Stressed and distressed debt origination research support for a London-based boutique sell-side desk

About Client:

A mid-sized credit-focused sell-side firm based out of London and with an investment team in Austin, Texas too, covered US and European credit markets. Had one senior desk analyst (Managing Director) in London, and two desk analysts in Austin.

Business Problem:

The firm was looking for a stressed/distressed debt origination support to increase the funnel of ideas at optimal research cost. The support was needed for their London and Austin desks.

ValueAdd Solution:

ValueAdd allocated one credit research analyst supported by a Team Lead, for new stressed/distressed debt origination.

Daily news updates:

  • Screen US/London overnight news and send a summary of news in a form of a newsletter with top gainers and losers
  • Spot significant 1-day swings of more than 4-5 bps in bond prices of iTraxx members and investigate and attribute the reasons triggering these screens.
  • Spot significant intraday swings of more than 2 bps in bond prices of iTraxx members and investigate and attribute the reasons triggering these screens.
  • Updating these ideas on clients’ CRM facilitating instant alerts to its investors; and research inputs for desk traders to pitch new ideas.

Weekly smart screens:

  • ValueAdd facilitates efficient origination process by running smart screens using distressed news and sectors screens on 3rd party databases e.g. Bloomberg

Credit tearsheets/ memos:

  • Prepare insightful tearsheets across global stressed/ distressed/ Reorg/ liquidation cases, across sectors.
  • Detailed debt structure based on Waterfall model; perform quick liquidation and recovery analysis based on different assumptions
  • Detailed organization structure with issuers, guarantors, and cross-guarantees
  • Build sensitivities based on operating metrics, commodity prices, and asset pricing.

Benefits Delivered:

  • The desk analysts/traders spent more time on pitching ideas to investors than doing research work themselves. The trading desk accelerated trading revenues by 1.5x.
  • Led to a saving of ~US$100,000 for not hiring analysts in London and/on in Austin, TX.
  • Led to acceleration of idea generation, and quick news and bond alerts to investors.
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