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IMPORTANT NOTICE
This presentation is given by Solus Alternative Asset Management LP in connection with Solus Recovery Fund Offshore LP and Solus Recovery Fund LP (collectively, the “Fund”). Solus
Alternative Asset Management LP is regulated by the Securities and Exchange Commission (the “SEC”) under US laws, which differ from Australian laws.
This information must not be copied, made available, published or distributed to any third party without the prior written consent of Solus Alternative Asset Management LP. It has been
prepared without taking into account anyone's objectives, financial situation or needs so before acting on it each person should consider its appropriateness to their circumstances before
making any investment decision. Solus Alternative Asset Management LP assumes no fiduciary responsibility or liability for any consequences financial or otherwise arising from any reliance
on this information.
This presentation does not constitute or form part of any offer, invitation or instruction to invest in the Fund, or any other securities, interests or markets referred to in the presentation.
Accordingly, this information should not be relied on in connection with any investment decision and each person should carefully read and consider the proposed offer document for the
Fund before making an investment decision. In particular, a person should consider the Fund's investment objectives, risks, fees and other charges. Each person should make their own
appraisal of the nature of an investment in the Fund as well as the associated risks and should consult to the extent necessary, their own legal, financial, tax, accounting and other
professional advisors in this respect prior to any investment in the Fund. This presentation and the Fund are only to be made available for wholesale clients as defined in the Corporations Act
2001 (Cth).
The information in this presentation is current as at September 2012 unless otherwise stated and Solus Alternative Asset Management LP is not under any obligation to update the
information to the extent that it is or becomes out of date or incorrect. It is confidential and has been prepared by Solus Alternative Asset Management LP solely for use in connection with
the Fund.
The information in this presentation is indicative and may change with market fluctuations. Past performance is not a reliable indicator of future performance. This presentation does not
purport to be a comprehensive statement or description of any markets or securities referred to within.
This presentation is for informational purposes only and is being furnished on a confidential basis to a limited number of eligible investors. This presentation is not an offer to sell, or a
solicitation of an offer to buy, any security. Any such offering may be made only by a private placement memorandum (“Memorandum”) related thereto and the information contained
herein will be superseded in its entirety by such Memorandum. The information contained herein is confidential and may not be reproduced or distributed in whole or in part.
The private investment funds (the “Fund”) described herein will not be registered under the Investment Company Act of 1940, as amended (the “Company Act”), and the interests therein will
not be registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state or foreign securities laws. These interests will be offered and sold only to persons who are
“qualified purchasers” for purposes of Section 3(c)(7) of the Company Act and who are also “accredited investors” as defined in Regulation D under the Securities Act, or to non-U.S. persons
who purchase interests outside the United States pursuant to Regulation S under the Securities Act.
Past performance is no guarantee of future results. Future performance may not meet the levels achieved to date. References to specific investments are for illustrative purposes only and
are not intended to be, and must not be relied upon as, recommendations to purchase or sell such investments or indications of performance of all portfolio investments. References set
forth herein are subject to change without notice. There is no representation or guarantee regarding the reliability, accuracy or completeness of this material, and Solus Alternative Asset
Management LP (“Solus”) will not be liable for any damages, including loss of profits, which may result from reliance on this material, in each such case, unless otherwise imposed under
applicable law.
Because Fund performance is expected to be volatile and an investor could lose most or all of his investment, an investment is very speculative and involves a high degree of risk, and
therefore is not suitable for all investors. Further, an investment in the Fund is illiquid due to restrictions on redemptions and transfer and there is no current or expected secondary market
for Fund interests. The investment strategy, where permitted, may include non-performing/distressed and illiquid assets and non-US assets and may employ leverage and short selling.
Management fees and performance compensation may create an incentive for the manager to take greater risks than it ordinarily would without such fees and compensation. This is not a
complete description of the offering, including the risks associated therewith. For full details of the offering, including a description of fees, performance compensation, expenses, risk factors
and tax consequences, eligible investors must consult the Funds’ Memoranda before investing.
Distressed Lifecycle
 Solus Recovery Fund II LP is Focused on a Very Specific Segment of the Distressed Lifecycle
       Unlike traditional distressed opportunities, Liquidations remove valuation and process risks
               100

               85                                Recovery
                     Deterioration
               75
Price (%par)

                                                                        Restructured Debt/Equity
               55

               25
                                                                              Liquidation

                                 Restructuring/Refinancing

                                                                                            Time
Late-Stage Bankruptcy Claims
Liquidation Claims
     Advantages
          • Significant insight into potential outcomes and return probabilities
          • Limited process risk; restructuring and distribution plans in place
          • Well-defined downside scenarios
     Primary influences on IRRs
          • Reductions to claims pool
          • Increases in distributable cash/assets
          • Timing of distributions

Litigation Claims
     Significant upside potential based on litigation outcomes or out-of-court settlements
     Claims generally trade at slight discount/premium to current distributable cash
     Legal expertise key to evaluating potential for success
Liquidation Claim
                                                  Well-defined downside allows for asymmetric
 Successful Liquidation Claim Outcome              risk/reward

                                                  Solus has extensive experience in evaluating
                                                   complex liquidations

