Tuesday, December 3, 2019

Frontier Communications Inc. Distressed Debt

Frontier Communications is a broadband internet, cable, and telephone company, formerly known as Citizens Utilities Company until May 2000 and Citizens Communications Company until July 31, 2008. (Interestingly, Citizens Utilities Company of Minneapolis was formed from remnants of Public Utilities Consolidated Corporation created by Wilbur B. Foshay.) Citizens Communications acquired the Frontier name and local exchange properties from Global Crossing in 2001. In May 2008, they changed the holding company name to Frontier Communications Corporation.

They provide service in 29 states to 4.2 million customers and 3.6 million broadband subscribers at an average monthly revenue per customer of $88.45. Their customer count was down 8% from third quarter 2018 to third quarter 2019, which is brutal in a high fixed cost business, although revenue per customer was up 4% year over year. The result was that revenue was down 6%.

Is this kind of like the tobacco business, with falling customer counts but rising prices? Cable companies ought to have some properties of good businesses: lack of competition and stickiness. How many choices do customers have, and how often do people switch their phone, cable, or internet providers, even when they have a choice?

The fixed cost structure is bad when customers are leaving. That's not a problem that the tobacco companies have. However, Frontier was able to cut some costs. Network access costs declined 13% year-over-year in the third quarter. And their own "network related expenses" were down 3%. The third category of recurring cash expenses, SG&A, was flat. The result was that EBITDA for Q3 was $781 million, versus $852 million the prior year - down 8.3%. That is more than the revenue decline - thanks to operating leverage. The current EBITDA figure would be $3.1 billion annualized. At the current run rate, this year's capex will be $1.2 billion, for a projected FCF of $1.9 billion before allowing for further customer declines.

We have previously mentioned that Frontier's debt is distressed, and that hedge funds are prodding the company to file for bankruptcy. You can readily see the unsupportable leverage of Frontier by the market value of its equity (only $68 million) compared to its total liabilities ($21.7 billion in Q3 2019), or by the trading prices of its unsecured debt. The capital structure consists mainly of $10.9 billion of unsecured holding company debt (which is the fulcrum). Senior to that is $5.7 billion of secured debt, which consists of $2.45 billion of bank debt and then $1.65 billion of first lien secured notes (8% due April 2027) and $1.6 billion of second lien secured notes (8.5% due April 2026).


The total debt load is $17.5 billion. There is also $2.1 billion of pension, post retirement benefits, and other liabilities; and $1.7 billion of non-debt current liabilities, against $1.6 billion of current assets (excluding assets held for sale).

One thing you will notice is that the unsecured holding company debt maturing between 2021 and 2046 is trading solidly in the 46 range, with the exception of a couple tiny pieces and more notably with the exception of the two pieces that mature in April and September of 2020. It is a distress indicator when you have debt of higher and lower coupons all trading at the same price, based on an assumption of what the recovery will be. Even the fat 10.5% coupon on the September 2022 debt is not enough to budge the price from the same level that a January 2025 6.88% bond is trading at. Another good distress indicator is the fact that the $10.9 billion principal amount of unsecured debt trades at a market value of $5.1 billion - a $5.8 billion "hole" in the capital structure. The higher price for the 2020 debt suggests a small chance that the company will limp along for another year.

As Moody's commented on November 12:
Frontier's credit profile is supported by the company's large scale of operations, its predictable cash flow and extensive network assets. The rating is also supported by the company's improved ability to generate cash following the elimination of its common dividend in early 2018. Moody's expects Frontier to have adequate liquidity to retire the remainder of its outstanding unsecured debt maturing prior to 2022. Frontier has been meaningfully reducing its refinancing risk hurdles in the near term, including through a March 2019 refinancing of short-dated first lien term debt with a first lien bond offering. Though Frontier expects gross proceeds of $1.352 billion from the sale of western state operations in first half 2020 (subject to closing adjustments), the use of such proceeds remains undisclosed but will likely facilitate capital structure enhancement efforts.
They just sold their "Northwest Operations" (Washington, Oregon, Idaho, and Montana) for $1.35 billion, which represented 7% of revenues, but chose not to disclose what proportion of operating profit these operations represent. Considering that this would value the entire enterprise at $19 billion, it is likely that this company followed typical "circling the drain" behavior and sold one of its better divisions in order to buy time. It's always easier to sell a better division. 

