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Distress Funds Target Beaten-Down Tech Bonds; Sinclair Unit's Debt Deal
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Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Friday, January 14. Here's what you need to know: Convertible bonds issued by technology companies are migrating into the hands of distressed asset managers, a consequence of a broad selloff hitting the sector.
Note to readers: Our next newsletter will arrive on Tuesday as we take Monday off to remember the Rev. Martin Luther King Jr.
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PHOTO: JOHANNES EISELE/AGENCE FRANCE-PRESSE/GETTY IMAGES
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A broad tech selloff pushes ex-unicorn bonds into distressed hands. Distressed-debt funds have been purchasing discounted convertible bonds issued by technology companies and former unicorn startups after a broad sector selloff, sometimes reaping double-digit yields in an otherwise benign credit market characterized by low defaults and accommodative lenders.
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Convertible securities don’t usually carry the high interest rates or collateral guarantees that distressed investors typically seek, but opportunities in distressed debt are currently limited as the leveraged loan and high-yield bond markets have rebounded strongly since the pandemic began, driving interest in alternative assets. Buyers are effectively taking the other end of short bets being unwound by hedge funds, such as convertible arbitrage funds. Following a rout of tech stocks that began in the fall but has continued into 2022, those funds have cashed in on the short bets and have been selling off the hedges.
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Sinclair unit secures financing amid push into streaming. Sinclair Broadcast Group Inc., the largest owner of regional sports channels, said its sports unit has secured $600 million in debt financing as it develops a streaming service that it aims to launch by the third quarter.
Regional sports networks, once engines of growth for media companies due to the high fees owners were able to charge cable and satellite companies to be included in traditional pay-TV packages, have been hit hard by cable cord-cutting. Pivoting to streaming has become a high priority. Diamond Sports Group LLC, a heavily-indebted subsidiary that owns Sinclair's portfolio of 21 sports networks, has been working toward building a streaming service.
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Longtime head of DOJ's bankruptcy monitor to retire. U.S. Trustee Program Director Clifford White, the federal official who has led the Justice Department’s bankruptcy unit for 17 years, will retire March 31, the department said Thursday.
The U.S. Trustee Program has taken action in major corporate bankruptcies throughout Mr. White’s tenure, including successfully challenging a $4.5 billion settlement between OxyContin maker Purdue Pharma LP and its owners. In 2019, the U.S. Trustee Program struck a $15 million settlement with McKinsey & Co. over allegedly inadequate disclosures in bankruptcy retention applications of the consulting giant’s clients and investments. Mr. White began serving as active director of the U.S. Trustee Program in May 2005 and was appointed director the following year. — Jonathan Randles
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A flood of private lending has reached some unexpected places, from Rugby Australia to celebrity Khloé Kardashian to Delta Air Lines.
PHOTO: DAVE HUNT/EPA/SHUTTERSTOCK, TERENCE PATRICK/CBS/GETTY IMAGES, CURTIS COMPTON/ATLANTA JOURNAL-CONSTITUTION/AP
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How private debt helps power the global economy. Asset managers' foray into consumer finance is part of a boom in private credit—lending by money managers rather than banks—spreading across the globe. Funds that make such loans now control about $1.2 trillion, nearly twice the capital they had five years ago, according to analytics company Preqin. The flood of cash has reached some unexpected places. Yield-hungry investors like pension funds—expecting low future returns on traditional stocks and bonds after the pandemic run-up—are paying money managers to hopscotch the globe looking for borrowers that traditionally relied on banks, venturing into everything from aircraft leasing to sports
franchises.
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Mallinckrodt Plc urged a bankruptcy court to approve its $65.75 million proposed settlement resolving a securities fraud class action over statements about revenues from its Acthar Gel product. (Bloomberg)
The ill CEO of bankrupt nursing home chain QHC Facilities LLC is recovering, but the judge overseeing the proceedings said she still has “grave concerns” about the case, foremost making sure patients are protected. (Bloomberg)
AMC Entertainment CEO Adam Aron has unloaded yet another trove of stock in the movie-theater chain — and claims he’s done selling for now. (New York Post)
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