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Speaker 1: Hello, and welcome to Credit Edge, a weekly markets podcast.

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Speaker 1: My name is James Crombie. I'm a senior editor at

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Speaker 1: Bloomberg and.

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Speaker 2: I'm Totalu Ala Mutu, a senior analyst at Bloomberg Intelligence.

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Speaker 2: This week, we are very pleased to welcome Perima Puri,

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Speaker 2: governing partner at HPS Investment Partners. How are you, Panima,

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Speaker 2: I'm good, Thank you, Thank you for joining us. Panima

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Speaker 2: is the head of Liquid Credit at HPS. She's also

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Speaker 2: the portfolio manager for multi asset credit strategies. She joined

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Speaker 2: HPS in two thousand and seven as founding partner and

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Speaker 2: sits on the investment committee for the private credit businesses.

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Speaker 2: HPS Investment Partners is one hundred and fifty billion dollar

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Speaker 2: credit manager, with a majority of those funds focused on

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Speaker 2: private credit.

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Speaker 1: We have got loads of questions for you, but before

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Speaker 1: we start with that, just wanted to set the scene.

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Speaker 1: Credit markets are looking pretty complacent at the moment, with

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Speaker 1: junk bonds trading ever tighter as demand for yield rises

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Speaker 1: and the supply of corporate debt remains thin. Robust returns

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Speaker 1: in public debt leads some to question the actual value

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Speaker 1: of private markets, which have enjoyed sellar growth over the

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Speaker 1: last few years, private debt is taking a bit of

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Speaker 1: a beating. Jeff Gunlack from Double Line recently compared the

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Speaker 1: mania for that market with the rush to collateralized debt

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Speaker 1: obligations CDOs in the run up to the global financial crisis.

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Speaker 1: He also doubted whether the asset class actually offers less

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Speaker 1: volatility for investors. It's not moved very much this year,

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Speaker 1: despite all the chaos of tariffs, inflation, rates, taxes, immigration,

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Speaker 1: and global geopolitics, but there are questions of whether the

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Speaker 1: loans are actually being marked correctly. So, Pernima, what's your take?

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Speaker 1: Is private credit risk fairly valued at the moment? Do

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Speaker 1: you think?

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Speaker 3: I do?

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Speaker 4: I think private credit risk FIRS. I think you have

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Speaker 4: to sort of bi far kate what private credit is.

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Speaker 4: So there's non investment grade private credit. There's the ABF market,

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Speaker 4: and there's the real estate market, infrastructure market, et cetera.

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Speaker 4: And then across the rating spectrum there's a variety of

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Speaker 4: versions and flavors of private credit. You know, I think

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Speaker 4: number one, the value of private credit has been historically

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Speaker 4: and continues to be an incremental spread over the liquid markets,

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Speaker 4: and that incremental spread has held up. Now that spread

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Speaker 4: has moved down on an absolute level as the liquid

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Speaker 4: markets have moved down, but the one hundred and fifty

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Speaker 4: to two hundred basis points and the sort of core

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Speaker 4: lending market has remained. The second thing I would say

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Speaker 4: is that private credit there's been I think there's the

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Speaker 4: last numbers I've seen sort of eleven hundred to twelve

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Speaker 4: hundred private credit vehicles. They're not all treated the same,

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Speaker 4: they're not all created equally. Of that number, there's about

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Speaker 4: ten that are over ten billion in size, so the

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Speaker 4: majority are much smaller in terms of scale. And what

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Speaker 4: that means is that there is a part of that

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Speaker 4: market that's significantly more competitive and as part that is

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Speaker 4: significantly less competitive. And the third thing I would say

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Speaker 4: is sort of another consideration to think about in private

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Speaker 4: credit is the dependence on origination and the sponsor market

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Speaker 4: versus the non sponsor market. And again, you know, when

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Speaker 4: you think about the world, you know, I think eighty

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Speaker 4: plus percent of companies with you know, revenues of over

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Speaker 4: one hundred million dollars are privately held. So there's a

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Speaker 4: huge amount of capital or capital needs, I should say

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Speaker 4: for companies that are privately.

