RX Thread

(i) You already see weak companies defaulting, such as GNC being unable to pay back 1.5% Term Loans. Sooner or later, given that this situation will go on for some time (until a vaccine is produced and mass distributed or everyone is infected due to antigenic drif), big companies that have massive credit lines that have recently taken on more debt to keep the lights on will start experiencing panic as well, such as Disney with their new $6B debt offering.

(ii) Two obvious industries that are under stress are O&G and Consumer Retail from idiosyncratic changes to their respective industries (ie. eCommerce for Consumer Retail companies). Both industries are experiencing significant declines for two different but converging reasons: 1. Oil Price War initiated by Saudi Arabia and Russia, which contributed to stock market crash 2. Coronavirus causing both a demand and supply problem across the board for all industries, with CR being hit especially hard, which also contributed to GDP contraction and entry into bear territory

With corporate debt at an all time high and many companies being forced to draw down their credit lines, which leads to a systemic shift into the environment that we see today - idiosyncratic defaults will become cyclical by nature as companies face liquidity issues due to lack of demand or supply chain disruptions. Researchers project that a contraction half as severe as 2008 will cause $19 trillion of debt (40% of all corporate debt) to default. Just look at $LQD and $HYG right now. It's clear we're at the cusp of collapse. The silver lining to this, however, is the fact that interest rates are close to zero, so refinancing should alleviate much of the stress.

Any companies that rely on consumers will be under financial stress (airlines, restaurants, hotels, etc.)

It's clear from multiple reports put out by conomists from the big banks that a global GDP contraction ranging from 15%-26% is probable in Q2. We're about the enter the most significant recession in recent history that will structurally change how the world is run.

(iii) The majority chunk of activity will probably come in the form of refinancing due to low interest rate, so your BBs will be kept busy. Obviously, your usual RX advisors will alsotake on mandates. Given the projected influx of restructuring activities, Tier 1 shops will probably be overrun, so a lot of mandates will also be given to smaller shops.