💵PE Growth Continues💵

Dean Foods, ShopKo, L Brands, Lyft, AWS & More

Disruption from the Vantage Point of the Disrupted
3/3/19 Read Time = 14.3 a$$-kicking minutes
Twitter: @petition; Website: petition.substack.com

🗞News of the Week (5 Reads)🗞

1. Disruption Milks Milk Producers (Long…Oats?)

Dean Foods Co. ($DF), the largest US supplier of milk and dairy to retailers with over 50 brands, announced this week that, in light of “a significant amount of change happening in the marketplace” and a “dynamic retail environment,” that it would pursue strategic alternatives (read: a sale, a take-private transaction, asset sales, a JV, or a merger). The company’s stock plunged nearly 12% on the announcement before rebounding slightly later in the week.* It is down 90% since its peak in 2007.

The company’s capital structure also suffered a bit. The company cap stack looks as follows:

  • A new $265mm due 2024.

  • A new $450mm A/R securitization facility; and

  • $700mm of 6.5% fixed rate senior unsecured notes due 2023.

The latter, rated B3 by Moody’s and B- by S&P, currently trades at distressed levels in the mid-70s.

Meanwhile, credit default swaps on the name just got meaningfully more expensive:

Why is this especially newsworthy? Well, first, the consumer packaged goods space had a rough week. See, also, Kraft. CEO Ralph Scozzafava stated:

In addition similar to what other CPG companies have been experiencing lately margins continue to be impacted by inflationary pressures from higher fuel and freight costs as well as a very tight labor market particularly as it relates to our drivers.

We saw this coming from a mile away. And we expect it to continue to be an issue. Notably, he added:

To help offset this escalating cost environment, we are continuing to address our cost base and have also executed certain pricing initiatives effective in the first quarter of 2019.

“Pricing initiatives” is code for higher prices passed on to the consumer. Get ready for your milk and ice cream to get more expensive. That is, if you even drink milk or eat ice cream anymore.

Second, it demonstrates how disruptive innovation is taking a significant bite out of longstanding incumbents — an especially troubling fact given that the total market for milk consumption appears to be in decline.** CEO Ralph Scozzafava stated:

In terms of volume the overall fluid milk category continued to post declines of roughly 2% year-over-year according to the USDA. One key driver of the change in our 2018 results versus prior year was the anticipated customer volume exiting our system, beginning in the second quarter.

Moreover, this is, to some degree, a story of bad timing. In the last several years, the company failed to recognize — and, by extension, realize — the growth trend in non-dairy forms of milk. Indeed, the company divested itself of alternative, healthier milk products such as WhiteWave Foods and Morningstar. Subsequently, coconut milk and almond milk have — particularly in light of the rise of gluten and dairy free diets — taken meaningful market share from pure dairy cow-produced milk. Just recently, PE-backed Oatly, an oat milk brand (whatever that is) has taken the Jack Dorsey types in Silicon Valley by storm and was recently Included in Fast Company’s list of most innovative companies (#9). Moreover, dairy-free brand Califia Farms launched a new line of oat milk beverages this week, featuring pea, oat and sunflower seed protein (8 grams!); it secured a $50mm round of financing last summer from the likes of Jared Leto, Karlie Kloss, Shaun White and Leonardo DiCaprio. Now that will be some “got milk?” campaign!! Here’s a live shot of Leto after downing a glass of oat milk:

Don’t you just want to rush out and get yourself some now!?!

If that competition wasn’t enough, bigbox retailers and grocers with scale have — recognizing the absurdly thin margins in the food segment — increasingly sought to private-label milk (e.g., Walmart Inc. ($WMT), Kroger Co. ($KR)). Walmart recently reported earnings and its grocery business was one of several bright spots. Compounding matters, Amazon Inc. ($AMZN) recently released its own private-label milk online, called Happy Belly. Lactards across the country unleashed uproarious laughter at that name. 

Investors in Dean Foods, however, aren’t laughing.

*The company also announced weaker-than-expected Q4 earnings and the suspension of dividends. The company posted a loss of $260.1mm. 😬
**This piece about the struggling small milk farmers in Wisconsin is bleak AF.

