Distressed Debt Investing: An Open Letter to CFOs Across America

Dear CFO -

I hope this letter finds you well. My name is Hunter and I started and currently run a collection of sites focused on credit - specifically?distressed and speculative credit. Our readers come from across the world and include every major U.S investment bank and many hedge funds, law firms, and asset managers in the country. I've spent the majority of my career working in leverage finance as an investor allocating and providing capital to sub-investment grade issuers and companies in bankruptcy.

You might be wondering why I am writing to you today. As an active participant in both the primary and secondary credit markets, I spend a significant amount of time?gauging?the risk?appetite of investors that provide financing in the U.S. bond and bank debt markets, up and down the risk and ratings spectrum. Simply put: You are doing your investors and your company a disservice if you are not tapping the credit markets as soon as possible. If you are not planning a new bond or bank debt offering, call your relationship manager at your preferred investment bank of choice and put the wheels in motion. Whether it be refinancing your capital structure, financing an acquisition, dividend, or share repurchase, or simply stuffing the war chest for a rainy day, I behoove you to issue into this market.

If you read the news and watch CNBC, you may assume all is wrong in the world. Unemployment rates are high, Europe is a mess, China's booming economy seems to be slowing, Middle East tensions run high, oil prices and food prices are rising, a significant fiscal cliff will hit America beginning in January 2013, etc. Of course, there are things to be positive about: Chairman Ben?Bernanke?is poised to grow the domestic economy with further monetary stimulus, Apple is selling a lot of IPhones, and the stock market continues to make new highs.

From your perspective, and for your shareholders perspective, one thing to be immensely positive about is the seemingly endless demand for credit coming from institutional buyers. Maybe its because we have been told that interest rates will stay low for the foreseeable future and investors are looking for yield. Maybe its because corporate balance sheets are robust. Its hard to actually pinpoint the exact reasons. With that said, you, as steward of your corporation's finances, need to use this voracious demand to you and your company's advantage.

Here are a few salient goals you can accomplish with tapping the credit markets today:

• Lower your cost of financing
• Extend maturities
• Loosen terms
• Remove covenants
• Add cash to the balance sheet for that big acquisition you've been dreaming about.

If you are a more risky credit and have been told in the past that "the market isn't quite ready for you", I'm here to tell you things have changed. Tier 2 and Tier 3 investment banks and syndicate desks are bringing bonds and bank debt that are oversubscribed by?institutional?investors. Issuer's whose debt traded at double digit yields just a year ago are bringing 10 year paper with a 5-6% coupons. Investment grade issuers are seeing record tight pricing for their paper, and in spite of that, investor demand is insatiable. In the last few days, more dividend and shareholder friend deals have been announced in the bank debt market since the go go times on late 2006 and early 2007. Don't like covenants? Not a problem in this market.

Like all of us, you want to get ahead in this world. You want to do whats best for your company. You want to lower expenses, grow cash flow, and provide flexibility for your company for the uncertain road ahead. Take it from me: Issue a bond or bank financing. You won't regret it.

All the best,

-Hunter

Source: http://www.distressed-debt-investing.com/2012/09/an-open-letter-to-cfos-across-america.html

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