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I don’t want to sound like a grumpy buysider so I’ll share a little more details on my insider experience with credit analysts
PortCo is a mid-market infra company. Extremely solid company, long-term contractualized revenues, cash-flow generating and so on
PortCo has also an incompetent management and primitive finance division, they have SAP but they use like 10% of its functions, don’t produce a real annual budget, don’t have periodical reporting, they can’t even produce a proper P&L by division
Your boi here is a lender at family HoldCo (2 layers above PortCo) and needs a liquidity event to get the fuck out. Typical shareholder consolidation financing #specialsitslife, so it’s in our interest to advise the company on m&a and debt matters
The key shareholder has tried sometimes to sell a minority of the company but always failed due to the combination of crazy price expectations and the above-mentioned lack of financial discipline (the financial DD advisors wanted to kill themselves every time)
PortCo is also extremely underlevered, so we decided to try and find some cheap leverage and get out through a special dividend. A big name insurance company was interested, but they needed a rating….
… yours truly thought it would be a nightmare: this company takes forever to satisfy basic Financial DD questions (e.g. “we don’t have monthly working capital movements”), “those credit analysts must be tough”, I thought.
Instead, the rating agency (big one) was ok with: i) not having final FY20 accounts (we are in fucking Q22021!!), rather relying on a bullshit budget from 01/20; ii) working with the company’s model, which is a bachelor degree-level model with simplistic (plain wrong) assumptions
iii) fill the note with bullshit market color from the management; iv) accepting the company’s terrible management accounts without requiring any Financial DD. All these granted PortCo an IG rating.
The big insurer is now happy to refinance the company, so your sneaky boi will be out. Happy ending
