New Look post terrible results, bonds collapse

Great points,

My whole experience with WiseAlpha so far has been a learning experience. Is it wrong that a little bit of me would like to see New Look go under just so I can see the winding up process unfold? As I have so little skin in the game at the moment I wouldn't lose much (£100 in New Look), but if it all ran smooth I would feel a lot more confident as I move past experiment phase and into investment.

Did you have New Look? I saw you finally bit the bullet and took the plunge into signing up. I actually thought of you when I first saw the bond vanish and was hoping you didn't pick it first.

On another note, where are you getting your bond prices? I am struggling to find a good source with an interface I like.

Kazamx

While this should become an invest and forget deal in the medium term, for now, I am finding it too interesting. I have never had anything to do with bonds before and have fallen down that rabbit hole, where no matter how much I read I find there is more to go.


Kazamx
www.reddit.com/r/wisealpha

Hi Guys, 

We've updated New Look now post results yesterday, we just took it off briefly until we'd got some trading colour and analysed the results. I wouldn't think of it as a crisis just yet but needs to be kept an eye on. It's easy to get alarmed by price changes when most bonds are pretty stable but it does happen. You do get the odd company having performance issues now and then so you still need to assess each company and formulate your own views as to whether it will perform over the medium term. 

Just to note as examples Matalan was at 77 last year following a few poor quarters and has now risen up into the 90's and back in 2015 Iceland hit the low 80's and now is 108 (results rebounded and the company has been buying back it's bonds strongly and risk has reduced massively). Generally more volatility with the retailers as they can have a few bad quarters so you've got to look at those guys over the medium term. Key is whether you think they have the financial flexibility and good brand positioning because even big companies can get into financial difficulties even though it's less common than small business. Remember your capital is at risk - these are investments just like shares and P2P.

From what I can see results continued to be weaker for UK womenswear (they're still the No.1 Womenswear retailer (for under 35's) but they seem to be executing well on their e-commerce and international strategy which is becoming a larger part of their business so it will all be about stabilising and re-growing that part going forward while the rest of the business grows. The retailers are a bit all over the place at the moment as you say macq. 

May well be a buying opportunity soon as you are now effectively getting an equity yield for senior secured debt risk. We'll revisit in a few months because I don't expect them to rebound performance wise very quickly and right now we're focusing on building diversity at the moment with some new bond issues coming.

For those interested in doing a deeper dive before we revisit things to look for include their liquidity (cash and revolver flexibility), how quickly the rest of the business is growing, the company and it's owners purchasing it's bonds (the company bought back some of it's unsecured 8% bond).

Kind regards,

Hi Macq, 

We'll continue to diversify although we think that some of the financial companies can offer good value. For example we will be putting on a new issue shortly that started trading today for Kirs group (8.375% senior secured bond) which is in the insurance sector. 

www.kirsgroup.co.uk/media-centre/news/kirs-group-launches-800-million-bond-offering/

And we're also going to be launching another tranche of our 8% WiseAlpha Investment bond - since this is our own product we manage - the bond will stay at face value - so a bit simpler for those folks not keen on continuously monitoring their portfolio.


Kind regards, 

Hi Macq, 

While theoretically any investment could lose all of it's value, for senior secured debt the average recovery on a defaulted issue is approx 70% according to research by Credit Suisse (Feb 2017). For unsecured high yield bonds it's approx 30-40% depending on year of vintage. All things being equal the closer you get to maturity the price tends to move back to par (i.e. the notional face value). Obviously if a company is under-performing with a short time to go this may not be the case but if a company has a strong brand and market position it's more likely there are re-financing options and the owners can also choose to contribute more cash to prevent losing the company to lenders. A company can't choose to avoid paying the debt back unless lenders agree to that. I hope that helps.

Kind regards,

In this modern world of constant change the new look can become the old look very quickly.

Yes it is wrong of you kazamx !! Is it wrong that a little bit of me would like to see New Look go under just so I can see the winding up process unfold?

Personally I could do without having your curiosity satisfied here!