It may be possible to use some of those $1.35 billion proceeds to pay the 2020 debt maturities and interest payments, which include something like $333 million on March 15 and $381 million on April 15). On the other hand, there are leverage covenants in their secured debt that apparently step down from 1.5x EBITDA to 1.35x EBITDA in Q2 2020. They have $4.1 billion of first lien secured debt, so the 1.35x limit would be iffy given the recent $3.1 billion of annualized EBITDA. So if the company decides not to restructure, it may need to take a good chunk of the proceeds to pay down first lien debt with covenants before it could use any to buy back unsecured debt at a discount.

So we can guess that this company will restructure in 2021 if not next year, and we know that the unsecured is the fulcrum security. The question is: what should the unsecured debt be trading for. In order to estimate that, we need to think about the value of the enterprise and the liabilities that are ahead of the unsecured debt. Frontier itself attempts to assess its enterprise value, as disclosed in its filings:
We use a market multiples approach to determine Frontier’s enterprise fair value for purposes of assessing goodwill for impairment. Marketplace comparisons, analyst reports and trends for other public companies within the telecommunications industry whose service offerings are comparable to ours have a range of fair value multiples between 4.1x and 7.6x of annualized expected EBITDA as adjusted for certain items.  At September 30, 2019, we estimated the enterprise fair value using an EBITDA multiple of 4.4x.
Using a 4.4x multiple on $3 billion of EBITDA would imply that the enterprise is worth $13.2 billion. Enough to cover all of the secured liabilities and structurally senior subsidiary debt of $6.6 billion, but not enough to cover the unsecured debt and other unsecured liabilities, which appear to total $13 billion. This would leave unsecured creditors with ~50 cents on the dollar, just north of where the bonds are trading right now. When was the last time we even saw a pre-bankrupt company with  unsecured debt that stood to recover something?

Of course, we should not take the company's EBITDA projection or multiple at their word. Here are some competitors in the space (CenturyLink, Cincinnati Bell, and Consolidated Communications Holdings) and their enterprise value multiples.


Market Cap EV EBITDA (ttm) EV/EBITDA
CTL 15,590 51,290 9,180 5.6
CBB 325 2,580 392 6.6
CNSL 263 2,630 462 5.7
FTR*
13,000 3,100 4.2

The FTR is for the enterprise value of the debt only, at approximate market values of the debt. Notice that CBB and CNSL have very small market capitalizations in relation to their enterprise values. As one analyst we read pointed out, "at some point, all industry players will not be able to service their unsecured debt and will need to restructure". That analyst also pointed out that the CBB and CNSL stocks are probably inappropriately valued:
Unsecured debt of CBB and CTL is being created at substantially higher multiples, compared to those of CNSL and FTR. The same pertains to the market creation of unsecured debt plus equity. Why? Just because these companies are paying dividends.
So here is how the FTR unsecured recovery would look for the following pairs of EBITDA and EBITDA multiples, and assuming that $6.571 billion of liabilities would be in front of them and they would share with $13 billion of total unsecured liabilities:


4.25 4.5 4.75 5 5.5
2,400 28% 33% 37% 42% 51%
2,600 34% 39% 44% 49% 59%
2,800 41% 46% 52% 57% 68%
3,000 48% 53% 59% 65% 76%
3,200 54% 60% 66% 73% 85%

The big questions are: what is the EBITDA that this business will earn going forward, and what multiple would the enterprise be worth. On the EBITDA question, it is alarming how rapidly the company's business is shrinking. They went from 4.85 million customers at the end of 2017 to 4.2 million now, a 13% drop in under two years. With that level of customer exodus, the chart of historical EBITDA by quarter is not too pretty. 


The analyses that I have seen are pretty complacent about EBITDA. They take a >$3 billion level as a given and then assume that since CBB and CNSL's debt (which both trade close to par) create those enterprises at >5x EBITDA, FTR will do the same. The problem is that if the ice cube continues to melt, not only will EBITDA be lower, but it will probably be worth a lower multiple. In the 2x2 matrix of unsecured recoveries above, there's really only a line of realistic outcomes: low EBITDA, low multiple; or high EBITDA, high multiple.

