ABC_11_09_17

From Investors

isney (DIS)-ABC Television Group is said to be planning to cut about 10% of its annual budget, a move that could include up to 300 layoffs across several Disney-owned channels by the end of September, according to the Wall Street Journal.

ABC, ABC Studios, ABC News and local TV stations will reportedly take the biggest hit, and Disney Channel and Freeform’s staff will also be impacted. Variety sources said that no head count has been formally determined yet, and that Disney’s aim with the restructuring is to free up more resources for content development.

Disney’s rivals, both in the traditional entertainment space and burgeoning streaming arena, are pumping resources into original and licensed content.

Netflix‘s (NFLX) content chief Ted Sarandos recently told Variety that the company is likely to up its content spending to $7 billion in 2018 from $6 billion this year. The streaming heavyweight recently lured away ABC’s hitmaker, Shonda Rhimes, the creator of “Scandal” and “Grey’s Anatomy.”

Amazon (AMZN) Studios devoted an estimated $4.5 billion to content. Even Apple (AAPL) has put some money on the table, and is reportedly set to spend $1 billion on originals.

 

Oi_11_09_17

From Reuters

SAO PAULO, Aug 29 (Reuters) – A Rio de Janeiro court decided that billions of reais in debt the telecom company Oi SA has with Brazil’s regulator Anatel should be included in the firm’s in-court debt restructuring, Oi said on Tuesday.

The decision, if confirmed, is a blow to Brazil’s prosecutor’s office, which wanted Oi’s debt with the federal telecommunications watchdog to be treated separately and with a different status.

Representatives for the Rio appeals court, which according to Oi confirmed a ruling from a previous court, could not be immediately reached for comment or confirmation.

In an unrelated statement, the company said the Rio de Janeiro court authorized payment to small creditors before the largest ones, as proposed by the phone carrier in May.

Oi’s bankruptcy protection case, opened last year, is the largest ever in Brazil with a total debt above 60 billion reais ($18.96 billion) and around 55,000 creditors.

Distressed_11_09_17

From Bloomberg

Investors who’ve ridden a monster rally in the riskiest corporate bonds over the past year are now left with slim pickings.

The number of emerging-market securities paying yields more than 10 percentage points above Treasuries is the lowest in a decade as surging demand pushes up prices, according to data compiled by Bloomberg and JPMorgan Chase & Co. Just last year, the average payout on company debt from Brazil, Ukraine and Iraq all reached so-called distressed levels. But rallies in the three countries have now pushed yields well below that threshold.

On one hand, the scarcity of distressed credits is reflective of the huge gains in the riskiest bonds over the past year — JPMorgan says emerging-market securities with the lowest credit scores returned an average of 26 percent, seven times as much as investment-grade notes. But the phenomenon also raises red flags for investors who say it shows complacency among bond buyers taking on enormous risks because they’re desperate for high yields.

 “There is too much money coming to emerging markets, so leverage is increasing and investors are piling on certain trades of dubious quality,” said Diego Ferro, the co-chief investment officer at Greylock Capital Management, which specializes in undervalued, distressed and high-yield assets. “Not all of them are poor quality, but almost all of them are well bid.”Only 26 emerging-market corporate issuers have an average yield of 10 percent or higher versus 60 issuers a year ago, Bloomberg data show. The average yield on junk-rated corporate debt from developing-nation issuers has fallen almost a full percentage point from mid-November to about 6.43 percent, according to JPMorgan data.

To be sure, some of the reduction in the availability of distressed credits is due to reduced political risk in countries such as Brazil, Russia and Ukraine, as well as a slew of defaults in 2016 that took out some of the highest-yielding bonds. And companies such as PT Indika Energy, Vedanta Ltd. and Digicel Group Ltd. left the distressed camp after refinancing shorter-term maturities to shore up their finances.

But for investors dedicated to the highest-yielding debt, fewer options means there’s growing risk they’ll snatch up credits with less upside than a year ago.

