LOS ANGELES, April 28, 2021 /PRNewswire/ — In a new research paper, Robert Cohen, CFA, Director of the Global Developed Credit team at DoubleLine Capital LP, studies the impact of special purpose acquisition companies (SPACs) on target companies and their debt before and after the targets’ merger into SPACs.
While the proliferation of SPACs in 2020 and this year has raised legitimate concerns about the risks to equity investors, Mr. Cohen found the SPAC target companies in his study in general emerged post-merger in stronger financial condition, an improvement that was reflected credit quality of their debt.
“Debt prices of target companies have experienced price appreciation of up to 4% after a SPAC has announced a target company,” Mr. Cohen writes. “In addition to price increases, credit investors benefit from significant deleveraging (i.e., strengthened solvency) and a fresh cash injection into the target company (i.e., improved liquidity). Credit investors should be on the lookout for bonds trading below their change-of-control put price or loans trading below par that can benefit from a SPAC transaction.”
The paper, titled “SPAC Impact on Leveraged Finance Markets,” can be found at this link: https://doubleline.com/wp-content/uploads/SPAC-Impact-on-Leveraged-Finance-Markets_Cohen_April-2021.pdf
Robert Cohen, CFA, is a Portfolio Manager and Director of DoubleLine’s Global Developed Credit (GDC) team. The GDC team invests in U.S. corporate credit, including investment grade and below-investment grade bonds and bank debt. Mr. Cohen also is a permanent member of the Fixed Income Asset Allocation Committee. Before joining DoubleLine in 2012, Mr. Cohen was a Senior Credit Analyst at West Gate Horizons Advisors (and its predecessor ING Capital Advisors), where he worked as an Analyst covering bank loans and high yield bonds. Prior to ING, he was an Assistant Vice President in the Asset Management Group of Union Bank, where he managed a diversified portfolio of leveraged loans as well as a portfolio of collateralized debt obligation securities. Prior to Union Bank, he was an Associate Director of Corporate and Investment Banking at the Bank of Montreal in its Natural Resources Group. Mr. Cohen holds a B.A. in Economics from the University of Arizona and an MBA from the University of Southern California.
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