Provisions From January’s High Yield Bonds

Provisions From January’s High Yield Bonds
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It’s hard to keep up with all the new issuance, let alone the terms in those deals that could be detrimental to one’s investment. In a new report Xtract Research highlights provisions from January’s high yield bonds which may give many investors pause.

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Provisions You Need to Know From January’s High Yield Bonds

Highlights from the report include:

[Exclusive] ExodusPoint Is In The Green YTD Led By Rates And EM/ Macro Strategies

Invest ESG Leon CoopermanThe ExodusPoint Partners International Fund returned 0.36% for May, bringing its year-to-date return to 3.31% in a year that's been particularly challenging for most hedge funds, pushing many into the red. Macroeconomic factors continued to weigh on the market, resulting in significant intra-month volatility for May, although risk assets generally ended the month flat. Macro Read More

Truck Hero’s Senior Notes contain no restriction on reclassifying outstanding Term Loan borrowings ($1.55B) out of the credit facility basket when it can meet the ratios.

NGL issued notes that in one respect were far tighter than most deals, as the covenants include protections against early repayment of existing senior notes and antilayering provisions for liens and payment subordination that would limit "first out" debt to $25mm. However, reclassification risk exists that could allow for emptying of the credit facilities basket, as the outstanding ABL debt and notes issued on the issue date are "initially… deemed to have been incurred on such date" under the credit facilities basket. It does not require, as it should, that such debt may not be later reclassified.

This problem even exists in high yield lite bonds. In Crowdstrike’s Senior Notes while there is no debt covenant, there is nothing in the liens covenant that mandates that secured bank debt be incurred under the $1B credit facilities lien basket, and any liens that actually are incurred under that basket can be reclassified away from it.

The PetSmart and Park River deals include an expansion of the similar business definition that we have been seeing from time to time, since PetSmart’s alleged use of the basket (when it started moving part of Chewy out of the credit and into an Unrestricted Subsidiary (and also another portion to its sponsor)).

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Jacob Wolinsky is the founder of, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at) - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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