The Role of an Activist Bond Analyst
Arthur E. Schloss Vice President Morgan Stanley Investment Management
This chapter posits that bond analysts are activists when they properly perform their role. By activist, I am referring to an analyst who seeks to improve portfolio performance by being proactive rather than reactive in the face of a deteriorating credit. While activism can present itself in different contexts, it is the assertive analyst who can add value to a stressed credit by following the general guidelines discussed in the following sections.
ACTIVIST BOND ANALYST’S APPROACH TO IMPROVING STRESSED OR DETERIORATING CREDITS
The role of an activist bond analyst is evident in each stage of the credit process. It begins with the initial review of deal-related documents and the framing of credit questions for the site visit. It includes a review of the legal provisions governing the transaction and the request to tighten the terms and conditions for the financing. While each stage of the process contains elements of activism, it is the approach to stressed credits which best illustrates activist bond analysis. An activist analyst will ask probing questions and will ask in-depth follow up questions before suggesting a purchase. Over time the underlying economics of a credit will change and management may also change. An activist analyst will keep up with developments and seek to anticipate where a credit is headed. The acquisition phase for a new credit is ...