020, which is below the 11.2% forecasted by credit rating agency Moody’s in April 2020. [WSJ; Oct. 26, 2020]
Reporting from Business Insider details how subscription streaming service Quibi is shutting down nearly six months after it raised $1.75 billion in pre-launch investments. Quibi will reportedly pursue an assignment for the benefit of its creditors in lieu of filing for bankruptcy. [Business Insider; October 23, 2020]
On October 22, 2020, the New York Court of Appeals issued a split decision in CNH Diversified Opportunities Master Account, L.P. v. Cleveland Unlimited, Inc., finding that the holders of a minority in principal amount of senior secured debt retained the right to sue for payment on the notes after a majority holder-directed strict foreclosure that purported to cancel the notes. Justice Garcia authored the court’s opinion, which held the purported cancellation violated the indenture agreement (which incorporated language from the Trust Indenture Act) because the minority holders did not consent to the cancellation. [N.Y. Ct. App.; Oct. 22, 2020]
The Wall Street Journal reports that Purdue Pharma L.P., which filed for bankruptcy in September 2019, has agreed to settle the United States Department of Justice’s claims against it for approximately $8.34 billion, subject to bankruptcy court approval. Purdue Pharma L.P. will also plead guilty to three felonies as part of the settlement. The reporting further indicates that the company’s assets are far less than the $8.34 billion settlement amount, and that the Sackler family, who owns Purdue Pharma L.P., remains the subject of an additional criminal investigation. [Oct. 21, 2020]
In reporting for Bloomberg, Apollo Global Management’s head of credit investments Jim Zelter predicted a spike in commercial loan defaults starting in 2021 as companies struggle to service the debt they took on to respond to the COVID-19 pandemic. Zelter further predicted that an uneven economic recovery will keep companies in the travel, lodging, and entertainment sectors under financial pressure through late 2021 and beyond. [Bloomberg; Oct. 16, 2020]