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Speaker 2: Held considering one of the issues that you mentioned is

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Speaker 2: the opportunity, the size of the investable opportunity. One of

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Speaker 2: the issues I guess that we've had over the last

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Speaker 2: I'd say at least couple of years is that there

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Speaker 2: may be too much money chasing too few opportunities, and

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Speaker 2: that's maybe had an effect on the potential returns. But

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Speaker 2: you're still talking about a differentiation there of one hundred

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Speaker 2: and twenty plus basis points between private and public. Do

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Speaker 2: you think, though, that there is still too much money

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Speaker 2: chasing too few opportunities or do you think that the

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Speaker 2: opportunity set is vast enough to take up all the

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Speaker 2: funds that have been raised for this part of the market.

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Speaker 4: Yeah, So a couple things. One is, I think the

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Speaker 4: spread premium in the straight down the fairway private credit

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Speaker 4: world is sort of one hundred and fifty to two

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Speaker 4: hundred basis points, and I think that spread premium has maintained.

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Speaker 4: I think two is there's the ABF market and then

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Speaker 4: there's the corporate credit market. And within the corporate credit market,

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Speaker 4: and the idea of sort of too much money chasing,

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Speaker 4: I go back to sort of the number of funds

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Speaker 4: that exist and that sort of dictates the size of

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Speaker 4: companies that they're trafficking in. So said differently, I think

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Speaker 4: I mentioned before sort of ten funds over ten billion,

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Speaker 4: there's nine hundred funds that are sub.

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Speaker 3: A billion dollars in size.

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Speaker 4: And so when you think about portfolios and you think

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Speaker 4: about depersification, you can kind of backwards engineer the math

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Speaker 4: into what those holding sizes look like, call it anywhere

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Speaker 4: from a two to five percent position. And when you

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Speaker 4: think about that, that market is significantly more competitive.

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Speaker 3: That market would I would.

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Speaker 4: Argue on spread and on terms, is a much more

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Speaker 4: competitive market. I think when you're looking at some of

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Speaker 4: these larger vehicles, they tend to traffic in a different

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Speaker 4: segment of the market. And so when I look at

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Speaker 4: our business and some of our competitive businesses that are

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Speaker 4: of that size and scale. You know, for our business,

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Speaker 4: our core business has you know, eb adopt two hundred

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Speaker 4: million dollars plus in the course in your lending business,

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Speaker 4: and we have the ability to control and underwrite tranch

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Speaker 4: sizes that are quite large, as do many of our peers.

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Speaker 4: So I think that segment of the market is less

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Speaker 4: competitive and more disciplined. I also think what's important is

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Speaker 4: that segment of the market has been able to hang

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Speaker 4: on onto structural terms and structural protections, Whereas I think

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Speaker 4: you're right in that there is a lot more competition

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Speaker 4: and in the in the smaller funds and therefore smaller companies,

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Speaker 4: and the premium and the terms whether you think of

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Speaker 4: that as covenants or structure, et cetera. Uh, you know,

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Speaker 4: are are are dissipating a little bit, for sure.

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Speaker 1: But also at that higher level that the larger scale

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Speaker 1: you're competing with the banks in traditional broadly syndicated loans,

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Speaker 1: Is that not a tough fight at the moment, given

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Speaker 1: how much potentially cheaper you'll get your funding if you

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Speaker 1: go syndicated.

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Speaker 3: Yeah, it depends.

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Speaker 4: I think it's interesting because there's a lot of numbers.

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Speaker 4: But basically, if you look at last year and you

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Speaker 4: look at year to date, the number of broadly syndicated

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Speaker 4: loan takeouts, meaning private credit taking out broadly syndicated loans

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Speaker 4: and the flip of that, which is public credit liquid

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Speaker 4: credit taking out the private least indicated loans, tends to

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Speaker 4: be pretty symbiotic. So I would say last year, I

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Speaker 4: don't have the exact numbers in my mind now, but

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Speaker 4: I want to say it was thirty to thirty five

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Speaker 4: billion dollars. That's roughly on both sides of the coin.

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Speaker 4: This year we're running it roughly the same size on

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Speaker 4: both sides of the coin as well, so we are

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Speaker 4: seeing those markets work in tandem.

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Speaker 3: I actually think that you're right in.

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Speaker 4: That today where we're sitting, there is so little new

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Speaker 4: supply and the vast majority of financing has been refinancing

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Speaker 4: in the liquid markets, high yield in the loan market.

