Author Topic: Proof there are a million ways to value invest WIN/UNIT  (Read 517 times)

Gregmal

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Proof there are a million ways to value invest WIN/UNIT
« on: February 15, 2019, 04:59:04 PM »
https://reorg-research.com//pdf/1862178.pdf

I'd imagine there are at least a few on these boards who were following this. Fascinating stuff.

Knowing the law well enough to find value discrepancies in linked securities. Someone just made a fortune


sarganaga

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Re: Proof there are a million ways to value invest WIN/UNIT
« Reply #1 on: February 15, 2019, 05:38:53 PM »
Wow!!! Thanks for posting this. Fixed income can be really complicated & treacherous.

WneverLOSE

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Re: Proof there are a million ways to value invest WIN/UNIT
« Reply #2 on: Today at 04:17:41 AM »
a TLDR summary would be nice  8)
« Last Edit: Today at 04:19:49 AM by WneverLOSE »

Cigarbutt

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Re: Proof there are a million ways to value invest WIN/UNIT
« Reply #3 on: Today at 05:25:48 AM »
Humble take.
It is the story of an activist-type hedge fund that gets involved in distressed scenarios and who is ready to use variable strategies in order to realize large gains.
The case seems to revolve around the definition of a sale-leaseback transaction done by a sub of a holding company that had issued bonds with indentures that could be interpreted in many ways.
The judge had to decide if the issuing firm unfairly avoided default or if the active player in the restructuring is trying to fabricate a default.
The latter won the last battle but I would say that the jury is still out.

bizaro86

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Re: Proof there are a million ways to value invest WIN/UNIT
« Reply #4 on: Today at 06:43:44 AM »
I read the decision. There were two main issues.

Was the sale of the network a sale-leaseback? If so, they violated their covenants and had an event of default, which required them to buy back these bonds. I'm not a lawyer, but it seems pretty obviously yes.

The second question was did they successfully weasel out of the default by converting other types of bonds into this class and getting them to waive the default. Still not a lawyer, and the judge ruled their machinations didn't count because the new debt wasn't allowed to vote under the indenture.

Cigarbutt

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Re: Proof there are a million ways to value invest WIN/UNIT
« Reply #5 on: Today at 07:09:11 AM »
This case is another example where the credit default swap instrument can give rise to an unusual set of incentives.
https://www.ft.com/content/98fd33c8-b93d-11e8-94b2-17176fbf93f5
Who said that reading a bond indenture was boring?

shhughes1116

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Re: Proof there are a million ways to value invest WIN/UNIT
« Reply #6 on: Today at 08:48:25 AM »
This is a pretty interesting situation.  When Windstream did the exchange for this debt maturity, those that exchanged the debt agreed to waive the default claim.  I think a majority of the bondholders did the exchange, except Aurelius of course. Will be interesting to see how this “forced default” plays out in court, not only with Aurelius but also with the other bondholders.  I suspect this situation will drag out for quite some time.

Not sure if anyone here has an actual stake in either Windstream or UNITI.  I took a 1% position in UNITI a while back on the belief that they will continue to diversify away from Windstream, the master lease for the fiber assets is unlikely to be rejected in court (and if it is, I have trouble believing the subsequent renogiation will be crushing to Windstream), and the belief that they will slash the dividend and use the cash flow to invest in additional assets to continue diversifying away from Windstream.  Given the after hours debacle with WIN and UNITI, I hope UNITI management uses the ensuing storm to slash the dividend now, and put that money to more productive use.