IMHO given the volumes these are real prices, sometimes they are not.

 

Why the fall - just based on memory off the top of my head so numbers may be off.

 

1) Apollo/Brightspeed acqui of Embarq+ is $7.1bn and funded with only $1bn of equity, the balance is bank debt and secured bond. With this structure, Apollo is only risking a little big of cash and the pay off can be big, multiples if say Embarq value goes up by 50%, they will 3x their equity.

 

2) Brightspeed debt to ebitda is 8x. Very risky so that's why structurally they used secured debt to lower interest as much as possible.

 

3) Embarq notes are structurally junior to the new debt (though possibly it may be close in seniority) given some things I read.

 

4) The fall is also due to some investors not able to hold junk debt and must exit at any price.

 

It's getting to the price where it's interesting. You may have a tiny bit of comfort that this bond is senior to Apo's equity. It's not a free lunch tho, u have to read the bond docs and FS of each subsidiary in the chain, figure out seniority, etc. BS could easily default. Apollo has other levers you won't have like taking money out by borrowing more from banks or issuing even more senior bonds (and diluting your security) .

 

In my experience, investing in co's/bonds/equity where u have a combination of declining rev and increasing rev in a company - this is really quite difficult, could take forever for the market to figure out, can be run by idiots in that time frame. As is the case with our champion. For a HY bond investor 50-70% return is excellent over 2-3 years. But for comparable or even less risk you could make 3x+ w some garp investment.