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Speaker 4: But we have had a lot of bouts of volatility, right,

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Speaker 4: so that I mean we had peak volatility and I

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Speaker 4: guess Liberation Day sort of that week of April second

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Speaker 4: to the ninth or something like that. And I think

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Speaker 4: these moments of uncertainty and volatility are actually have have

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Speaker 4: sort of imprinted in people's minds that no market is

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Speaker 4: here to stay. And in fact, the value proposition for

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Speaker 4: private credit continues to be strong, especially when you see

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Speaker 4: these moments of volatility, because issuers need to know that

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Speaker 4: there is a market that they can they can access

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Speaker 4: if they need financing.

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Speaker 1: Right, right, But then you know, on this scale, as

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Speaker 1: you say, there aren't that many players, there is this competition.

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Speaker 1: It is somewhat more commoditized at the top, right, because

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Speaker 1: these are bigger names. Are you not therefore susceptible to

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Speaker 1: much more compression in the spread and differential between public

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Speaker 1: and private in terms of your return as an investor?

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Speaker 4: Yeah, we haven't seen that yet because again, that differential

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Speaker 4: has been able to hold, certainly because there's fewer folks

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Speaker 4: out there, they can offer billion dollar size, you know,

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Speaker 4: financings to counter parties. We have been able to maintain that.

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Speaker 4: Whether we're able to maintain that going forward, you know,

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Speaker 4: I don't know, we'll see, But thus far it's been

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Speaker 4: a pretty rational market in terms of where things price right.

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Speaker 1: Okay, But then as you say that the lower end

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Speaker 1: of the spectrum, maybe that's where potential trouble is that

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Speaker 1: that people like gun Lak are talking about?

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Speaker 2: Is it?

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Speaker 1: I mean that is that the kind of where the

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Speaker 1: misconceptions and the problems of a building around private credit?

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Speaker 4: Yeah, I mean, look, I hear the story, but we

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Speaker 4: haven't seen it. So again, like now, if you look

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Speaker 4: at so link it, first of all, there's not a

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Speaker 4: lot of great data on private credit. There's some data,

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Speaker 4: but there's not a lot.

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Speaker 3: Of great data.

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Speaker 4: But if you look at Lincoln, which is a third

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Speaker 4: party valuation firm, the tracks deals across industries, right, they

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Speaker 4: would say that ebitdog growth has been higher and default

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Speaker 4: rates have been lower for borrowers that are bigger. So

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Speaker 4: since you know more specifically, I think the numbers were.

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Speaker 4: You know, in Q one LTM e bit DOOG growth

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Speaker 4: for one hundred million dollar plus borrower was nine point

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Speaker 4: nine percent and defaults for bigger borrowers was sub two percent.

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Speaker 4: So you're not seeing a huge variance in terms of

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Speaker 4: the default rates in private versus liquid now, I would

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Speaker 4: say that, and this gets into sort of the state

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Speaker 4: of the world. If you look at most people's estimates,

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Speaker 4: the default rates are expected to increase from currently. You know,

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Speaker 4: we're running at like three and a half percent in

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Speaker 4: the loan market that includes distressed exchanges. You know, the

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Speaker 4: estimates are for that to increase. If you look across

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Speaker 4: the board, you know they're all over the place. Four

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Speaker 4: and a half to five percent or something for next year,

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Speaker 4: and high yield to increase as well. So if you

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Speaker 4: see the default rates increasing as a result of slowing

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Speaker 4: GDP growth and potentially tariff impacts, you will see a

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Speaker 4: resulting impact of private credit, it won't be immune to it.

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Speaker 4: It can't be immune to it. But this you know,

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Speaker 4: so far, you haven't seen a huge variance in those

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Speaker 4: in those default rates, and certainly you've seen growth that's

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Speaker 4: a bit higher in the private credit market, certainly from

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Speaker 4: the Lincoln data, than we've seen in the liquid markets.

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Speaker 2: One of the issues that you've mentioned is about the

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Speaker 2: quality of data, or even maybe the quantity of data.

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Speaker 2: I guess in some instances, how do you get around

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Speaker 2: that and how do you get comfortable with these relatively

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Speaker 2: large positions if one can't get the quantity or quantity

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Speaker 2: of data that maybe might be available in some other markets.

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Speaker 3: Well, so I'd say I'd say two things.

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Speaker 4: One is that the quality of data in our in

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Speaker 4: our book and in many of our competitors' books is financials.

