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• Teaching Note | HBS Case Collection | April 2020

  Oaktree: Pierre Foods Investment

  Victoria Ivashina, Michael Harmon and Terrence Shu

  Teaching Note for HBS No. 219-018. This case is a setting to discuss “loan to own” investment strategy that is often pursued by distressed investors. The aftermath of the 2007 financial crisis left many companies with poor liquidity and limited ability to obtain credit. One of these companies was Pierre Foods, a producer and distributor of processed and precooked protein products that had experienced several years of promising sales growth and held a leading market position. Despite this, 2007 saw Pierre foods adversely affected by a spike in production costs and unsustainably high leverage. This made Pierre Foods an attractive opportunity for Oaktree Capital Management, allowing them to employ its strategy of investing in distressed debt securities with the goal of leading a restructuring during which their debt investment would be converted into a controlling equity stake. The challenge of executing “loan to own” strategy is being able to identify ahead of the restructuring the debt layer that stands to become equity (the so called “fulcrum security”). Overall, this case can be used to understand unique elements of a representative distressed investment. It can also be used as a platform for discussing sources of value and risks associated with distressed investing.

  Keywords: distress investing; Investment; Debt Securities; Strategy; Restructuring;

  Citation:

  Ivashina, Victoria, Michael Harmon, and Terrence Shu. "Oaktree: Pierre Foods Investment." Harvard Business School Teaching Note 220-083, April 2020.  View Details

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• Supplement | HBS Case Collection | April 2020

  Oaktree: Pierre Foods Investment

  Victoria Ivashina and Terrence Shu

  This case is a setting to discuss “loan to own” investment strategy that is often pursued by distressed investors. The aftermath of the 2007 financial crisis left many companies with poor liquidity and limited ability to obtain credit. One of these companies was Pierre Foods, a producer and distributor of processed and precooked protein products that had experienced several years of promising sales growth and held a leading market position. Despite this, 2007 saw Pierre foods adversely affected by a spike in production costs and unsustainably high leverage. This made Pierre Foods an attractive opportunity for Oaktree Capital Management, allowing them to employ its strategy of investing in distressed debt securities with the goal of leading a restructuring during which their debt investment would be converted into a controlling equity stake. The challenge of executing “loan to own” strategy is being able to identify ahead of the restructuring the debt layer that stands to become equity (the so called “fulcrum security”). Overall, this case can be used to understand unique elements of a representative distressed investment. It can also be used as a platform for discussing sources of value and risks associated with distressed investing.

  Keywords: distress investing; Investment; Debt Securities; Strategy; Restructuring;

  Citation:

  Ivashina, Victoria, and Terrence Shu. "Oaktree: Pierre Foods Investment." Harvard Business School Spreadsheet Supplement 220-715, April 2020.  View Details

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• Working Paper | 2020

  Loan Types and the Bank Lending Channel

  Victoria Ivashina, Luc Laeven and Enrique Moral-Benito

  Using credit registry data for Spain and Peru, we document that four main types of commercial credit—asset-based loans, cash flow loans, trade finance and leasing—are easily identifiable and represent the bulk of corporate credit. We show that credit growth dynamics and bank lending channels vary across these loan types. Moreover, aggregate credit supply shocks previously identified in the literature appear to be driven by individual loan types. The effects of monetary policy and the effects of the financial crisis propagating through banks’ balance sheets are primarily driven by cash flow loans, whereas asset-based credit appears to be largely insensitive to these types of effects.

  Keywords: bank credit; loan types; bank lending channel; credit registry; Banks and Banking; Credit; Financing and Loans;

  Citation:

  Ivashina, Victoria, Luc Laeven, and Enrique Moral-Benito. "Loan Types and the Bank Lending Channel." NBER Working Paper Series, No. 27056, April 2020.  View Details

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