Rising Above Ratings: A Small Cap's Path to De-Leveraging and Beyond

Uncovering Overlooked Opportunities for Organic Growth and Deleveraging

Executive Summary:

In this post, I review a publicly-traded small cap company with quite a tenured history. The company’s leverage is currently high; however, I think there is a credible path to organically de-leverage over the next 12-24 months, absent a recession.

The company has an overlooked, small-tranche bond issue which is rated CCC; however, I think this is closer to B- risk. As the company de-leverages over the near-term, I think its bonds should re-rate closer to B-credit risk, potentially driving attractive double-digit returns. Lastly, there’s upside in the trade to the extent markets begin to price this as YTC paper as the maturity window is approximately 3 years.

Disclosure: The information provided is for informational purposes only and should not be considered as investment advice. Any investment decisions made based on the information provided are at your own risk. It is essential to conduct your own research and consult a qualified financial advisor before making any investment decisions. Investing involves risks, and past performance is not indicative of future results. By using this information, you acknowledge that you are responsible for your own decisions and release me from any liability. Seek professional advice tailored to your financial situation and objectives.