Steve Tananbaum on Calpine Equity: Invest For Kids Chicago Presentation

We're posting up notes from the Invest For Kids Chicago conference 2015.  Next up is GoldenTree Asset Management's Steve Tananbaum who talked about Calpine equity.


Steve Tananbaum's Invest For Kids Chicago Presentation

•    $24B AUM – credit manager formed in 2000.
•    Credit market discussion – HY defaults increasing, many leading indicators.
•    High transaction multiples and leverage increasing – debt to ebitda around 5.2x. Increase in default rates, just about to begin over the next 12-24 months.
•    Would get 1000 bps, think were halfway there at 500 bps spread.
•    Is HY cheap now? Now its ok, closer to fair value.
•    2/3 bonds trading below par. 90% of loans trading below PAR
•    Now a bond/loan picker market.
•    June 14 – 90% of bonds above par
•    In bonds – 2/3 of what is trading below 95 isn’t energy. Loans its 80%.
•    Looking at triple C credits, many funds who owned them did great in FY09-13, and then 14/15 something went wrong. What occurred is the lowest part of the market had a significant reversal (i.e. CCC) underperforming by almost a 1000 bps. Expect it to continue.
•     Triple C headwind.
•    Oil futures $52 for dec 15, hy market/stock market pricing in a $65 price. Performance in energy/commodity function where oil is.
•    Problematic sector? Technology. Leverage is around 7x currently for Tech LBOs. What enters LBO tech market is slow to no growth tech companies (i.e. Compuware although no mentioned by name). Went from 4x to 8x. Technology is 8% of CCC issuance.
•    Illiquidity in HY market? More where it is in the 90s, 05 was an anomaly.
•    Finding some value in structured products. Greater issuance versus corp bonds a decade ago. 2x1 structure vs corporate. Now it is 20% of issuance. Less eyes on structured products.
•    Adjustable rate feature in structured rate products aren’t being priced in.


•    Idea is Calpine equity (CPN) –an independent power producer trading at low multiple, trough earnings and strong cash flow.
•    Half of cash flow is locked in for 3 years. Stable earnings outlook even in a low commodity price environment.
•    Young reliable efficient gas and geothermal fleet.
•    Texas – currently at trough earnings/depressed margin (25% of cash flow)
•    Buying back stock aggressively – 20% over last two years.
•    Significant NOL to shield free cash.
•    Will buy back another 15% of stock.
•    $22.3 by FY17 or a 20% FCF yield today.
•    Create gas assets at $477kw less than half of replacement costs.
•    Risk is increasing renewable supply such as wind/solar, potential new gas supply if prices recover and high leverage at 5.4x or 6.4x including major maintenance.
•    Bonds trade above par at spread basis, credit markets benign view.
•    FCF conversion currently 33%. 
•    Trades for ~8.25x EBITDA.
•    Price target includes 298 shares, $3.16 per share of FCF and implies a 12% fcf yield.
•    Down 32% YTD – market thinks price will be priced off $2 gas. Half of cash flows already locked in.


Check out the rest of the presentations from Invest For Kids Chicago 2015.

Goldentree's Steve Tananbaum on Wall Street Week

Anthony Scaramucci's rebooted version of Wall Street Week recently interviewed Steve Tananbaum of Goldentree Asset Management.

Goldentree manages $24 billion and has a bottom up value process focused on the credit markets.

Tananbaum commented on the recent market volatility, noting that investors all have differing views on what we should be concerned about: the Federal Reserve tightening, China issues, potential instability in Europe, etc.  He says that's what the market is struggling to prioritize.

He also notes that the bond market isn't as concerned with the direction of earnings.

As far as sectors go, Tananbaum said he thinks the media sell-off has been overdone, and singled out Time Warner (TWX) and Tribune Media (TRCO).

Embedded below is the video of Tananbaum's appearance on Wall Street Week:



If you missed it, be sure to also check out Eminence Capital's Ricky Sandler on Wall Street Week as well as Mario Gabelli's interview.

Steven Shapiro Long Co-operative Bank at Capitalize For Kids Sohn Canada

We're posting up notes from the Capitalize For Kids Sohn Canada conference that just took place.  Next up is Steven Shapiro of Goldentree who pitched long Co-operative Bank in London (LON:CPBB)


Steven Shapiro's Sohn Canada Presentation

Pitched LONG Co-operative Bank, trades in London. It’s the 7th largest bank in the UK (on deposits), thinks it can double in 12-24 months. Currently trades at half book value and has completed two rights offerings in the few years (to raise much needed capital).

Some risks include balance sheet correlation with UK real estate market, potential large pension liability outstanding, and payment protection insurance issue. Has recently worked to reduce non-core assets, the bank’s portion of the pension deficit is small. Now comfortable with payment protection issue. Significant franchise value as it is a recognized brand in the UK. Currently trades at the rights offering price and it a well-capitalized bank (Basel 3 compliant). Co-op is currently operating at much lower levels than peers, particular with high liquidity ratio.

Be sure to check out the rest of the presentations from Capitalize For Kids Sohn Canada here.

Notes From SALT Conference Panel With Kyle Bass, Dmitry Balyasny & Steven Tananbaum

At the SALT Conference in Las Vegas today there was a panel called "From Crisis to Renewal: Uncovering Opportunities."  It featured Kyle Bass of Hayman Capital, Dmitry Balyasny of Balyasny Asset Management, Steven Tananbaum of GoldenTree Asset Management, as well as John Bader of Halcyon Asset Management.


Kyle Bass says that we are near the trough of the housing crisis and thinks the bottom could come in the next 12-18 months.  We posted up an excellent presentation on the housing market by Aaron Edelheit from the Value Investing Congress recently.

Talking about the generational balance in Japan, Bass says there's now more adult diapers being sold than baby diapers in that country.  He compared Japan to Bernie Madoff in that lying works until there isn't new money coming in - you can make promises and there won't be any issues as long as you don't have to follow through.

We've posted his Bass' presentation on Japan before as well.  At SALT he said that the country is already monetizing their debt so it's just a matter of time.

He admitted to making a mistake in 2009 by not anticipating all the printing by the sovereigns.  He focuses on the losses and forgets the gains, he says.

As to what the Hayman Capital man recommends now: long non-agency MBS credit while shorting Europe and Japan.  The hedge fund manager also said that Greece would be "ungovernable" in the near future.


Dmitry Balyasny talked about how he is 'neutral' on US companies but always hunting for quality picks.


Steven Tananbaum cited his propensity to favor corporate debt and mortgage backed securities (MBS) as longs in this environment.


John Bader pointed out that there are plenty of liquidation plays in this environment. He also advocated seeking out uncorrelated strategies.  Bader does not seem to be convinced the crisis is over.


For more notes from the SALT Conference, check out:

- Identifying opportunities in emerging markets with John Burbank


- Barry Rosenstein, Leon Cooperman & Joel Greenblatt's panel on stocks


- Risk panel with Phil Falcone and Eric Sprott







The above was compiled from notes sent in along with help from live tweets from: @ldelevingne , @pdmckenna ,  @AttainCapital & @realrobcopeland