Douglas - Just like Lowell
All,
We’ve had some questions incoming on the Douglas news - that the company are looking to identify their creditors to explore options. Such an exercise makes perfect sense to us.
Similar to Lowell, Douglas will be a self-help deal. The majority of demand for the new paper will come from those in the name already - facing losses if the deal does not fly. CVC then have to find less capital to make up the margin.
There are two similarities and two differences to Lowell here:
Similarities:
1) We think that in both cases the SSNs won’t want to have another SUN tranche ranking behind them
2) Fresh Cash from outside CVC might have a chance leveraging the equity above the structure - not appearing on the BS, but ranking effectively in the same place as the current SUNs with possibly very attractive economics (and some risk admittedly).
Differences:
1) There is no CDS on Douglas, which we think is a disadvantage as the usually concentrated sellers can often contribute
2) Douglas is the far better company.
The Lowell refi fell flat in the first round. This could happen at Douglas as well, although we do not think so. We are remaining long the Subs for 6.5% of NAV.
Here to discuss,
Wolfgang
____________________
E: wfelix@sarria.co.uk
T: +44 203 744 7003