Investing in Restructured Bonds: The Case of At Home Group Inc.At Home Group Inc., a home decor retailer, has undergone significant restructuring since being acquired by private equity firm Hellman & Friedman (H&F). Previously a publicly traded company, At Home was taken private in a $2.8 billion deal, allowing for strategic changes without the pressure of quarterly earnings reports. This shift has provided the company with greater flexibility to refine its business model, optimize operations, and navigate the challenges of the home furnishings market.
As part of its financial restructuring, At Home Group issued first-lien bonds with a 7.125% cash coupon and an 8.625% PIK coupon option, maturing in May 2028. Currently, these bonds are trading at 40-45% of their nominal value, presenting a yield-to-maturity of nearly 40%. This high yield reflects both the potential upside and inherent risks associated with investing in a leveraged private company. The first-lien nature of the debt offers bondholders a priority claim on the company’s assets, providing an added layer of security in the event of financial distress.
Despite the promising aspects of this investment, challenges remain. As a private entity, At Home Group has limited financial disclosure, making it harder for investors to gauge its financial health and strategic execution. Additionally, the company operates in a highly competitive space, contending with major industry players such as IKEA and HomeGoods. Furthermore, home furnishings and decor are cyclical sectors, heavily influenced by macroeconomic conditions, consumer spending, and housing market trends.
However, At Home Group’s restructuring under H&F could be a catalyst for long-term stability and growth. Hellman & Friedman has a strong track record in successfully repositioning struggling businesses, which could enhance At Home’s operational efficiency and financial performance. If the company executes its turnaround strategy effectively, the bonds could represent a compelling opportunity for high-yield investors seeking structured downside protection. While uncertainties persist, the combination of strong private equity backing and attractive bond yields makes this an investment worth considering for those with a high-risk tolerance.
Corporate bonds
Euroclear Resumes Settlements for Select Russian EurobondsThe global financial landscape witnessed a pivotal development on December 2, as Euroclear resumed settlement operations for 10 Russian Eurobonds. Among these issuers are major players such as RUSAL, Russian Railways ( RZhD ), and EVRAZ. This decision comes amidst a backdrop of geopolitical complexities and sanctions, marking a significant step for both investors and issuers.
Key Developments
Euroclear’s decision aligns with legal clarifications from Russian Federal Law No. 292 (July 14, 2022) and Presidential Decree No. 430 (May 20, 2024). Euroclear’s compliance department conducted an extensive analysis to ensure the settlement process align with sanctions frameworks, ultimately reinstating operations for these instruments.
This move enables investors to transfer Eurobonds to Russian depository accounts within Euroclear, facilitating their eventual submission to issuers for substitution—a process governed by Russian law.
Strategic Motivations Behind Euroclear’s Decision
We can confidently emphasize two key drivers here:
1. Sanction Avoidance vs. Process Control
The substitution mechanism operates under Russian jurisdiction, reducing European depositories' control over these transactions. Euroclear and Clearstream seem inclined toward compromise to maintain oversight and mitigate risks tied to non-compliance with EU sanctions.
2. Financial and Legal Pressures
Increasing litigation expenses and adverse court rulings, such as cases where investors successfully claimed both coupon payments and bond values, have likely influenced Euroclear’s decision. These precedents underscore the rising costs of maintaining frozen securities.
Implications for Russian Investors
This development is a positive signal for the Russian market, noting the high risk of a complete cessation of Eurobond settlements just months ago. While challenges remain, this partial resumption reflects Euroclear’s strategic recalibration amidst evolving financial and legal pressures.
Further View
This decision may set the stage for further negotiations between issuers, investors, and custodians. Any progress in unfreezing additional securities will not only alleviate investor concerns, but also reshape perceptions of Euroclear’s role in the current geopolitical climate.
For now, this resumption underscores a willingness to adapt, balancing compliance with operational sustainability—a cautious yet promising approach to navigating the complexities of international finance.
