01.06.2016

Coates Hire debt spreads

Several major lenders to Australia’s largest rental company Coates Hire are offloading their loans at a discount.

The companies selling include Deutsche Bank, Bain Capital and Barclays, so far Goldman Sachs Special Situations group, CarVal Investors, Broad Peak of Singapore and at least two other hedge funds have picked up small portions of the Coate's debt from them. Deutsche was set to auction all of its $65 million holding last Tuesday, but we have not heard if it actually sold much more than $10 million.

While Barclays was due to auction off its $65 million holding last night – Tuesday. The two were members of the rental company’s 25 member banking group that was holding over a billion dollars of its debt.

The type of companies acquiring the debt in general have a totally different approach, to that of the original lenders, and are probably betting on the rental company pulling through the current market challenges, during which its revenues and profits have taken a massive hit. It it does flourish again and pay down the debt, the new lenders will make a substantial profit. Alternatively some of them would probably appreciate a debt for equity swap if business proves more difficult.