US High Yield Year in Review 2020

US High Yield Year in Review 2020
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In a new report, Xtract Research presents a recap of material issues and developments from 2020 high yield bonds.

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Q4 2020 hedge fund letters, conferences and more

Highlights from the report include:

Fund Manager Profile: Zhang Hui Of China’s Southern Asset Management

investHistorically, the Chinese market has been relatively isolated from international investors, but much is changing there now, making China virtually impossible for the diversified investor to ignore. Earlier this year, CNBC pointed to signs that Chinese regulators may start easing up on their scrutiny of companies after months of clamping down on tech firms. That Read More

We saw only a few express documentary addbacks for COVID-19 related expenses in draft private loans (but not bonds) (an add back for “extraordinary, unusual or nonrecurring Charges, including those in connection with the COVID-19 pandemic and in another an adjustment to CNI for “one-time costs and expenses associated with any epidemic, pandemic or disease outbreak, including COVID-19, up to $10mm per period.”

As a general matter, most bonds have not included tighter covenants in our COVID-19 world. Deals post March 2020 looked an awful like deals pre March 2020.

High Yield Lite Style Covenant Packages

Covenant packages for repeat issuers have been consistent with prior deals, incorporating the same existing aggressive terms, even for companies operating in hard hit sectors, such as Hilton, Marriot Ownership Resorts, AMC and YUM! Issuers who had previously issued high yield lite bonds, such as WYNN Resorts, YUM! and Cleveland-Cliffs issued new bonds with the same high yield lite style covenant packages.

While the bonds issued by The Gap and Cedar Fair blocked their respective issuers from accessing certain baskets, those blocks fell away upon the availability of Q2 or Q3 2020 financials (regardless of what the results said).

Non Consensual Subordination of First Lien Debt: while we did not see this phenomenon in the bond context, we include it here as a cautionary tale: first lien debt can find itself subordinated if the documentary stars align. The loan market saw several high profile situations—Serta Simmons and Boardriders—in which minority first lien lenders found themselves subordinated to new debt, without their consent, knowledge and in one case without any restrictive covenants.

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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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