2. L. Brands is F*cked (Short Stale Brands that Peddle Fantasy).

Long-time readers know that we’ve been questioning L Brands Inc’s ($LB) strategy since our inception. On February 14, 2018, we wrote in “Misplaced Optimism in Retail”:

Read this fascinating Wall Street Journal piece about L. Brands Inc. ($LB) CEO Leslie Wexner and tell us that you don't want to short the sh*t out of the stock. 

The stock was trading in the high 40s at the time.

Since then, we’ve continued to monitor the company’s descent here, here and here. Yet, as the company’s P/E ratio dropped precipitously, perhaps optimists have been considering whether the company would, eventually, be able to turn itself around. Thus far, that doesn’t appear so.

The company reported earnings this week and, on theme, they sucked. While sales increased YOY, net income fell approximately 20% with Victoria’s Secret leading the way down with -3% comps for the quarter (and -2% for the year). Store comps (comps minus the DTC business) were -7%. Sheesh. One analyst is quoted in RetailDive, saying:

"VS is not showing any real signs of improvement in product or tweaking their messaging. As we continue to shop their stores, we are also noting the quality remains poor. The product continues to promote the sexy ideal and in their messaging," Jane Hali wrote. "Not only do these [competing] brands have positive on-trend messaging, they are also solving the fit problem of intimates in general and the DTC specifically. DTC brands disrupting the category include, Lonely Lingerie, Negative Underwear and Adore Me to name a few."

The company indicated that it would close approximately 4% of its retail footprint — 53 stores. 29 Victoria’s Secret locations closed in 2018. In that WSJ piece, Mr. Wexner indicated that he was going all in on brick-and-mortar. Life comes at you fast. We previously wrote:

Mr. Wexner is going all-in on physical brick-and-mortar stores. As if direct-to-consumer brands aren't coming at Victoria's Secret on every flank. Wexner has 3000 stores, a number on the upswing. 20% of sales for Victoria's Secret and Bath & Body Works are online, and Mr. Wexner expects that level to remain stable. Wait...what?!?! E-commerce growth is explosive and yet Mr. Wexner doesn't think that warrants some increased focus and adoption of online sales? This is unbelievable. All of this coming from the same man who completely and admittedly missed the athleisure trend - an opportunity that could've helped develop a decade of customer affinity and loyalty. Comically, the article goes out of its way to quote Mickey Drexler, another elderly man who had no idea what was coming for him. Where's a grain of salt when you need one? 

At the time of the article, 6.9% of LB shares outstanding were short. We reckon that the number has increased since then. 

And, yes, this week the stock continued to get beaten up only to, inexplicably, recover later in the week:

Remember: it was in the high 40s merely a year ago.

As if matters couldn’t get worse, the competition is merely getting stronger. This week, ThirdLove, a direct-to-consumer e-commerce startup that specializes in lingerie and underwear designed for all shapes and sizes of women, announced this week that it secured $55mm in new funding (at a $750mm valuation on $100mm of annual revenue). The proceeds will be allocated towards expanding (i) internationally, (ii) size availability, (iii) its retail footprint, and (iv) product lines into swim and athletic wear. Investors include L Catterton, Allen & Company, Katie Couric and many others.

This quote from Tim Armstrong, the former CEO of Oath and AOL and an investor struck us:

“ThirdLove is the triple threat,” added Tim Armstrong….“They have great margins, own the entire customer relationship and the full stack of data behind it, and they’re in a low competition category serving the largest customer base of commercial people – women.”

Daaaaaaaaamn. Low competition? Is it us or is he casting some serious shade on L Brands? Anyway, putting all of that aside, he has succinctly nailed what DTC digitally-native-vertical-brands have that legacy retailers don’t: full-stop knowledge of their customers. This is something that bankrupted retailers are learning the hard way.

Compounding matters is the fact that Target Inc. ($TGT) also announced that it, too, will be taking on Victoria’s Secret. The bigbox retailer is launching new lingerie and sleepwear lines with the hope of siphoning off $1b in revenue in sales in the next year; it will offer 200 bras in 40 styles as well as provide special fitting tools (including digital…watch out ThirdLove!).

