Rising Above Ratings: A Small Cap's Path to De-Leveraging and Beyond
Uncovering Overlooked Opportunities for Organic Growth and Deleveraging
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.
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