Industry Conferences and the Credit Research Process

Last week, I was fortunate enough to attend one of the most-respected high yield and leveraged finance conferences in the world; an event that remains the world’s largest and longest-running leveraged finance conference. Every year, the conference aims is to gather the most important issuers, investors and sponsors to discuss the themes that will shape the business in the year ahead. And while the planners designed an agenda with plenty of informative keynote sessions, I found that the most instructive and valuable sessions were the interactive panel discussions and one-on-one meetings.

As an example, on the evening before the conference officially kicked off, a group of investors had the opportunity to sit down with the finance executives of one of the largest high yield telecom issuers and learn first-hand of their business plans and how those will influence the company’s leverage and free cash flows. It was a great opportunity to get a direct view of all the information analysts and investors have had access to through conference calls and SEC reports, but in a clear and simple manner. Tomorrow, my colleague Ryan Fick will go into more detail, but I wanted to take a minute to explain why the interactions at conferences like this are valuable to a credit analyst. Essentially, conferences like this not only provide a great opportunity to meet fellow investors involved with the issuer, but also to meet the executives of the company.

On the first day of the conference, I met with over a dozen issuers in either in very small group meetings (two investors and the issuer), small group meetings, or large group meetings. When attending these types of events, I have three primary goals: gain insights into companies I already know and in which we may be invested, learn about new companies, and listen to companies that may shed light on sectors where we’ve got some research interest.

I find that one of the more unique, and valuable, aspects of these types of conferences for an analyst is finding out how competing companies view each other in the market, which can shed new light on how I look at these companies. In fact, one company intimated that a competitor of theirs was competing mostly by discounting prices. Then when I met with that other company later in the day, they claimed the “competing through discounting” was a total falsehood. That type of interaction gives me a new perspective not only on those two issuers, but also on how the competitive landscape looks from their perspectives. Fundamental research is the foundation of our investment process, and these types of conferences contribute valuable, and unique, insights to that research.

 

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