LB had ample opportunity to right the ship and leverage its early advantage. It failed. The company has nearly $6b of total debt. While only the longest-dated tranche trades below 80, it is not currently at risk of tripping any covenants, and it doesn’t have any near-term maturities, the writing is on the wall.

We can’t wait for the inevitable “strategic alternatives” announcement. At a minimum, advisors should be circling this baby selling performance improvement services.

3. Retailers Need to Consider Increasing Cloud Costs (Long Clouds).

As more and more retailers rejigger their strategy to include more reliance upon e-commerce and less and less on physical mall-based brick-and-mortar retail, they must consider amounts they may have to pay to their digital landlords. After all, for any internet business to function properly while dealing with high volume, it’ll need a viable cloud provider (unless it wants to go old school and build out its own server farm — an expensive endeavor). Hence the soaring stock values of Microsoft Inc. ($MSFT) and Amazon Inc. ($AMZN), both of which have leading cloud businesses. 

What’s fascinating about this is that nearly every bankrupt retailer states, as part of its proposed resurgence, that omni-channel capabilities are key to driving customer conversion, whether that’s digital conversion or increased traffic to brick-and-mortar locations. To do this, however, you need data and you need storage. Insert cloud computing here. 

One problem with this: costs are rising. The Information reported this week that, as cloud use soars, so are bills:

While businesses have flocked to cloud computing services like AWS in recent years, drawn by the promise of flexibility and cost savings, they have also found it easy to go overboard on their cloud spending if they don’t pay attention or precisely forecast their computing needs.

Jumps in cloud bills are to be expected as the businesses hand over more and more of their computing chores to providers like AWS, while seeing greater usage of those they have already moved into the cloud. But missteps by the companies have also contributed to the increases, according to people who have worked at them. Their efforts to contain costs show how new technologies like the cloud that solve existing problems often bring with them new complications.

Let’s be clear: the article refers to Pinterest and Capital One as examples of companies caught off guard by the size of their bills. More likely than not, most retailers aren’t seeing the level of daily traffic that a social media/banking site might get thus requiring far less cloud usage. Nevertheless, this is something worth watching.


If you’re not convinced this could become an issue, consider Snap Inc. ($SNAP). The company is contractually on the hook for $600mm to both Google and AWS in 2019. That figure constitutes its “minimum purchase” requirement, regardless of whether people are using its app. If usage slips and Snap fails to meet the minimum purchase requirement, it still has to pay the difference between what it used and what it contracted for (subject to some limited offsets and carryovers).

Think about that: fads come and go. If Snap fails to sustain, its cloud contracts could become the digital equivalent of an above-market long-term brick-and-mortar lease.


Consider also Lyft Inc. This week the company released its financials by way of its S-1 as it gets closer to an IPO. Among a ton of new financials, the company reported revenue of $2.1b with a net loss of $911mm in 2018. That’s right: a LOSS of $911mm. Yet, that was an improvement: revenue doubled YOY and the net loss is coming down.

Other highlights include: (i) a significant decrease in marketing spend; (ii) a rise in “take rate” for the company, meaning that it has been keeping more of every dollar (PETITION Note: it seems the drivers are the losers here); and (iii) active riders and revenue per active rider are up. The company has also committed to spend at least $300mm on cloud computing services with AWS between 2019-2021. This means that several cents of every ride are essentially being paid as a royalty to AWS in 2019.

Again, Lyft is a perfectly fine company that will surely raise billions of dollars in its IPO and have years of runway to figure out how to actually be a profitable business. Nevertheless, it will be increasingly beholden to its cloud services provider along the way. It will be interesting to see whether — sometime down the road — we see cloud services providers entangled in bankruptcy cases in the manner we see mall landlords today. In fact, we wouldn’t be surprised to see, five, six or seven years from now, AWS, Microsoft and Google listed as a top unsecured creditors on bankruptcy petitions.

4. Private Equity = Gangbusters (Long Nascent Fear). Shopko Directors vs. Sun Capital Partners?

Bain & Company recently released its “Global Private Equity Report 2019” and if you’re a total nerd with no lives like we are than you should give the glorious 70+ page novella a read. Or, you can just read our short summary below over a mere coffee-fed 4.1 a$$-kicking minutes. The upshot: despite all of the negative headlines you’re reading about PE-backed retailers filing for bankruptcy seemingly every other second, the industry is firing on all cylinders. The number of individual transactions in 2018 was down 13%, but the total buyout value was up 10% to $582b.