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Speaker 3: That's the quality of the data.

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Speaker 4: So the problem is not that we don't have the

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Speaker 4: data to look at how our businesses are doing, or

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Speaker 4: that our competitors don't have the data. They have the data.

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Speaker 4: They actually have financials. Oftentimes they're monthly financials, you know,

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Speaker 4: sometimes they're quarterly financials. But those information rights Again, when

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Speaker 4: I and I'm bifurcating the market because I we don't

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Speaker 4: tend to traffic in the smaller, much more competitive part

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Speaker 4: of the market, but in the larger market, information rights exist,

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Speaker 4: so quality of data and underlying operation performance is not

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Speaker 4: the problem. And in fact, I would say we've been

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Speaker 4: surprised at how well the portfolio has held up. I

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Speaker 4: think what you're referencing is quality of the market data,

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Speaker 4: and it's getting better and better as the market gets bigger.

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Speaker 4: I mean the big the market now is. You know,

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Speaker 4: the numbers are all over the place, but call it

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Speaker 4: one point seven trillion dollars a private capital in the

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Speaker 4: corporate world, and cliff Water and Lincoln and there's several

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Speaker 4: providers that are starting to have better quality data. That's

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Speaker 4: that's more readily available if you compare it to the

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Speaker 4: highield market and the loan market, which by the way,

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Speaker 4: those markets are about the same size. Obviously, we have

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Speaker 4: that data, and that data is published by every every

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Speaker 4: brokerage house there is.

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Speaker 3: But I would I.

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Speaker 4: Would argue that as this market has evolved and the

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Speaker 4: market has grown so much, the data has increased, and

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Speaker 4: there are more and more places that are starting to

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Speaker 4: be able to bifurcate some of the market data. I

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Speaker 4: gave you the numbers, for example, in the default numbers.

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Speaker 4: You know, if you look at the link in data,

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Speaker 4: they've split up those default numbers for under twenty five

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Speaker 4: million dollar borrows, fifty million dollars borrowers.

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Speaker 3: Et cetera. So it's coming.

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Speaker 4: But the operating data is certainly there for people to

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Speaker 4: judge how companies are performing and are they are they

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Speaker 4: using pick? Are they do we have companies that are

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Speaker 4: in trouble or where are we defaulting?

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Speaker 3: Et cetera. We got you know, managers have that data.

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Speaker 2: You've raised a really interesting and topical point there, pick right.

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Speaker 2: So and also the default issue and how that's being defined.

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Speaker 3: So when you're looking at I.

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Speaker 2: Guess pure default data, there is always the issue of

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Speaker 2: how is that being defined and whether it includes amend

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Speaker 2: and extend type situations and so on. How comfortable are

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Speaker 2: you that the defaults correctly capture those sorts of situations

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Speaker 2: or do you think that if the people need to

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Speaker 2: look wider and consider picks and so on, and then

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Speaker 2: considering the picks and amend and extent situations, have you

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Speaker 2: seen rises in that as well? Some of our data

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Speaker 2: suggests that, but clearly you're looking at a slightly different

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Speaker 2: opportunity set. So have you seen increases in issuers looking

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Speaker 2: to pick or to amend an extent?

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Speaker 4: Well, so a couple things. So in the liquid markets,

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Speaker 4: let me answer the first question, which is, how do

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Speaker 4: you incorporate liability management into default rates? In the liquid markets?

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Speaker 4: The published numbers JP Morgan, Goldman, et cetera. They publish

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Speaker 4: default rates and then they publish default rates that include

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Speaker 4: distressed exchanges. So you're capturing both of those, and you're

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Speaker 4: right in that there's a big differential. So LTM default

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Speaker 4: rates for high you bonds are forty basis points if

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Speaker 4: you include distressed exchanges one point three percent. In lever loans,

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Speaker 4: LTM default rates are one point four percent. If you

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Speaker 4: include distress exchanges, there are three points. So there's a

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Speaker 4: variance in those numbers. Certainly in the liquid markets we're

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Speaker 4: seeing it. With regard to the private markets, I can

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Speaker 4: tell you that we know what our companies are doing

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Speaker 4: in terms of defaulting, and I think I don't have data,

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Speaker 4: you know, on whether there's been a big increase in

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Speaker 4: pick or not. What I can tell you is that

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Speaker 4: the value proposition historically for private credit has been around

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Speaker 4: the following, which is number one. Unlike the liquid market,

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Speaker 4: which likes sort of a risk box to go after.