                                                  Significant value creation through fundamental
                                                   analysis
                                                      • Bankruptcy process expertise
                                                      • Claims pool analytics
Disputed
 Claims                                               • Scenario analysis for distributions
                                                      • Expertise in asset valuation
                                    Litigation
                                                  Significant upside potential through claims pool
                                     Assets
                        Allowed                    reduction, increases in distributable cash and
                         Claims                    assets, accelerated timing of cash distributions and
           Assets
                                                   potential litigation recoveries
                                      Cash

            Cash                                  Past examples include:
                                                      Adelphia, Anchor Glass, Asarco, Calpine,
     Beginning                End                     Comdisco, Conseco, Enron, Horizon PCS, Marconi,
                                                      Refco, Washington Mutual, Worldcom
What Goes into Liquidation Recovery Calculation
                Dedicated                                    Top 5 investment
              Restructuring                                 professionals have
            Specialist with over                               100+ years of
                34 years of                                collective experience
            Bankruptcy Practice                                 in analyzing
               Experience                                       liquidations

Extensive network
                                    CASH                                   Value creation
amongst legal and
    advisory
   community                       A LLOWED   = RECOVERY
                                                   %                       through claims
                                                                            pool analysis
                                    CLAIMS

                                                               Ability to identify          1)   Settlements
            Broad stable of                                                                 2)   Adversary proceedings
                                                                and synthesize
                seasoned                                                                    3)   SIPC correspondence
                                                              large quantities of
           analytical models                                                                4)   Congressional testimony
                                                                 valuable and               5)   Judicial rulings
           driven by an array
                                                                    complex                 6)   Bond indentures/
           of diverse sources
                                                                 information                     Loan agreements
Sample Opportunity Set
Adelphia         General Motors    Nortel                 Current liquidation market value in excess of
                                                           $120 billion
Ambac            GGP Bank Debt     PMI

Axon             Golden Key        Serpentine             Average life of opportunities ranges from 6
                                                           months to 3 years
BKUNA            Graceway          Sigma

CapMark          Gryphon           Swissair               Ability to source claims at opportunistic prices
                                                           critical to investment success
Chemtura         Icelandic Banks   Terrestar

Chrysler Finco   KGen              Tho rnburg Mortgage    Significant value in off-the-run (less liquid)
Colonial Bank
                 Lehman and
                                   TOUSA
                                                           opportunities
                 Subsidiaries
                                                                 • Size of claim
Dynegy           MadoffClaims      Victoria Finance
                                                                 • Overlooked subsidiary claims
Enron            MadoffFeeders     Washington Mutual

Fontainebleau    MF Global         WR Grace
Why are they selling?
                 Original Investor                                    Hedge Funds

 Lack of expertise to value assets and/or          Early stage bankruptcy players often want to
  navigate the legal process                         “book a profit”

 Desire to “move on” from a mistake (get it off    Deal fatigue from protracted litigation is
  the books)                                         common (even hedge funds wear out)

 Temptation to sell at first opportunity after     Legal expertise and significant experience are
  long period of illiquidity                         critical in accessing the timeframe and potential
                                                     investment reward
 Time-consuming nature of liquidations and
  litigations can be prohibitive                    Larger funds need to take advantage of liquidity
                                                     when available

                                                    Post-distribution sizes of positions become
                                                     inconsequential for larger funds
Strategy Advantages
Compelling Alternative to Traditional Fixed Income Investment

                                                   Fixed Income            Late-Stage Bankruptcy Claims

 State of the Market                     • General market segment     • Specific market segment designed to
                                           overbought due to excess     exploit current market opportunity
                                           liquidity created by QE
 Correlation to Market Returns                         High                             Low

 Dependence on Macro-Economic Factors                  High                             Low

 Duration of Investment                              7-10 years                     6-24 months

 2012 Return Expectations                              3-8%                             15%

 Current Cash Flow                               Interest payments                  Distributions

 Potential for Capital Appreciation                    Low                              High

 Risk Factors:
       Significant Corporate Leverage                  High                             Low
      Low-Growth GDP Environment                       High                             Low
      Refinancing Risk                                 High                             Low
      Interest Rate Risk                               High                             Low
Return Drivers – Case Study (Enron)
                                     WSJ articles begin

                                                                                                                                                        Enron settles final
                                       Merger with Dynegy announced                                                                                   MegaClaim with Citibank
                                                                                                                                                   6th distribution
                                                                                                                                        5th distribution

                                                                                                                            4th distribution
Bond Price

                                         Credit downgrade/                                                        3 rd distribution
                                         merger terminated
                                                                                                      2nd distribution

                                                                            1 st distribution to creditors
                                                                                                                                                   Enron sells Latin Assets
                                                                                                                                                for 4.0x estimated Plan value

                                                                                                                          Enron settles MegaClaim
                                         Ch 11 filing                                                                    with JPM, TD, CIBC and RBS
                                                                                                             Enron sells Pipe Assets
                                                                                                         for 1.4x estimated Plan value
                                                                             Plan of Reorganization filed,
                                                     Asset auctions begin     estimated recovery of 18%

             Source: Deutsche Bank Securities Inc.
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