“There are very few names that pay double-digit yields anymore,” Steve Drew, the head of emerging-market credit at Janus Henderson, which oversees $331 billion in assets, said from London. “We have a scarcity of assets that will pay you what is needed to match the liabilities that are out there.”

Fragile_Brazil_11_09_17

From Reuters

SAO PAULO, July 05 (Fitch) The severe recession, corruption scandals and a difficult external economic environment have simultaneously challenged Brazilian bank credit quality and spurred a distressed debt market, according to Fitch Ratings.

“Brazilian banks have remained conservative, with limited risk appetite and restrained growth prospects. Even government owned banks, with outstanding loans that grew by 83 percent versus 22 percent for private bank peers between 2011 and 2014, decided to decelerate loan growth and reviewed their underwriting standards,” said Claudio Gallina, Senior Director. “However, the distressed loans market is gaining traction as in Portugal, Greece and other economies that have faced severe economic turbulence.” Domestically, the bulk of the impaired loans have already been written off from the banks’ balance sheets.

Fitch estimates that total outstanding distressed loans in Brazil are around BRL500 billion, including BRL122 billion of non-performing loans that are still registered on the banks’ balance sheet. Both local international banks are entering the Brazilian market. For the lenders, benefits include short-term cash flow generation, reduction of tenor mismatches between assets and liabilities, and favorable tax treatments. For buyers, pricing and loss recovery prospects are the determining factors and depend on the type of loans, tenors, interest rates and guarantees. Nevertheless, on average, distressed loans have been sold at around three to four percent of their face value. The average profitability of distressed debt investing is around 30 percent in Brazil, a solid return considering it involves a collection service fee and consumes very little capital. Foreign banks have been increasingly interested in Brazilian distressed loans, especially the ones originated in the retail / residential mortgage portfolios, given the strong potential for recovery due to the loan guarantees.

The acquisition of Brazilian bank non-operating assets is another growing market. The bulk of transactions are foreclosed real estate owned by banks following the recovery of the collateral backing residential mortgage loans. Banks normally aim to reduce their foreclosed assets, given their high capital consumption, as well as the relatively high administrative and maintenance costs. While local players are actively managing distressed loans, international players are encountering challenges specific to Brazil with both distressed loans and non-operating assets.

Complex contract structures, local characteristics of ownership and registration of guarantees, cumbersome notary procedures, and compliance issues are among the main difficulties. Executing partnerships with local players is a common, though still new, solution. Contact: Claudio Gallina Senior Director +55-11-4504-2216 Fitch Ratings Brasil Ltda. Alameda Santos, 700 – 7th floor, Sao Paulo, Brazil. Jean Lopes Director +55 – 21 – 4503-2617 Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com.

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Ohio_11_09_17

From Us news

CLEVELAND (AP) — A telemarketing company owned by a politically connected multimillionaire who was sent to prison for witness tampering has filed for bankruptcy protection.

Suarez Corporation Industries said in a bankruptcy court filing that it owes $10 million to $50 million and has $500,000 to $1 million in assets.

Company owner Ben Suarez, 75, was convicted of witness tampering charges in a campaign finance investigation and spent just over a year in prison before being released in early 2016.

Suarez was convicted of witness tampering in June 2014 but acquitted of seven other charges related to campaign contributions made by employees, relatives and others to the 2012 campaigns of U.S. Rep. Jim Renacci and the failed U.S. Senate bid of OhioTreasurer Josh Mandel. He had sought the politicians’ help in fighting a California consumer practices complaint.

Neither politician was accused of wrongdoing. Both campaigns returned the money after an FBI investigation was made public.

 Suarez’s attorneys argued that he did not know it was illegal to reimburse the contributors.

Cleveland.com reports (http://bit.ly/2wqE1rn ) that a court filing blamed the SCI’s current money trouble on the Great Recession and Suarez’s time in prison.

The company based near Canton owes money to 100 to 200 creditors, including property companies, technology companies and banks, according to the bankruptcy petition.

