VERITS 7 ½ 02/01/23

Publicly listed companies mentioned herein: Carlyle Group LP/The (CG), CommVault Systems Inc (CVLT), JPMorgan Chase & Co (JPM), Symantec Corp (SYMC)

Highlights

The presenter is long Veritas bonds (VERITS 7 ½ 02/01/23) due to his optimism on the company’s recovery. The enterprise software company was acquired from Symantec by The Carlyle Group with the deal closing in Q1’16, which the presenter notes to have been a bad time for the market. The company’s first lien is valued at ~$3.5B split mostly between a term loan and a 7.5% secured bond. There is also an $800MM, 10.5% unsecured bond. He got involved in Summer 2018 when the first lien’s bond was trading in the “low-90s” and the unsecured bond was trading in the “low-80s.” Things turned around for the company and both bonds were trading at ~110, but then the company’s performance disappointed again and the bond values fell their current ~95 (secured bond) and ~86 (unsecured bond). In the next twelve months, the presenter expects the secured bond to be trading at par with a high teens total return percentage. He thinks this is a great value, as investors can create a position at 4.5x EBITDA when comps trade at 8x+. His expectation for the unsecured bond is also bullish, as he expects the bond to trade in the mid- to high-90s, representing 25% – 30% total return which can be created at 6x EBITDA.