FICC Focus Beach Point’s Sauer on LMEs, Coops: State of Distressed Debt
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Nov 14, 2024 Jordan Sauer, Senior Vice President at Beach Point Capital Management, shares his expertise in distressed debt and credit agreements. He emphasizes the necessity for lenders to be 'hyper-vigilant' during liability management exercises. Sauer discusses how his legal background equips him to spot vulnerabilities in credit agreements. The conversation covers the low distressed ratio's impact on investor behavior and delves into the evolving landscape of leveraged buyouts, highlighting creditor engagement and negotiation in distressed scenarios.
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Historically Tight Spreads
- High yield spreads are currently near historic tights, last seen before the 2008 financial crisis.
- This signals potential over-optimism and necessitates extra caution from investors.
Beach Point's Approach
- Jordan Sauer's legal background at Wachtell Lipton informs his investment approach at Beach Point Capital.
- Beach Point, with $18B AUM, focuses on credit opportunities across the capital structure.
Rise of Distressed Exchanges
- Distressed exchanges are increasingly common, comprising two-thirds of defaults, up from 20% in 2008.
- Covenant quality in loan documentation continues to decline, increasing risk for investors.