Unless you can have reason to believe that the decline in customer losses is about to stop, there does not seem to be a margin of safety in the unsecured debt. If 13% of customers (net - more after figuring churn) left over the past two years, they probably went somewhere, since they are not likely just canceling their internet entirely. There must be competitors in Frontier's markets that are better or cheaper and are eating their lunch. For all we know, the most alert or savvy customers are the ones who just left and it is the beginning of an S-curve of the slower to react customers leaving too.

Monday, December 2, 2019

Ideas for 2020 Prediction Contest?

Our contestant Barbarian Capital (mentioned in previous contest post) has some suggestions for the upcoming 2020 prediction contest. Anybody else? Leave a comment below...

Financial (NEW)
- One or more cease to exist in its current form: Grubhub, Uber Eats, Postmates, DoorDash
- Adam Neumann and/or Patrick Byrne is formally charged by the SEC and/or the DOJ
- Bloomberg's stake in Bloomberg LP is sold (agreement signed, not close date)
- Any legal (ie court case) or governmental curtailment of index investing 
- At least one Ivy endowment makes a direct allocation to crypto
- At least one major VC fund ($1 bn+ AUM) is charged by the SEC or DOJ for any reason (ie mis-marking of investments, anti-competitive behavior, aiding and abetting fraud at a porfolio company, etc.)
- UBER + LYFT LTM GAAP loss exceeds $3 bn (as of Dec 2020) Q319 combined was ~$1.5 bn
- Formal anti-trust action against any "Big Tech" member by a federal agency
- Saudi Aramco fails to IPO or loses more than 30% of market cap at any time during 2020
- Sheryl Sandberg is no longer at FB as of 12/31/20
- BRK makes a single $50 bn+ cash acquisition (current cash is $128 bn) 
- Altria writes down JUUL by an additional $4.5 bn+ (invested $12.8; took a $4.5 hit)
- WeWork defaults on any bond or loan 
- At least 2 of the following go into restructuring: CHK WLL ASNA JCP TUP PRTY FTR
- MJ (pot etf) trades below $10 at any time in 2020 ($17 currently)

Finance x Politics (NEW)
- Donald Trump or a family member with confirmed $10+ million in short term capital gains 
- Means testing of any kind introduced for Social Security (for any birth year cohort)
- COLA for Social Security is substantially modified (ie chained CPI)  (for any birth year cohort)  
- Congress passes a bill that presents a major curtailment of cash returns to shareholders (limitations on buybacks and/or dividends)  
- A named executive officer ("NEO") of any US S&P 500 company is detained in Mainland China, Hong Kong or Macau for any reason  
- One or more states establish an "exit tax" for any group of former residents 
- One or more major state pension plans ($50 bn+ in obligations) are placed in any kind of special status 
- At least one new issue sovereign bond goes into default before first scheduled interest payment
- latest FRED for "all transactions house price index for NY-Jersey City- White Plains" is down by 10% of more (current: 295.72)

Politics (NEW)
- Donald Trump selects someone other than Mike Pence for VP candidate 
- One of the two major party presidential candidates endorses UBI
- Bloomberg runs as an independent/third party 
- Hillary Clinton runs for president 
- Rep. Ilhan Omar (D-MN) is not in office by 12/31/20
- Rep. AOC (D-NY) is not in office by 12/31/20
- Sen. Romney (R-UT) votes for DJT impeachment 
- NY Governor Andrew Cuomo is formally charged by the DOJ with corruption-related charges
- NYC Mayor Bill de Blasio is formally charged by the DOJ  with corruption-related charges
- Any current US state votes on secession from the union (referendum or state reps)  
- Alberta becomes the 51st US state 
- Greenland becomes a US territory
- Turkey de facto or de jure leaves NATO
- US and UK sign a comprehensive trade deal by 12/31/2020 
- US introduces a special immigration program for Hong Kong SAR passport holders 
- More than 500 US military and/or law enforcement personnel are deployed in Mexico at once at any time in 2020 