PE dry powder hit a record high $2 trillion in December 2018 across all fund types. And there’s a reason why more and more capital keeps flowing into PE funds. Per Bain:

…the overall trend in exits has been strong and steady, generating an equally steady flow of capital back to LPs. Investors were cash flow positive for the eighth year running, meaning distributions have outstripped contributions each year—a virtuous cycle that has encouraged LPs to continue pumping capital back into the industry….

Cha. Ching. The PE bros (and LPs) are rolling in it right now. But, things aren’t all roses and prancing unicorns:

“Returns, while still strong relative to other asset classes, have slowly declined toward public market averages during the period. Persistent high prices, volatile capital markets, US–China trade arguments, Brexit worries and, of course, the ever-present threat of recession have injected a sense of uncertainty that dealmakers dislike. The pace of technological change is also increasing in almost every industry, making it harder to forecast winners and losers. So, while the good times are rolling, some bells of worry are tolling.”

When you read that, it’s actually fairly remarkable what the markets have been doing since December: so much uncertainty looms and yet “the FED put” seems to be driving equity markets higher nonetheless.

But, Lyft’s S-1 notwithstanding, a lot of that drive is in private equity markets:

“…we see fundamental shifts happening in capital markets that are likely to drive a long-term trend toward much larger private capital (and private equity) opportunities vs. traditional public equity models. This ongoing movement will have seismic impacts for providers of capital, investors of that capital and for the companies owned by a widening variety of private models. It portends a future in which a much larger share of capital flows into private markets. Perhaps this is indeed the beginning of ‘the rest of the story’ for the PE industry.”

That last bit is interesting. It’s been said that the private markets are the public markets. Bain indicates that, in 2018, that was definitely true and they seem to think that will continue — pending IPOs of Pinterest, Slack and Uber notwithstanding.

They also indicate that, as Howard Marks eloquently stated and Warren Buffett reiterated, 2018 can be summed up as too much money chasing few deals:

“Chronically heavy competition has driven deal multiples to historic highs, and growing jitters about an eventual economic downturn are affecting decision making, from diligence to exit planning. For general partners (GPs), putting record amounts of capital to work means getting comfortable with a certain level of discomfort when investing. They are paying prices they swore they would never pay and looking to capture value that may prove elusive post-close. The most effective GPs are stepping up their game to identify targets and sharpen diligence, while simultaneously planning for the worst.”

A lot of this multiple expansion is driven, in fact, by corporate buyers pushing up prices as they strategically seek to advance corporate objectives (read: buy innovation) and capture alleged…cough…synergies. Public equity holders bear that risk. Some of it is sponsor-to-sponsor related: one private equity firm selling to another. Will the LPs of the buyer be left holding the bag? In the public-to-private LBO context, it’s high-yield investors who are generally fronting the risk. We’ve written (and you’ve surely read) plenty about these blockbuster LBOs with issuer-friendly terms (covenant-lite, a Trump-relaxed regulatory environment encouraging higher debt multiples, etc.). Per the Loan Pricing Corp., which tracks the syndicated loan market, the share of deals with multiples north of 7x rose to almost 40% of the total. And, a broader view:

The average multiple for leveraged buyouts in the US and Europe has hovered around 11 times EBITDA in recent years, above levels leading up to the global financial crisis.

We’re sure that will end well (tisk tisk).

On the flip side, however, Bain notes that younger (read: newly raised) capital will help stave off trouble because there won’t be as much urgency to put money to work. 67% of the dry powder currently sits with funds raised in the last two years. In fact, just this past week, Genstar Capital raised $7b in new funds, Siris Capital Group closed a $3.45b fund, Trilantic North America closed a $2.5b buyout fund, and SK Capital closed a $2.1b fund. Stone Point Capital is out raising a $6.5b fund and NEA is currently raising $3.6b. These numbers are staggering.

