Doublelines Gundlach says a bottom tier just market down its Red Lobster equity position 98% overnight; oddly that equity position was in a "private credit" fund
- Disturbingly, that fund's large Red Lobster debt holding is market at par, even though the equity bas basically wiped out overnight, RUN.
- Amazingly, and extremely telling, that bottom tier private credit sponsor has, per Bloomberg, marked UP the value of its large Red Lobster debt position five quarters in a row! Marked it UP?!?! Possibly PIK “magic” in action.
Context
This news indicates significant turmoil for the private credit fund linked to Red Lobster, particularly given the drastic drop in its equity valuation while the debt remains marked at par. This discrepancy raises red flags regarding the true solvency and cash flow of the underlying business, suggesting a potential mispricing in the credit market if a further reassessment occurs. Investors may want to scrutinize private credit positions more closely, especially those with inflated valuations that could be covering up distress.
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