Other (NEW)
- Greta Thunberg is hospitalized for mental or undisclosed/generalized ("exhaustion") reasons 
- At least two Epstein associates are charged with Epstein-related offenses by any government
- US life expectancy declines for a fourth consecutive year (based on most recent data)
- At least one major league pro athlete (NFL/NBA/NHL/MLB/MLS) is involved in a sports betting scandal of any kind 
- Number of Americans giving up US passports is over 5,000 on an LTM basis (sub-3000 LTM now)
- San Francisco poop reports over 35,000/yr on most recent data (25,000 in 2018)
- China wins more medals than the US in the 2020 Olympics (2016: 70 vs. 121)
- Most recent data on the Harvard class Asian ethnicity percentage goes above 28% (22.9% prior year and 25.3% most recent
- Median SAT move by 20 pts +/- (2019 at 1059, 2018 at 1068)
- Martin Shkreli commutation or pardon (by 1/20/2021)

Saturday, November 30, 2019

Looking Back on the Credit Bubble Stocks 2019 Prediction Contest

We are coming to the end of the 2019 prediction contest. (See the questions and the crowd consensus on probabilities.)

Longtime participant and prescient prediction suggester Barbarian Capital wrote in to say, "Looking at my suggestions from last year as I am thinking about next year's..." See below:


Financial (NEW)
- GE or TSLA or PG&E: chapter 11 or substantial equity dilution or restructuring of liabilities >>> PGC Chapter 11! 
- Low vol (50/50 USMV SPLV) underperforms SPY on a total return basis >>> neck in neck YTD
- Lloyd Blankfein is criminally charged in the US in relation to the MDB1 scandal >>> does not look like it... GS settlement talks 
- At least one Theranos BOD member is criminally charged in the US in relation to Theranos >>> not happening!
- SEC approves a cryptocurrency ETF >>> shot down another proposal I think 
- AMZN HQ2 is materially modified (current status 2x 25k jobs over 10 yrs in NYC and NoVA; subsidies in the billions) >>> BLEW UP!
- More than 10% of US AMZN workforce vote to, or joins, a union > nope
- FNMA and/or FMCC trade below $0.10 at any time during 2019   >> nope 
- The price return of a basket of KKR BX CG APO is below that of XLF price return for 2019 >>> PE outperformed by quite a bit
- Uber, Lyft, Slack, Pinterest, Palantir, Robin Hood: the median price return of all entities that IPO in 2019 is negative for 2019 from IPO price >>> YAS, the IPOs were weak
- Formal attempt by the US government to use anti-trust against any "Big Tech" member >>> House Anti Trust panel is seeking docs
- Facebook pays or agrees to pay $10 bn or more in relation to advertising fraud >>> paid $40 mm settlement in a private party suit
- Western Canadian Select trades at a premium to WTI at any time (in USD terms; in 2018 the discount ranged between ~$10-$52) >>> nope (it has never traded above)
- The most current 13F as of 12/31/19 of the Swiss National Bank shows a balance below $45 billion (current $89.769 bn) (filings) >>> not happening 
- SEC announces plans to no longer require quarterly reporting by US public filers >>> nope 
- US student loans drop below 1,563.5927 bn (balance as of most recent FRED data) >>> nope, 1.638 rn
- A US regulator imposes a material new restriction on Credit Default Swaps >>> nope
- A US regulator imposes a material new restrictions on equity shortselling at any time for any period in 2019 >>> nope; serious convos in the EU 
- The SPY has at least one -5% day>> not so far
- At least one $1 bn+ AUM US fixed income ETF closes at a 10% or greater discount to NAV on at least one trading day >> have not seen that 
- Case Shiller NYC condo index drops below 250 (most recent 274.82, published Nov 18)  >> 272 currently, SALT is starting to bite IMO. This or NJ or CT house index is a proxy for taxpayer flight. 

