Looming Crisis: Unmasking a Company's Descent into Liquidity Woes and Impending Bankruptcy

A Deep Dive into a Strategic Bond Short Opportunity

Executive Summary:

In this post, I review a compelling short opportunity in a #shitco’s baby bonds. The company is currently facing a liquidity crises that stems from operational underperformance coupled with high debt and near-term maturities.

I believe this company will ultimately file bankruptcy in the next 12-24 months and that the discussed securities herein are all fundamentally worth 0.

Unlike in other highly-levered situations, the issues above are met with a tight credit agreement and a sophisticated lender. Unfortunately, I do not see a way this can be resolved through liability management.

The reason the opportunity exists is because the bonds are baby bonds that are held primarily by retail investors. They are attracted to the high all-in yield but do not understand capital structure or realize the company will run out of cash to make these interest payments.