Yet, LPs maybe aren’t totally buying — or aren’t aware of — that “young money” argument. Per Reuters:

Some of the world’s biggest private equity investors raised concerns this week that the $3.4 trillion leveraged buyout industry is overheating, as more fund managers pay top dollar for acquisitions that could prove costly down the line.

Private equity firms are sitting on a record $1.2 trillion amassed from investors for acquisitions, leading to fierce competition for deals.

Here are some quotes from some worried LPs — articulated right before or as they open up their purses to dole out rich sums of money to PE fund managers DESPITE THEIR GROWING CONCERNS:

“‘There is an expectation returns will go down because there’s a lot of competition for deals and the awareness that an economic downturn could be coming soon,’ Simon Marc, head of private equity at PSP Investments, a Canadian pension fund with $153 billion in assets, said on the sidelines of the conference.”

“‘There are beads of sweat forming on the brows of a few people thinking, Is this deal where I’m overpaying?’ said Richard Hope, managing director on the investment team at Hamilton Lane Inc, a private markets investment firm.

“Private equity investors ‘are scared. If you lived through the financial crisis, you don’t want a repeat of that,’ said Andrea Auerbach, global head of private investments at Cambridge Associates.”

Logically, Bain reports that, due to this rising fear, money is shifting into distressed funds (PETITION shoutout to all of those funds who shuttered their distressed strategies over the last few years). Indeed, Bain notes:

With the global financial crisis fresh in their memories, firms are focusing their diligence much more intently on downside scenarios this time around. They learned valuable lessons during the crisis about what holds up well through the cycle—or not—and are adjusting accordingly. Even within a sector like healthcare, widely viewed as recession-resistant, there were subsector differences in performance worth noting. Healthcare support services, for instance, produced multiples of better than two times invested capital, while healthcare equipment and pharmaceuticals fared less well, according to CEPRES, a digital investment platform and transactional network for the private capital markets.

We alluded to money managers upping their game above. How so? First, they are generally being more selective in the market. Second:

…firms are paying much closer attention to what might disrupt their carefully prepared value-creation plans and looking to avoid blind spots. Not only are they running through more robust downside scenarios to pressure test investments, but they’re also anticipating other challenges—how to cope proactively with digital disruption, for instance, or how to negotiate issues like consolidation in the supply base.

Mmmm hmmm. Now they’re speaking out language. Third, firms are sitting on cash, patiently awaiting — again, with younger capital — a downturn to create attractive opportunities with high IRR. Per Bain:

That also applies to distressed situations. Recognizing that downturns create real opportunity for those prepared to invest across the capital structure, firms like Apollo and Centerbridge Partners have developed the capabilities to pivot quickly to buying debt or other distressed credits. In Apollo’s 2008 fund, for example, distressed debt and other credits made up 60% of total assets, reflecting the firm’s confidence in acquiring the debt of companies in trouble. By the 2013 fund, however, distressed investments comprised only 4% of assets as the economy improved and the firm shifted back to traditional equity investments…. “We traverse downturns,” Apollo cofounder Leon Black told the Financial Times. “Forty percent of all our money has been invested in down- cycles, when everybody else shuts down.”

Fourth, they’re not being too greedy about their existing portfolios, opportunistically shedding assets (and a little IRR) now for a greater seat at the table later:

The median holding period (how long funds are holding onto portfolio companies before exiting) fell 10% last year to 4.5 years….

The urgency to sell reflects a number of factors. First, demand for assets among both corporate and PE buyers is ravenous. The same rise in competition and deal multiples that frustrates GPs on the buy side provides a rich opportunity to sell assets for premium prices. Second, as signs of economic weakness pile up, firms are also looking to sell anything that isn’t tied down, knowing that a recession could make it harder to sell later. Similarly, firms know that the robust fund-raising environment won’t last forever, meaning it pays to get back on the road as soon as possible. Many are willing to trade a little bit of IRR on current exits so they can turn to raising a new (and hopefully bigger) fund, which can provide fee income and fresh capital to invest for the next five-plus years. Decisions like those are made easier by the proliferation of exit committees charged with moving assets out of the portfolio most opportunistically. Taking the decision away from the managing director who “owns” the deal tends to avoid the trap of missing opportunities while trying to squeeze every last dollar from every last deal.

