Guggenheim Investments experienced a significant 77% drop in second-quarter earnings, a decline that was attributed to a delay in reporting certain fee revenue from its private investments unit. This unit is currently under scrutiny following a whistleblower report, which triggered a broader investigation into Mark Walter's various ventures.
GIH Borrower LLC, Guggenheim Investments' financing entity, informed investors that the firm's revenue fell by 38% to $186 million in the second quarter compared to the previous year. Consequently, a key measure of earnings plummeted by 77% to $37 million, according to individuals familiar with the matter. This earnings hit caused the firm's loan to whipsaw as lenders processed the implications during a recent call.
The revelations about Guggenheim's earnings come amidst a challenging environment for leveraged loans, where distress in the market persists despite a decline in default rates. The loss given default percentage for selective defaults, which includes distressed maneuvers, stood at 45.78% at the end of June. This broader context likely exacerbated the market's reaction to Guggenheim's financial disclosure. Separately, Guggenheim's connections also negatively impacted bonds of Sammons Financial Group, with their bonds due in June 2036 falling to their lowest point since issuance.
