Wednesday, September 3, 2014

Richard M. Hixson pardoned Nu Skin

Yesterday I put up a popular post noting that Nu Skin, a multi-level marketing company - had breached its debt covenants and was pardoned by its bank.

The banker who signed on behalf of JPMorgan Chase was none other than Richard M. Nixon - the (presumably) deceased former President.

Prior to posting I confirmed that there was no easy-to-trace Richard M. Nixon working at JPM.

But hey - Nixon used to hang around with Elvis, and Elvis is still alive - so why not the President?


Anyway Nu Skin lodged an SEC filing stating that they had been pardoned by Richard M. Hixson (declaring a typographical error).

I have confirmed through back-channels there is a Richard M. Hixson working for JPM and in an appropriate role at the bank.

I accept the Nu Skin explanation.


Nu Skin has neither confirmed nor denied they needed a pardon on their debt covenant - and they neither confirmed nor denied that they will breach their covenants again at the end of this quarter.

Those calculations are on the original post.

The buried punch-line of the original post was this:
In July 2014, the Company's subsidiary in Japan borrowed 3 billion Japanese yen (approximately $30.0 million), which is due on September 30, 2014.  In July 2014, the Company's subsidiary in South Korea borrowed $20.0 million, which is due in December 2014, with a right to extend the term for an additional six months.
The company borrowed $30 million for two months without an obvious reason. It's like hey, I got $234 million in the bank, can you spot me $30 million for two months?


Whatever - they breached their debt covenants. And they needed a pardon. Richard M. Hixson did the job. And they are borrowing money offshore despite saying in their last conference call they have no trouble repatriating their (considerable) offshore balances.


At this point though I feel a little like Kermit the GORF.



Anonymous said...

Great stuff again. The touch of humor is like adding a anesthetic to the knife while stabbing.

Anonymous said...

Darn it - I was really looking forward to you catching out another cheatin' company with the collusion of a big bank!

Anonymous said...

Depending on the location of the cash, and the location of the short term need, it doesn't strike me as unusual that a multi-national like Valeant would look to borrow short term funds externally, rather than transfer internally. This is generally because of the various tax considerations that are triggered when money is moved (even by loan), and the difficulty unwinding some of these deals once done.

In my experience, there is also typically some genuine caution by US companies who may able to repatriate funds back home, but often choose not to, because of the triggering of the tax obligations and the like. So while it may be true that the money can be moved back without any practical restraint, there may be some other considerations.

But this is no comment on the quality of Valeant generally.

Bill Cosby said...


I hear you on borrowing debt for an extra two months. But isn't there an obvious reason - the company said on the 2Q14 call that they hope to fix their capital structure by the 3Q14 call in October. I would assume that they could announce a fix any day now and perhaps an ASR. So they rolled that debt for a couple of months because that's the book-end for longest it would take to get this cap structure fixed...

what am I missing here?

I enjoy your posts.

General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.