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Speaker 4: Why because north of sixty percent of the liquid market

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Speaker 4: or COLO buyers and there's a nice you know, we

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Speaker 4: sale buyers like a rating, an amount of leverage, a

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Speaker 4: diversity score, et cetera. Private credit has more flexibility with

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Speaker 4: regard to that. So what does that mean. That means

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Speaker 4: that you can offer borrowers the ability to pick for

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Speaker 4: two years maybe when. And we've seen a lot of

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Speaker 4: this where they're very good businesses and maybe they needed

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Speaker 4: but that flexibility was built in from the beginning for

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Speaker 4: a reason. And it was built in because you know,

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Speaker 4: and I could tell you this from being on our

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Speaker 4: investment committee, and I'm sure this is true at many

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Speaker 4: other places that when you're looking at underwriting an investment,

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Speaker 4: you know you're you're incorporating a whole bunch of cases,

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Speaker 4: one of which may be a stab plation in case.

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Speaker 4: And if that's the case, you might need to be

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Speaker 4: able to offer that flexibility. But those are oftentimes flexibilities

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Speaker 4: that are built in from time zero. So why what's

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Speaker 4: the value proposition? The value proposition is certainty of execution.

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Speaker 4: The value proposition is flexibility of capital to create capital

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Speaker 4: the way people need it. The value proposition is delay

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Speaker 4: draw facilities for liquidity purposes. Those could be short term

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Speaker 4: liquidity purposes, those could be you know, there might be

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Speaker 4: a roll up involved, and people need financing that's on

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Speaker 4: the wire and ready to go and not being constrained

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Speaker 4: by a ratings box. That's the value proposition. And when

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Speaker 4: there's volatility, that value proposition is all the more apparent

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Speaker 4: to issuers. So your question is distressed exchange is you know,

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Speaker 4: I'd say in the liquid markets, it's very transparent. Those

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Speaker 4: numbers are available and they are significantly higher, as much

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Speaker 4: as three times higher LTM.

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Speaker 3: And and in.

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Speaker 4: Terms of the private credit, we haven't seen our borrowers

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Speaker 4: increase pick dramatically. I don't know what the market is showing.

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Speaker 1: And you'll see more good pick compared to bad pat.

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Speaker 4: Well, I mean the stuff is baked in, right, you

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Speaker 4: know when you when you put a Trump sheet together, yeah,

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Speaker 4: you have you have a pick flexibility.

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Speaker 1: Right Okay, Yeah, And going back to the strategy, talked

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Speaker 1: about the bigger deals. They're really on that many of

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Speaker 1: them are there there's a pipeline.

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Speaker 3: Oh, there's a lot of big deals.

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Speaker 1: Where does it come from.

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Speaker 4: Yeah, it comes from Look, I mean, eighty plus percent

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Speaker 4: of the companies in America are privately owned, so they

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Speaker 4: need financing. We've done billion plus dollar deals private companies.

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Speaker 4: They come from taking share from the syndicated markets when

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Speaker 4: the syndicated markets are super volatile. And you know, the

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Speaker 4: loan market, and the syndicated market has been roughly flat

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Speaker 4: over the last number of years. But this is a

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Speaker 4: this is a there's a fin nancing opportunity available for

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Speaker 4: private companies that's going to the private market so many instances.

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Speaker 1: So it continues to grow at this same pace.

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Speaker 3: It's been growing at you know, fifteen to twenty percent

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Speaker 3: a year roughly.

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Speaker 1: Yeah. Yeah, And you think the volume for direct lending

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Speaker 1: to leverage companies grows at that rate.

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Speaker 4: No, if it grows at fifteen or twenty, or if

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Speaker 4: it grows at ten. But I think that companies in

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Speaker 4: general that are growing need to access financing. And this

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Speaker 4: market is i mean, in just a number of years,

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Speaker 4: it is now a third of the size of the

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Speaker 4: non investment grade levered market.

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Speaker 3: Right, it's a big part.

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Speaker 4: And then we haven't touched on sort of the asset

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Speaker 4: bat market. I mean that's private credit is five percent

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Speaker 4: of the asset is twenty six trillion dollar market if

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Speaker 4: you include real estate. Right, it's literally private credits five

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Speaker 4: percent of that marketightly right.