Finance x Politics (NEW)
- Congress passes a bill that presents a major curtailment of cash returns to shareholders (limitations on buybacks and/or dividends) >>> no, but is a campaign issue
- Congress passes a bill that introduces a federal net worth based tax >>> no, but is a campaign issue
- Congress passes a bill that reverses the SALT situation from the DJT tax cuts >> nope
- Congress passes a bill that substantially changes established retirement savings accounts (IRAs, 401k, 453, 457 etc.) >>> nope 
- Congress passes a bill that substantially modifies the current student loan situation (eligible for bankruptcy discharge pari passu with other debt, lifetime payments limit for all, etc.) >> no, but is a campaign issue
- Congress passes a bill that introduces a universal single payer healthcare system ("Medicare for All" type) >>> no, but is a campaign issue
- Congress passes a bill that substantially harms the profitability of pharma cos (ie drug price negotiations or IP modifications) >>> nope 
- Congress passes a bill that substantially introduces a points-based immigration system >>> nope 

Political (NEW)
- DJT announces/is prevented from/or equivalent outcome that he will not seek re-election in 2020 > no
- DJT pardons any family member or formal campaign staffer by 12/31/19 (12/31/19 included) > no
- DJT Jr. is suspended or banned from Twitter at any time during 2019  > no
- Pelosi is no longer the House leader as of 12/31/19 (she has a multi-year deal starting in Jan) > no
- One or more states establish a resident "exit tax" based on net worth and/or future income > no but NYS is auditing 100% of high income earners who move
- Federal voter photo ID becomes the law of the land > no
- Xi and DJT physically meet five or more times  > no but trade negs are still daily headlines 
- Macron, Trudeau and/or Erdogan no longer head of state on 12/31/19 (not in the position, plans do not count) > still there 
- Jerome Powell is no longer Fed Chairman on 12/31/19 (not in the position, plans do not count) >> getting more interesting 
- Ukraine and/or Russia formally declare war on the other party by 12/31/19 > no
- Recreational pot legal in all 50 US states > no but SAFE act advances 
- Any current US state votes on a split (referendum or state reps) >> no 
- Any current US state votes on secession from the union (referendum or state reps) >> no
- A named executive officer ("NEO") of any US S&P 500 company is detained in Mainland China, Hong Kong or Macau for any reason >> no
- Kanye West, Kim K, Scarmucci and/or Tiffany Trump have a formal White House role at any time during 2019 >> no

Other (NEW)
- NYC sets a new high temperature record (currently 106F) >> no
- NYC sets a new low temperature record (currently -15F) >> no
- Number of Americans giving up US passports (on an LTM basis as of 12/31/19) is more than 6,000 (LTM as of 12/15/18 is around 4,000, tables here)  >> lower YTD
- the XFL substantially delays or fails to launch (Jan/Feb 2020 scheduled start) >> still scheduled
- Conor McGregor has no UFC belt on 12/31/19 (incl from any 12/31/19 event) >> lost both 
- Brazilian jiu-jitsu is declared a Summer Olympic sport >> no
- Most recent data on the Harvard class Asian ethnicity percentage goes above 28% (most recent data, class of 2022 is 22.9%) >> up to 25.3% 
- "Class of 2019" mean total SAT score moves by +/- 20 or more points vs. Class of 2018 at 1068 (College Board data) >> mean score down to 1059
- Substantive #MeToo allegations against Warren Buffett published in NYT/WSJ/WaPo/LAT >> no

