Andy Hagan, Tom Richards, and Gilles Teerlinck from Weil, Gotshal & Manges discuss liability management in today's credit markets. They cover confronting volatility, equity injections, and executing amend-and-extends when CLOs are out of reinvestment. Other topics include refinancing debts, loan consent techniques, and the push and pull dynamics of liability management in 2021.
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Quick takeaways
Navigating the volatile credit markets requires proactive liability management strategies, including refinancing options and alternative capital providers.
A&E transactions in the loan market, aimed at adjusting debt maturity, involve incentivizing investors and are influenced by CLOs.
Deep dives
Liability management and upcoming maturities
The podcast episode delves into the topic of liability management in the bond and loan market, specifically for pre-stress or stressed companies. With a significant amount of debt coming due in the next few years, the podcast highlights the importance of refinancing discussions and getting ahead of the curve. The conversation focuses on refinancing options, such as opportunistic buybacks, addressing capital structure through exchange or tender offers, and exploring alternative capital providers. The volatile market conditions and the need to be prepared for when a window opens are also emphasized.
Loan market and A&E transactions
In the loan market, A&E (amend and extend) transactions are prevalent due to the scarcity of new money deals. The podcast explains that A&E transactions aim to keep the existing investor base while adjusting the debt's maturity timeline. The advantages, challenges, and techniques of A&E transactions are discussed, including incentivizing investors with increased economics or covenant stripping. The podcast also mentions the role of CLOs (collateralized loan obligations) in influencing loan market dynamics.
Bond market and refinancing strategies
In the bond market, the focus is on refinancing strategies and liability management through exchange offers. The podcast highlights that these exchange offers are often geared towards current investors rather than distressed situations. The discussion emphasizes the importance of economics, pricing, and maintaining a positive investor base. The podcast also mentions the consideration of covenant adjustments and the potential impact on ratings when structuring exchange or tender offers.
Primary markets are not as simple as they used to be. How can borrowers navigate the choppy waters of today’s credit markets to manage their liabilities?
In this week’s episode of the Cloud 9fin podcast, Brian Dearing chats to Andy Hagan, Tom Richards and Gilles Teerlinck of Weil, Gotshal & Manges to get the lowdown on how companies are dealing with a challenging market backdrop.
They discuss confronting volatility, the ins and outs of equity injections, and the difficulty of executing amend-and-extends when CLOs are out of reinvestment.
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