Wow. Who knew that FEES drove investment decisions?!?! Now, of course, if you’re an LP in the fund that just shaved some IRR so that they “can turn to raising a new (and hopefully bigger) fund” you best be hoping that you’re getting that option to invest in that new fund. Otherwise, you just got hosed son!

Fifth, funds are innovating around product. There has been a flurry of activity around new product in three areas in particular: sector-focused pools of money, growth equity funds and long-duration funds. This is precisely why, in the first instance, you see more dedicated funds focused on healthcare, oil and gas or infrastructure and, in the second instance, more private equity money flowing into late stage high growth “startups.” Mid-market funds are also on the rise.

And, finally, GPs are delving into advanced analytics. Yup, that’s right: BILLIONS doesn’t make this sh*t up: PE funds actually DO — now more than ever in search of that ever-elusive edge — deploy (i) web-scraping tools to extract and analyze data from the web, (ii) take “digital x-rays” of companies to understand a target company’s use of tech to create new growth opportunities (e.g., are they using the correct Google AdWords? will Instagram be a more effective top-of-the-funnel sales approach?), (iii) using satellites and drones to evaluate traffic patterns around retail networks, and (iv) “identifying disruption.” BOOM! Per Bain:

Another advantage of analytics tools is the ability to see around corners, helping fund managers anticipate how disruptive new technologies or business models may change the market. Early signs of disruption are notoriously hard to quantify.

Even those who know the industry best often fail to anticipate technological disruptions. With access to huge volumes of data, however, it’s easier to track possible warning signs, such as the level of innovation or venture capital investment in a sector. That’s paved the way for advanced analytics tools that allow PE funds to spot early signals of industry disruption, understand the level of risk and devise effective responses. These insights can be invaluable, enabling firms to account for disruption as they formulate bidding strategies and value-creation plans.

It’s about damn time.

One thing we haven’t yet mentioned is…wait for it…


Here’s Bain:

Despite the upward trend in US interest rates, GPs have continued to take money off the table and de-risk investments by recapitalizing debt. Dividend recaps, in fact, have held up better than anyone expected. Tightening credit markets are starting to take a toll, however. Given the favorable debt environment of the past two or three years, it’s becoming harder to find a new credit agreement with better terms than the old one. In Europe, dividend recaps were down meaningfully from a spike in 2017, crowded out by demand for loans from the broader M&A market. (emphasis added).

Thankfully!! We’d hate to think that there’d be no future in-bankruptcy attacks on dividend recaps due to a lack of activity.


Speaking of dividend recaps and private equity, there was some movement in the ShopKo bankruptcy case this week. The special committee of independent directors of ShopKo indicated in a statement in support of approval of the company’s disclosure statement that it continues to investigate pre-petition payments made to private equity sponsor, Sun Capital Partners. Because of that, the independents have made sure that any releases provided under the plan carve out possible causes of action against Sun.

Still, the statement shines a bright light on how Sun Capital leveraged its relationship with its (cough…now bankrupt!) portfolio company.

At issue are several dividends paid to Sun in the years leading to ShopKo’s bankruptcy filing: (a) a $55mm dividend in 2007, (b) a $20mm dividend in September 2010 (paid via the company’s then second revolving credit facility), (c) a $10mm dividend just three months later in December 2010 (paid via the same RCF), (d) a $44.5mm dividend in 2013 (paid via the company’s amended third RCF, and provided after Duff & Phelps provided a solvency opinion), and (e) a $50mm dividend in 2015 (paid via the third RCF). Yes, that’s nearly $180mm of value extracted from the company over the years.

But wait, there’s more! The directors are also investigating Sun’s long-term management services agreement with the company. Sun received $4mm a year from 2012 through 2017, before it graciously cut the company a break and lowered its fees to merely $301k per quarter. No fees have been paid since December 2017. How kind of them!!

But wait! THERE’S MORE!! Per the special committee:

SCM also is entitled to an additional fee in connection with certain transactions or events (“Consulting Events”), equal to approximately 1% of the value of the transaction. At this time, the Special Committee understands that since 2012, approximately six Consulting Events have occurred that have generated such a fee, including a $445,319.00 fee related to the 2013 dividend and a $500,000.00 fee related to the 2015 dividend.

