What we’re reading (8/19)
“Coming To A Cash-Strapped Company Near You: Creditor-On-Creditor Violence” (Wall Street Journal). “Grand alliances. Secret pacts. Betrayal. It’s all in a day’s work in the booming market for low-rated corporate debt. U.S. companies that struggle to repay their below-investment-grade bonds and loans have increasingly squeezed concessions from lenders by pitting them against one another. The private-equity firms and wealthy individuals who own most of the companies call the deals ‘liability management exercises,’ or LMEs. Debt investors call them ‘creditor-on-creditor violence.’”
“Alex Karp Has Money And Power. So What Does He Want?” (New York Times). “He’s not a household name, and yet Mr. Karp is at the vanguard of what Mark Milley, the retired general and former chairman of the Joint Chiefs of Staff, has called ‘the most significant fundamental change in the character of war ever recorded in history.’ In this new world, unorthodox Silicon Valley entrepreneurs like Mr. Karp and Elon Musk are woven into the fabric of America’s national security.”
“If The World Had A Hyperscale Datacenter Capital, It Would Be... Northern Virginia” (The Register). “If the internet can be said to have a geographic location, then perhaps it is Northern Virginia, which has the largest share of the hyperscale datacenter capacity within which the world's data is stored. Hyperscale companies accounted for 41 percent of the entire global bit barn presence last year, and this share is increasing, as The Register reported recently. Figures from Synergy Research Group show that Northern Virginia – close to Washington DC, and where the CIA is headquartered, FYI – accounts for nearly 15 percent of that entire hyperscale capacity – at least double that of where the next largest concentration can be found in Beijing, China.”
“Home Depot Issues A Warning About The Economy” (CNN Business). “The home improvement giant, a bellwether of consumer spending and the housing market, lowered its sales expectations for the year. It said customers were spending less on home improvement projects, pressured by higher interest rates and concerns that the economy is getting worse. Home Depot’s business is closely tied to the housing market, and high interest rates are putting a brake on housing turnover and consumers financing larger projects.”
“Private-Equity Firms Desperate For Cash Turn To A Familiar Trick” (Wall Street Journal). “Private-equity firms eager to pay their investors are returning to an old habit: loading up companies with risky debt. The rush into junk debt is letting buyout firms deliver payments to investors—and themselves—during a sharp slowdown in deals that is making it hard to sell portfolio companies. The transactions, which rely on low-rated debt, are known on Wall Street as dividend recapitalizations.”