Monday, November 25, 2019

November 25th Links

  • In order to be a contrarian, having a core belief in the fallibility of simplified generalisations, and an instinctive aversion to binary, reductionist thinking, is half the battle won, because it will cause you to be willing to seek out and listen to contrary arguments; test the veracity of widely-accepted claims against new evidence/data that emerges; and generally keep an open mind. Conversely, if you believe the world is simple and black and white, you'll find this virtually impossible, because you'll believe yourself to already be in possession of all the answers. Often, active open-mindedness is all that is needed to develop a far more nuanced, balanced view than the general consensus, and it is from this place that contrarian views naturally spring (often what is contrarian is actually having a more balanced view, far removed from the extremes/absolutes harboured by the mainstream). The reason people do not behave this way is not temperamental per se, but because they think the truth is obvious and further scrutiny of their existing views is therefore unnecessary. This is the fundamental cause of confirmation bias. [LT3000]
  • For Defendant's comments to relate to Plaintiff's participation in the public controversies, there must be some relationship between pedophilia and the [Rescue] or the Subs—there is simply no credible connection here. The limited-purpose public figure doctrine exists because "[t]hose who attempt to affect the result of a particular controversy have assumed the risk that the press, in covering the controversy, will examine the major participants with a critical eye." Waldbaum, 627 F.2d at 1298. But this eye only reaches "the issues at hand." Id. To allow criticism into every aspect of a plaintiff's life simply because he chose to get involved in a limited issue would render him an all-purpose public figure—effectively merging the limited-purpose public figure doctrine. [Unsworth v Musk]
  • There is no way the fight for single payer would survive Warren's plan. It is practically tailor-made to divide, depress, marginalize, and exhaust any political will for single payer before we've even begun the final fight. A skeptic might say that Warren must certainly know that this would happen, and is simply triangulating between Bernie and Buttigieg at this point — but her motives are really beside the point. We can generously say that she is being naive, and it nevertheless remains the case that Warren's plan cannot possibly succeed in what it supposedly sets out to do. Which returns us to the difference between Sanders and Warren. Sanders understands that this is a political fight, and that's why he insists on settling this in one bill — an approach that stands the best chance of keeping the public mobilized. Warren, for all her technocratic savvy, has badly misunderstood the political problem at hand: and that is why her plan, and so many of her plans, are doomed to fail. [Jacobin]
  • [R]unning your own mail server is not as daunting as many would have you believe. After all, that is how email is designed to work. Email is perhaps the most successful federated, decentralized protocol to ever exist. It's a shame we've allowed a centralized, monolithic advertising company to obtain a near monopoly on such a great technology. [link]
  • A recent event in Culiacan, Mexico should have drawn a lot of attention but didn't: a Fourth Generation entity, the Sinaloa Cartel, took on the Mexican state and beat it, not just strategically but tactically. It did so by demonstrating a remarkably rapid OODA Loop, far faster than the state's. This is a sign of things to come, not just in Mexico but in many places. All this is happening not in the Hindu Kush but on our immediate southern border. That alone should have drawn greater attention from a defense establishment fixated on non-threats from Russia and China. But there is more here than meets the eye. [Traditional Right]
  • A classic move from a potential buyer, that I've experienced in other businesses, is to make all kinds of assurances about how interested they are very early on in the discussion and then at the very end of the deal process the lawyers and accountants dig in with a million nit-picky irrelevant quibbles; then they come back with a ridiculous low ball offer. [link]

Tuesday, November 19, 2019

Trial Date for Vernon Unsworth v. Elon Musk Defamation Case

One of Elon Musk's many legal tangles, Vernon Unsworth v. Elon Musk (2:18-cv-08048-SVW-JC) is in federal court in the California Central District. From yesterday's order denying Musk's motion for summary judgment:

For the reasons discussed above, the Court DENIES Defendant’s motion for summary judgment. Dkt. 58. The jury trial remains scheduled for December 3, 2019 at 9:00 a.m., with pretrial on November 25, 2019 at 3:00 p.m..

