Stock markets and what you don`t know

Black friday could shine light on troubled us retail loans


Loan investors are watching the holiday shopping season for signs of respite as struggling US retailers, including ‎sporting goods retailer Bass Pro Shops, face resistance and higher financing costs in the leveraged loan market. The Retail Federation is predicting that retail sales in November and December will increase a solid 3.6% from last year to US$655.8bn and ‘Black Friday’ – the Friday after Thanksgiving – will be the biggest sales day of the holiday season for many retailers. Retail borrowers in the leveraged finance world have been hammered over the past 18 months as many brick-and-mortar chains continue to cede business to online sellers. “Like most sectors, retail remains a ‘have and have-not’ story when it comes to performance and access to debt capital,” a banker said. Average bids in the retail sector in the US secondary loan market of just over 95% of face value have been falling since mid-2015, when average bids were 98.5, according to Thomson Reuters LPC data. Retail sector average bids remain well below the average bid on the SMi100 of 98.64, the data shows. Retailers such as Toys “R” Us and fashion company Claire’s Stores have been struggling in the leveraged loan and high-yield bond space for years.  Toys “R” Us' term loan due in 2018 is trading at 95.5 after hitting lows of 70 in January and Claire’s Stores’ 7.75% notes due in 2020 are trading at 12.  Threats of a potential economic pullback are not helping, especially coupled with uncertainty over the economic direction of the country after Donald Trump beat Hillary Clinton in the US presidential election.

BIG NAME Bass Pro Shops is the latest big name to run into resistance in the loan market in November. In October, G-III Apparel Group had to increase pricing to 525bp over Libor with a 1% floor from guidance of 450bp-475bp on a US$650m term loan supporting its purchase of clothing brand Donna Karan. Bass Pro marketed a US$3.37bn term loan B and a US$500m asset-sale facility to support its acquisition of hunting and fishing specialist Cabela’s Inc. The company cut the size of a term loan B to US$2.97bn and increased pricing to 500bp over Libor with a 0.75% floor from initial guidance of 425bp over Libor after a weak response. Pricing on a US$500m loan, which will be repaid by a planned asset sale, was also increased to 475bp over Libor with a 0.75% floor after originally being offered to investors at 400bp. The company also added a US$400m term loan A that was made available only to relationship banks to cover the decreased size of the term loan. Term loan As are usually held by bank lenders and are more of a relationship play than B loans that are sold to a broader set of institutional buyers, including hedge funds, mutual funds and Collateralized Loan Obligation (CLO) funds.

Bankers and investors said they were not surprised to see the deal struggle as the retail sector has already seen many troubled names including American luxury department store Neiman Marcus and clothing company J. Crew. Apparel retailers have been hit particularly hard as they struggle to stay relevant in the fast-changing world of fashion. J. Crew’s term loan due in 2021 is trading at 68.67. The Neiman Marcus term loan due in 2020 is trading at 91.86.“There have been a number of high profile names within the high-yield/levered loan space that have struggled for years,” said Michael Terwilliger, global portfolio manager at Resource America, an investment company. “These high-profile struggles – even among well respected brands such as Neiman Marcus and J. Crew – will create a very challenging backdrop for retail credit going forward.”TOO EARLY TO CALL Political uncertainty has also added to concerns, although it is too early to say which way things will break under a Trump administration, say analysts. The president-elect’s policy proposals hint at the potential for the dollar to rise, which has already had a negative impact on some retailers, according to a November 9 report from Citigroup.

“Luxury retailers and department stores have been plagued by weaker tourism spend as the USD has strengthened against most global currencies,” the report said. However, the potential for lower taxes for both individuals and corporations could help discretionary spending, the report also said. Prior to the election, US retail sales came in better than expected in October, increasing 0.8%. Even when some deals have been challenging, there are some individual cases where banks are willing to underwrite for retailers with a good credit story. Goldman Sachs agreed to provide the debt to back online jeweler Blue Nile Inc’s US$500m buyout by Bain Capital and Bow Street, which was announced November 7. “Clearly there is a receptive audience for proven stories that have performed through recessions, but generally investors remain cautious on retail given most believe we are due for an economic pullback in next 18-36 months,” said the banker. But these are expected to be few and far between until companies in the sector are able to find a way to make their businesses more successful.“It's difficult to envision the market being willing to underwrite new retail LBOs amid what seems to be rather dramatic structural changes in the industry,” Terwilliger said.

Money Management


Managing your money is a big task. But if you want to get by in this world, it’s something you have to do. It can be too painful for some, so it gets avoided. But for the people who realize it, the pain/reward relationship is well worth the trouble to spend a few minutes managing your money.

After all, money makes the world go ‘round, so make sure you get your share! And the good news is: it’s as easy as controlling what you’ve got!

Here’s what you need to make sure that you have control over your financial situation. Here are some valuable budgeting techniques to guide you in your expenses and income.

The first thing you want to do is make sure that you pay for your utilities on time and in full every month. Don’t wait until it’s too late to pay them. The second thing you need to do is make sure that you don’t have too many credit cards. Only a few credit cards are necessary to get by in life. You should consider cutting up the rest of them. And the third thing you should do you, if your bills have gotten the best of you, is to consolidate them into a single loan. This will enable you to pay them off over time without getting slammed with high interest rates.

Finally, establish a budget for yourself. This seems difficult and that’s why most people don’t do it. And because people don’t have a budget they find themselves in financial straits.

The easiest way to establish a budget is to take a draw a line down the middle of a piece of paper. On the left, write down your after tax household income. Be sure to write down the after tax amount as you want to measure available income only. After all, you don’t get to spend the before tax amount, right?

In the right column, list an average of each monthly bill. But you should also include your typical spending habits as well, like eating out, or impulse shopping. Don’t forget to include paying off your credit card as part of the bills!

Now that you have a list of income and expenses, see if there’s a way to increase your income, or reduce your expenses. Usually you’ll find a way to do a little to both.

While it seems so simplistic, so few people do it. And yet, creating a budget and sticking to it often separates the successful people from everyone else. What’s stopping you from doing it right now?