BUSINESS SITUATION
The client had a pressing requirement of evaluating the high-yield (HY) companies across the US and Europe, owing to severe volatility caused by macro challenges and central banks’ policy actions. In addition to identifying and evaluating investment opportunities, the client’s team also needed support inactive maintenance and coverage of the portfolio in the HY space across sectors.
SGA APPROACH
After developing a detailed understanding of the client’s investment research process and valuation framework, SGA identified the key addressable areas and adopted the following approach:
- Deployed a team of proactive analysts aligned one-to-one with the onshore team to handle requests such as cash flow modeling with forecasting to ascertain the likely development of credit metrics, liquidity analysis to address refinancing challenges, interest rate-sensitive analysis of the portfolio, and capital structure analysis, among others.
- Implemented scenario analysis tools to evaluate alternative possible outcomes, and accordingly performed recovery analysis for tracing the reclaim value for secured/unsecured bondholders.
- Adopted both fundamental and relative valuation to ascertain the value of bonds and helped in reviewing the companies within the portfolio.
- Took the ownership of regular monitoring of the portfolio as well as initiating the coverage based on requirements and evaluating investment ideas even for new issuances.
BENEFITS AND OUTCOMES
- Quick turnaround helped the client to assess the entire portfolio timely and take informed decisions.
- SGA analysts gained client’s confidence and started to contribute to the daily affairs of the portfolio managers. There was regularity with the workflow, wherein the analysts started providing vital research inputs in a periodic manner.
KEY TAKEAWAYS
- Reviewed the portfolio of 60 companies in 2 weeks
- Expanded portfolio coverage of HY companies by four-fold across sectors
- 100% dedicated engagement model
- ~35–40% cost savings delivered during the first year itself