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Speaker 1: But also, as you said, it's kind of you know,

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Speaker 1: it's a good solution when things are volatile, sort of

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Speaker 1: foul weather. Friend. If you take the view that you know,

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Speaker 1: we're going into a time which you know, maybe the

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Speaker 1: Fed cuts rates, the economy continues to grow, everything is rosy.

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Speaker 1: Funding markets of liquid everything looks great. I mean, why

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Speaker 1: do these companies, you know, not flip back to the

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Speaker 1: broadly syndicated market and save them you know, say, save

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Speaker 1: themselves some money. Maybe they don't get such great terms

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Speaker 1: or flexibility, but why not flip back.

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Speaker 4: Because not every company is a single B rated company

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Speaker 4: that can be financing the liquid market.

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Speaker 1: So it's going to be the bigger, more risky companies.

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Speaker 4: Then, is that the I think one segment of the

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Speaker 4: market is a bigger, more risky company. I think another

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Speaker 4: segment of the market is companies that are first time

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Speaker 4: issuers that aren't known by the marketplace. So there's a

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Speaker 4: lot more of a learning curve for first time issuers.

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Speaker 4: I think a third segment of the market are companies

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Speaker 4: that are growing really quickly that could change.

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Speaker 3: The landscape of how they look.

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Speaker 4: So I think there's a lot of there's a lot

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Speaker 4: of different types of issuers that approach our market.

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Speaker 2: And earlier on you mentioned the difference in returns between

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Speaker 2: public and private markets, but you also mentioned that in

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Speaker 2: both markets we are seeing returned moderate a little bit.

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Speaker 2: So what would you say would be a good return

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Speaker 2: for twenty twenty five for private credit in terms of

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Speaker 2: rough percentages or ranges?

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Speaker 4: Yeah, I mean, look, it's hard to put a I

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Speaker 4: can't put a return number on the piece of paper.

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Speaker 4: What I can tell you is that you know, there's

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Speaker 4: a lot of BDCs that are tracking at sort of

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Speaker 4: ten percent. And I think one way to think about

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Speaker 4: this is if you look at the loan market and

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Speaker 4: you look at spreads. And the reason I say moderating

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Speaker 4: is because you know, spreads have contracted seventy five hundred

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Speaker 4: basis points since Liberation Day. So we can look at

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Speaker 4: public markets as kind of sort of sort of some

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Speaker 4: kind of proxy, I suppose, And so if you if

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Speaker 4: you think about the spread component. You've got loans and

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Speaker 4: high loans and high yield highields sort of three hundred

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Speaker 4: over and the loan markets, you know, depending on which

394
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Speaker 4: market you're looking at, as will roughly call it four

395
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Speaker 4: hundred is shover FED Funds Rader, you know, four three percent,

396
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Speaker 4: So loan market's roughly eight percent, and private credit is

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Speaker 4: a couple hundred basis points in excess to that.

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Speaker 3: And that's what we're seeing. Now. The question becomes, you know,

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Speaker 3: as James says, we're.

400
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Speaker 4: In a rosy land, I'm not sure I agree with that,

401
00:21:12,040 --> 00:21:16,160
Speaker 4: but uh, you know, if you if you do see

402
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Speaker 4: FED funds and see a number of cuts come in,

403
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Speaker 4: and those estimates are as much as five cuts over

404
00:21:23,400 --> 00:21:25,840
Speaker 4: the next call it through December twenty sixth or something

405
00:21:25,880 --> 00:21:29,520
Speaker 4: like that. So you know, if you see terminal FED

406
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Speaker 4: funds rate at three and a quarter, definitionally, returns in

407
00:21:35,640 --> 00:21:38,199
Speaker 4: a floating rate market will contract a little bit, and

408
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Speaker 4: that'll contract by one hundred basis points. And that's true

409
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Speaker 4: for the for the syndicated market, and it's true for

410
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Speaker 4: the for the private private debt market.

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Speaker 1: So this pipeline you talk about funny, but a big

412
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Speaker 1: pipeline for big deals. Where is it coming from? Is

413
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Speaker 1: it infrastructure relates, is it is power? Is it real estate?

414
00:21:57,119 --> 00:21:58,399
Speaker 1: Where are we seeing the opportunity?

