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Atlas Logistics · ATLS

DEMO DATAUNDERWRITING ASSUMPTIONHOLD
Five-minute case summary

Atlas Logistics

DEMO DATAUNDERWRITING ASSUMPTION
HOLD
1
The opportunity
Demo purchase of $100M face of First-Lien Term Loan at 96.5 (cash investment $97.0M): current yield 8.2%, yield to maturity 11.1%.
2
The question
Does a 11.1% yield on a rank-1 secured claim compensate for 45% probability-weighted default risk and 22% severe-case loss?
3
The thesis
Term loan at 96.5 matures June 2027 and should refinance in the base case; the question is downside. Short-dated loan with asset coverage of 1.3x is a short-duration pull-to-par candidate if the refinancing window stays open.
4
The risk (what causes loss)
  • Refinancing: $600M maturity in FY2027E; only $375M projected liquidity; $225M refinancing requirement.
  • Severe case produces a payment default in FY2027E.
  • Severe-case valuation recovery of 78% is below the 96.5 purchase price: a 22% loss given default.
  • Covenants breach in the Downside case (FY2026E); none in the Base case.
5
The protection
  • First-priority secured position on substantially all assets; 0% of recovery value is senior to us and 39% through our tranche.
  • Coverage of 2.86x EBITDA / interest; EBITDA can fall 65% before coverage reaches 1.0x.
  • Liquidity of $340M (23% of total debt).
  • Base-case refinancing tests pass for all 3 maturing tranche(s); 1 are repaid from cash.
6
The base case
Base case (55%): revenue 2.0% in FY2026E, EBITDA margin 11.0%; no default; IRR 11.3%, MOIC 1.11x vs 12% hurdle.
7
The downside
Downside (30%): EBITDA $169M at the trough, peak net leverage 8.7x, covenants breach in FY2026E; default in FY2027E; IRR 8.3%. Severe (15%): default in FY2027E, IRR 1.7%.
8
The recovery
If the company defaults, recovery value is $715M (liquidation) in the severe case → 78% recovery (22% LGD) on the target tranche; downside 100%.
9
The decision
HOLD. HOLD (do not size yet): Base-case IRR clears hurdle (11.3% vs ≥ 12.0%); Expected-cash-flow IRR (probability-weighted) clears hurdle (7.8% vs ≥ 12.0%); Principal protected in severe case (recovery ≥ price) (78 vs 96.5 vs recovery ≥ price).

Generated from the structured model (no free-text generation beyond the analyst’s thesis and risk lists). Hypothetical terms are underwriting assumptions; nothing here is a real transaction.