Tesla Enterprise Value Now Over $75 Billion



Monday, November 18, 2019

November 18th Links

  • Mark Twain read the Book of Mormon and, knowing what Smith would have read, not to mention knowing about frontier fakery, came to conclusions about both the sources of its prose and the sequence of its composition. [New Yorker]
  • Hugh liked to tell the story of a statue that had been exposed as a forgery. In the nineteenth century, it had been passed off as an ancient Etruscan sculpture; but in the twentieth century a sharp critic had detected its recent origin. How? The forger had endowed it with the ancient Etruscan mannerisms he could see; but also, unconsciously, with the nineteenth-century mannerisms he couldn't see. His contemporaries couldn't see them either, so for a while the counterfeit succeeded. But as fashions changed, those nineteenth-century mannerisms "rose to visibility." As Kenner put it, "The style of your own time is always invisible." This was a favorite moral of his. You have to be alert for the unconscious assumptions you share with your own era. Conservatives and radicals, thinking themselves opposites, may actually share the same prejudices without being aware of them. [link]
  • In his book "The Counterfeiters," Hugh Kenner tells of asking a museum director what had alerted her to a suspected forgery of the horse. "Simple," she said. "The faker had worked into that horse every Etruscan mannerism he knew about and every 19th-century mannerism he didn't." [NY Times]
  • The document known to us as the Donation of Constantine is one of the most famous medieval forgeries. Written at an unknown date and place in the heart of the Dark Ages, for unknown purposes, it was embedded in the Forged Decretals in the early 9th century, and so drifted into the main collections of legal material used in the Middle Ages, including Gratian's Decretum. In the absence of a stable political environment in Italy from the collapse of the Roman empire to the establishment of the modern Italian state, the papacy was obliged to provide for its own security. The document was used to justify it doing so. The text purports to be a legal document issued by the Emperor Constantine, transferring control of Italy and the western provinces to Pope Sylvester in gratitude for being cured of leprosy. The renaissance Popes, whose spiritual role seemed often secondary to their function as the heads of a minor Italian state, used it extensively to oppose the territorial ambitions of the great powers and support their own. But in the Renaissance, for the first time in a millennium, it was possible to compare such documents with the genuine products of antiquity. St. Nicholas of Cusa was one of the first to notice that the Donation did not agree with the picture given by other documents. But it was left to the quarrelsome but brilliant scholar Lorenzo Valla to make public that the document was a fraud. This he did around 1450, while working for King Alfonso of Aragon, Sicily and Naples, who was attempting to make claims to various parts of Italy. [link]
  • In general, there are three ways to trace art forgeries, namely detecting anachronisms, comparison with the artist's palette and differentiation based on impurities. The term "anachronism" points to an error in chronology, especially a chronological misplacing of artifacts. [Infrared and Raman Spectroscopy in Forensic Science]
  • The stock market may be efficient, but emulation is the way of the world. Take a good idea. Drive it into the ground like a tomato stake. Boom: It's a bad idea. Private equity was one such good idea. You borrowed the money with which to buy a nice, stable public company. You didn't overpay. You leveraged the balance sheet, but you didn't overleverage (well, you usually didn't). You fixed up the operations, extracted fees, and paid yourself a cheerful dividend. When the time was right, you sold. [Barron's]
  • Trump left the stage and we rushed off to his plane to fly to New York. Vitale whispered to me, in effect, "Get this book out fast. He is a wasting asset." On the flight, I was watching Trump carefully to see how he was doing. I couldn't spot a trace of anxiety. I don't remember anyone mentioning the story or his finances. After a sumptuous lunch of shrimp, charcuterie, and assorted desserts, Trump took Maples into his private cabin and reĆ«merged about ninety minutes later. Considering the Journal story, I would not have been surprised had he opened the jet's door and jumped out. And yet he seemed unfazed. [New Yorker]
  • Hovnanian Enterprises Inc. is a homebuilder with Caa1/CCC+ credit ratings and a history of creative debt refinancing, and today it announced the commencement of its latest refinancing, which features 1.75-lien notes. This follows the announcement last week of the completion of another Hovnanian refinancing involving first-lien loans, 1.125-lien notes, 1.25-lien notes and 1.5-lien notes. There are also existing second-lien notes, and unsecured notes. The list is therefore (1) first-lien, (2) 1.125-lien, (3) 1.25, (4) 1.5, (5) 1.75, (6) second-lien and (7) unsecured. If you have second-lien notes, you are sixth in line. [Bloomberg]
  • If your market is highly competitive, you may need to spend nearly as much to acquire your customers as you derive from their full lifetime value in order to win the bids to display your ads to those customers, so you may need a ratio like 1.5::1. If there is less competition for your customers, or you prioritize profitability over quantity, you can maximize your returns by targeting a CLV to CAC ratio as high as 4:1. [link]
  • Theroux is also as acerbic as ever. Entering Puebla, he writes that "[t]here is not a big city in Mexico — no matter how charming its plaza, how atmospheric its cathedral, how wonderful its food, or how illustrious its schools — that is not in some way fundamentally grim, with a big-box store, a Sam's Club, and an industrial area, a periphery of urban ugliness that makes your heart sink." [LA Times]