Alfred_Angelo_11_09_17

From Sun

rides: If you really want that Alfred Angelo wedding dress, get prepared to make a bid on Sept. 2 in Deerfield Beach.

On Monday, a bankruptcy court judge in West Palm Beach approved the auction of hundreds of thousands of dollars in sample wedding dresses and other inventory being held in Alfred Angelo’s warehouse in Deerfield Beach.

The auction was sought by court-appointed trustee Margaret Smith “to limit administrative expenses” in the company’s Chapter 7 case, according to Patricia Redmond, lawyer for Alfred Angelo. The 84-year-old company closed its stores around the world and filed for bankruptcy in mid-July.

Only sample dresses and wholesale inventory stored in the warehouse will be on the auction block — not those sold at retail stores in South Florida, said D. Brett Marks, lawyer for the trustee.

All dresses and other goods will be sold “as is,” according to the court filing.

Stan Crooks, long-time auctioneer and owner of Auction America in West Palm Beach, has been hired to auction the warehouse contents. He said Monday there are about 5,000 bridal gowns in the warehouse.

Crooks said if the warehouse contains any dresses that have deposits on them — and he’s not sure it does — he will work to return those dresses to the original buyers.

There will be an 8 a.m. viewing the same day, by appointment, and he’ll have more information about that and the inventory on his website, http://www.2bid4stuff.com, in coming weeks.

Crooks said he plans to hire about four former Alfred Angelo employees to help him take inventory of the warehouse before the auction.

As for proceeds from the auction, a priority will be given to CardConnect, Alfred Angelo’s credit card processor, according to the court filing.

While some brides with weddings within weeks of the retailer’s closure were able to pick up their gowns, other women with weddings in the months ahead are out of luck. The trustee has warned that if a dress hasn’t been delivered, brides and other customers shouldn’t expect them, as those orders will “remain unfilled.” For those people who are owed money, Smith posted a link on https://www.alfredangelo.com to make a claim.

Experts say Alfred Angelo was a traditional bridal boutique that carried mostly sample dresses, ordering desired dresses from manufacturers in China and elsewhere. The company moved too late to turn around amid a rising tide of debt.

Toys_11_09_17_01

From Bloomberg

Toys “R” Us Inc. has tapped lawyers at Kirkland & Ellis to help restructure its heavy debt load, said people familiar with the matter, the latest sign of trouble for a once-mighty retailer that has struggled to fend off Amazon.com Inc. and the discount chains.

The law firm’s restructuring experts are focused on the $400 million in debt that comes due next year, according to the people, who asked not to be identified because the deliberations are private. Toys “R” Us also has retained Lazard Ltd. to help with debt refinancing, the people said.

A restructuring would help Toys “R” Us get its house in order ahead of the all-important holiday season, when the company has its biggest sales surge. The chain has previously said that it’s evaluating a range of options for its 2018 debt load, including the possibility of lining up more financing.

Amy von Walter, a spokeswoman for the Wayne, New Jersey-based company, said it would provide more details during its second-quarter conference call later this month. The company has “many initiatives underway to provide an outstanding customer experience in our global retail locations and web store during the holiday season,” she said in an email.

Bonds Fall

The company’s $583 million 12 percent of first-lien bonds maturing in 2021 dropped 3.9 cents on the dollar to 92 cents after reports the retailer hired advisers for debt restructuring.

Toys ‘R’ Us has sufficient liquidity for its needs in 2017 despite a decline in the cash on its balance sheet to $211 million at the end of the second quarter, according to a Bloomberg Intelligence report in July. The combined effect of an increased borrowing base and use of payables for seasonal inventory adds to revolver availability that should be enough to navigate the 2017 holiday-shopping season, analyst Noel Hebert said in the report.

CNBC previously reported on the restructuring efforts, saying that one possible outcome of the deliberations could be bankruptcy. The report rippled through the toy industry and pushed down shares of Mattel Inc. and Hasbro Inc.

Bankruptcy isn’t being seriously discussed at this point, people familiar with the matter told Bloomberg.

