High Yields, Low Expectations: A Deep Dive into a Discounted Credit (>10% YTW)

Why Deep Discounts and Restructuring Could Signal Opportunity

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This week, I’m looking into a former market leader that has now become an industry laggard. The business faces clear secular headwinds, which have forced the management team to pursue an ambitious restructuring plan (as you would expect). Yet, liquidity is solid and there are no near-term maturities, providing runway for a potential turnaround.

So here we are—with deeply discounted bonds trading significantly wide of market spreads—within a somewhat complex capital structure. Despite some obvious challenges, I believe the market is wrong on the risk-reward profile. If the base case proves correct, a mid-teens IRR over the next year is possible.

In this deep dive, I’ll examine the investment case and explore why this situation may offer value in a name many have dismissed.