Credit research is tough enough without trying to do it with one arm tied behind your back. Back in the day, credit analysts would diligently put together massive spreadsheets with all kinds of metrics that explained all aspects of a company’s financial performance and credit strength. These days, however, you have quant geeks trying to boil everything down to one number that “explains it all” so that picking relative value is somehow “easier.” The most common relative-value graph produced by the Street these days is a plot of leverage versus yields. Well, in our view, easy isn’t the best in the world of high yield credit. We’ve seen numerous “credit pickers” out there focused entirely on leverage, who have totally forgotten the rest of the important credit metrics, particularly, coverage. Read more
Posts tagged ‘credit research’
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. Read more