Toys “R” Us’s private equity owners — Bain Capital, KKR & Co. and Vornado Realty Trust — loaded up the retailer with debt in a $7.5 billion buyout more than a decade ago.

Representatives for Bain, KKR and Kirkland & Ellis didn’t respond to requests for comment. A representative for Vornado declined to comment.

Last year, the chain extended maturities on some of its borrowings, giving it more time to execute a turnaround plan by Chief Executive Officer Dave Brandon. As part of his comeback bid, he’s looking to spruce up stores with more toy demonstrations and other experiences — seeking an edge on online sites such as Amazon.

But it’s been a struggle for the chain. Last Christmas brought disappointing results: Same-store sales dropped 2.5 percent during the final nine weeks of last year, hurt by sluggish demand and deep discounts.

— With assistance by Matthew Townsend

Toys_11_09_17

From CNBC

Toys R Us has hired a law firm to help restructure its roughly $400 million in debt due in 2018, a move that could include the marquee toy store filing for bankruptcy protection, sources familiar with the situation said Wednesday.

Addressing the retailer’s debt load prior to the crucial holiday season could give its major vendors such as Mattel and Hasbro clarity into the company’s long-term viability to help ensure the toymakers continue to stock its shelves throughout the holidays.

Toys R Us has hired restructuring lawyers at Kirkland & Ellis to help address the looming payments, the people said.

 Hiring a law firm like Kirkland is not indicative of a bankruptcy filing, and many companies work with law firms to successfully refinance or restructure their debt without filing for protection.

The company has already announced it is working with Lazard to help address its debt load, and it successfully refinanced some of its debt just a year ago. Still, it has become increasingly difficult for leveraged retailers to tap the refinancing market, as lenders have become spooked by the increasing number of retail bankruptcies.

“As we previously discussed on our first quarter earnings call, Toys R Us is evaluating a range of alternatives to address our 2018 debt maturities, which may include the possibility of obtaining additional financing,” Toys R Us spokeswoman Amy von Walter said in a statement.

“We expect to provide an update about these activities, as well as the many initiatives underway to provide an outstanding customer experience in our global retail locations and webstore during the holiday season, during our second quarter earnings call.”

Toys R Us will have its second-quarter earnings call on Tuesday, Sept. 26.

Toys R Us owners Kohlberg Kravis Roberts, Bain Capital Partners and Vornado Realty Trust either declined to comment or did not immediately have a comment. Kirkland also did not immediately have a comment.

The potential restructuring comes amid increased competition from both brick-and-mortar and online players. Big-box stores such as Wal-Mart have for years driven down prices of toys to draw parents into their stores to buy other more expensive goods. E-commerce giant Amazon.com has become an increasingly formidable competitor.

Toys R Us’ baby-centered store, Babies R Us, meanwhile, has seen diaper sales fall as parents increasingly buy diapers through online subscription businesses offered by Amazon and other e-retailers.

Wayne, New Jersey-based Toys R Us blamed intense promotional activity and slowing baby business sales for its disappointing 2016 holiday results. The company, which relies heavily on holiday purchases to support its year-round business, saw same-store sales drop 3.4 percent from the previous holiday season.

The weaknesses have carried into the spring, with the company reporting in June that it had a net loss of $164 million in the fiscal first quarter of 2017, widening from $126 million a year earlier. Its same-store sales dropped 4.1 percent.

Toys R Us had roughly $301 million in cash on its balance sheet as of April 29.

Toys R Us has sought to address its challenges under the guidance of CEO Dave Brandon by expanding in Asia and investing in a new website and baby registry. It has also been downsizing its real estate footprint, including closing its Times Square flagship in 2015.

The retailer announced in August that it will be opening a 35,000-square-foot temporary shop in the historic Knickerbocker Building in New York for the holiday season. The retailer has an option to renew the lease to extend its stay, a source familiar with the situation said.

Toys R Us was taken private by KKR, Bain and Vornado in 2005 in a deal valued at $6.6 billion.