Now this is absolutely precious. Nothing like getting paid a management fee for “managing” a portfolio company into directly gifting you nearly $180mm of value for which you ALSO collect a success fee for your efforts! Notably, SCP has two board seats.



5. Fast Forward

Pier 1 Imports Inc. ($PIR), which we previously wrote about here, is deteriorating and restructuring professionals are entering the fray.

Jones Energy Inc. ($JONE) will see you in bankruptcy.

Sanchez Energy Corporation ($SN) took one step closer to bankruptcy.

Want to tell us we're morons? Or praise us? Cool, either way: email us at petition@petition11.com

📈Chart of the Week📈

We thought this chart from the Shake Shack Inc. ($SHAK) earnings report was interesting:

That “[o]pportunities to streamline and optimize labor” bit is particularly intriguing. 🤔

📽Video of the Week📽

💼Pros Say💼

Energy. Rystad Energy, a Norwegian independent energy research and consulting firm says that “US shale operators will in 2019 barely have cash to both service debt and pay out dividends.

Intercreditor Agreements. Shearman & Sterling LLP discusses the issue of subordination in I/C agreements and summarizes the recent holding in the chapter 11 case of La Paloma Generating Co. that addressed the subject.

2018 in Review. Jones Day provides an overview of significant bankruptcy caselaw activity in 2018.


27th Annual ABI Duberstein Bankruptcy Moot Court Competition, 3/4, NYC

⛓Notable: What We're Reading (6 Reads)⛓

1. Advertising (Long FAANG). Digital advertising — thanks to Google Inc. ($GOOGL) and Facebook Inc. ($FB) has surpassed print and television advertising. Expect more media distress as a result.

2. Blu-ray (Long Slow Deaths). Samsung is discontinuing production of blu-ray players and the internet claims yet another victim.

3. Insurance (Long the Long Arm of AVs). Self-driving cars may rattle insurance markets.

4. McKinsey (Long the Long Arm of the U.S. Trustee). McKinsey pays $15mm and the U.S. Trustee backs down. Jay Alix, however, marches on.

5. Retail (Long Tech). Finally, retailers have something going for them: they are using tech to toggle prices based on demand.

6. Trucking (Long Price Increases). Lots of companies are complaining about higher freight costs.


Daniel Denny (Associate) has joined Milbank LLP from Gibson Dunn & Crutcher LLP.

James Bromley (Partner) has joined Sullivan & Cromwell LLP from Cleary Gottlieb Steen & Hamilton LLP.

🙌Congratulations to:🙌

William Baldiga (Partner) on becoming the Chief Executive Officer and Chairman of Brown Rudnick LLP’s Management Committee effective March 15, 2019.


We have compiled a list of a$$-kicking resources on the topics of restructuring, tech, finance, investing, and disruption. 💥You can find it here💥.

💰New Opportunities💰

Conway MacKenzie is seeking senior-level professionals as part of a significant expansion of their Houston office. 

In addition to Restructuring candidates, they are seeking senior level practice leaders and support staff specializing in Transaction Advisory Services and Litigation Support Services.  Applicants are required to have 10+ years of relevant experience.  Strong preference will be given to those with Big Four and international consulting firm backgrounds.   Relocation packages for those from other markets will be considered.

Qualifying individuals should submit an experience summary to: nklein@conwaymackenzie.com.


PETITION LLC, in conjunction with the one-year anniversary of our Membership launch, is looking to expand the team. Specifically, we are looking for a Chief Strategy Officer (or other commensurate title) to help take PETITION to the next level. The right candidate must be entrepreneurial, commercial, creative and, frankly, not too “corporate.” She/he must be willing to get her/his hands dirty in all aspects of the company, including, first and foremost, leading new strategic initiatives, but also engaging in sales, research/production, administration, etc. We will look at all candidates but financial advisory, legal, and/or journalism experience is preferred. Current Members will also get first look (logically, Members have a much better sense of what we write about and what we stand for). Email us at petition@petition11.com and write “PETITION CSO” in the subject line.

Nothing in this email is intended to serve as financial or legal advice. Do your own research, you lazy rascals.