Its owners had tried to take the company public, filing for an initial public offering in 2010, but later pulled it, citing challenging market conditions. At that time, the toy industry was struggling to deal with the increasing popularity of electronic gaming apps.

A restructuring could help Toys R Us simplify a capital structure made complex by its trio of owners and get out of expensive leases. It would follow on the heels of several private equity-backed retailers that have filed for protection to tackle oversized store footprints and debt loads.

Golden Gate Capital-backed Payless ShoeSource for example recently emerged from bankruptcy after shuttering roughly 700 stores across the U.S. with goals to grow in Latin America.

Bain-backed Gymboree is closing roughly 350 stores in bankruptcy, in hopes of re-emerging with only its most lucrative stores.

Essar_11_09_17

From Bloomberg

The Edelweiss Group, part of the lenders’ consortium to Essar Steel Ltd., is willing to provide nearly Rs 800-crore interim financing to help the steelmaker stay afloat during insolvency proceedings, three people aware of the matter told BloombergQuint requesting anonymity.

Through its stressed asset funding business, Edelweiss has agreed to fund Essar Steel for six months at an interest rate of 15-20 percent, the people quoted above said. The financial services major has discussed the proposal with Satish Kumar Gupta, the interim resolution professional in the Essar Steel insolvency case. It’s now waiting for an approval from the committee of creditors, as is the norm under the Insolvency and Bankruptcy Code, two of the three people quoted above said.

Essar Steel was among the first list of dozen companies – contributing a quarter of Indian lenders’ bad loans – that the Reserve Bank of India had identified for insolvency proceedings. The steelmaker, among the largest insolvency cases with a debt of over Rs 40,000 crore, had challenged the move in the Gujarat High Court but failed to get relief.

Interim financing is essential to keep Essar Steel as a going concern till lenders and the IRP finalise a restructuring plan within the stipulated 270 days.

Lenders in the committee of creditors are generally not very keen on approving financing offers as they don’t want to increase their exposure to any account classified as a non-performing asset. There is also the problem of provisioning against these additional loans, as lenders are not clear whether they would have to provide for half of these funds upfront. Any funding proposal outside the lending consortium requires the approval of the committee of creditors.

Edelweiss Asset Reconstruction Company Ltd. is a member of the lending consortium to Essar Steel. The ARC had purchased the steel company’s loans from HDFC Bank Ltd., Federal Bank Ltd., Axis Bank Ltd. and ICICI Bank Ltd. However, the interim funding proposal has come from a different arm of the Edelweiss Group.

In a meeting held on Wednesday, the insolvency professional apprised lenders of the Edelweiss offer. Gupta is from turnaround and interim management firm Alvarez & Marsal India, which was appointed by a consortium of lenders led by State Bank of India for the insolvency case.

Essar Steel and Edelweiss have declined to comment in response to separate emailed queries from BloombergQuint. Alvarez & Marsal India is yet to respond.

Lenders have sought details from the IRP about the end use of these funds. They also want to know what Gupta intends to do with the revenue of the company, now that he has asked them to suspend tagging these funds as repayment, according to the people quoted above.

In a previous meeting, the IRP had asked the lenders to allow the company to use the funds to keep its operations moving. The steelmaker earned around Rs 200-250 crore a month through its operations, which was entirely being tagged by lenders towards payment of interest on the loan exposure, according to the first of the three people quoted above.

On its part, the Edelweiss Group has been actively looking for funding opportunities in India’s stressed asset space for some time now. It had tied up with Canada’s second largest pension fund, Caisse de Dépôt et Placement du Québec, in October 2016 to scout for stressed asset funding opportunities in India. Under the deal, CDPQ would invest $750 million in India through Edelweiss, most of which would go into funding stressed assets. A part of these funds was invested in the ARC arm of the Indian company.

At the time, Rashesh Shah, chairman and chief executive officer of Edelweiss, had said that the financial services company wanted to invest Rs 12,000-14,000 crore in the stressed asset space, which included the funds from Canada.