415
00:21:58,560 --> 00:22:00,960
Speaker 4: Yeah, so we're seeing lots of different opportunities. You know,

416
00:22:01,040 --> 00:22:05,080
Speaker 4: on the corporate credit side, you know, add on financings,

417
00:22:05,119 --> 00:22:07,400
Speaker 4: there are still buy opps that are being done, rescue

418
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Speaker 4: financings in different parts of the capital structure. On the

419
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Speaker 4: asset back lending side, you know, they're securitizations of lease

420
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Speaker 4: stream equipment, lease streams, aircraft leases, data centers. We're seeing

421
00:22:19,080 --> 00:22:23,719
Speaker 4: financing opportunities other infrastructure buildouts. We're seeing in the private

422
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Speaker 4: credit space, which is sort of the corporate world of

423
00:22:26,040 --> 00:22:29,800
Speaker 4: private credit real estate. So you're kind of seeing the

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Speaker 4: need for financing in a whole bunch of different markets

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Speaker 4: at a whole bunch of different yield opportunities.

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Speaker 1: Okay, and have you got a size for that addressable

427
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Speaker 1: love chuge.

428
00:22:41,080 --> 00:22:46,120
Speaker 4: Sizes we've seen for the non well, let me say

429
00:22:46,160 --> 00:22:49,679
Speaker 4: that's the ABF market. So there's two kind of numbers

430
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Speaker 4: that people throw around. One is on the ABF market,

431
00:22:52,720 --> 00:22:56,720
Speaker 4: which is twenty six trillion dollars. That is about five

432
00:22:56,760 --> 00:23:00,520
Speaker 4: and a half trillion if you exclude real estate and structure,

433
00:23:00,880 --> 00:23:04,280
Speaker 4: and of that, the numbers we have seen are roughly

434
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Speaker 4: five percent. That's private credit right now, so it's pretty small.

435
00:23:07,800 --> 00:23:10,840
Speaker 4: In the corporate credit market, you see a market of

436
00:23:10,960 --> 00:23:15,000
Speaker 4: roughly thirteen trillion dollars, and that's comprised of you know,

437
00:23:15,200 --> 00:23:17,040
Speaker 4: one and a half trillion of high yield, one and

438
00:23:17,040 --> 00:23:19,520
Speaker 4: a half trillion of loans, one and a half trillion

439
00:23:19,560 --> 00:23:21,679
Speaker 4: of non ig private credit. We've talked about that that

440
00:23:21,760 --> 00:23:25,119
Speaker 4: maybe one point seven and then roughly nine trillion dollars

441
00:23:25,119 --> 00:23:30,359
Speaker 4: of investment grade corporates. That investment grade corporate market is

442
00:23:30,400 --> 00:23:34,680
Speaker 4: a humongous market. So imagine that you have ten percent

443
00:23:34,720 --> 00:23:38,080
Speaker 4: share take, a twenty percent share take. That's those are

444
00:23:38,240 --> 00:23:41,240
Speaker 4: very very large numbers that could could move its way

445
00:23:41,280 --> 00:23:45,800
Speaker 4: into private corporate credit. And lots of reasons for you know,

446
00:23:45,920 --> 00:23:47,960
Speaker 4: is it off balance sheet? Is it on balance sheet?

447
00:23:48,240 --> 00:23:51,360
Speaker 4: You know, are there specific boat bespoke structures that all

448
00:23:51,400 --> 00:23:53,560
Speaker 4: that stuff is sort of valid there as well.

449
00:23:54,160 --> 00:23:58,400
Speaker 2: You mentioned moving from sorts of five percent to maybe

450
00:23:58,560 --> 00:24:03,280
Speaker 2: ten or even twenty percent of certain markets in what

451
00:24:03,440 --> 00:24:06,960
Speaker 2: time frame do you think that that's sort of feasible?

452
00:24:07,040 --> 00:24:10,440
Speaker 2: And should we not be just a little bit concerned

453
00:24:10,480 --> 00:24:16,199
Speaker 2: that the market has already grown pretty fast in the

454
00:24:16,240 --> 00:24:21,359
Speaker 2: last few years, and so I'm putting my credit and

455
00:24:21,480 --> 00:24:26,480
Speaker 2: it's hat on here. People would normally already be concerned

456
00:24:26,520 --> 00:24:31,800
Speaker 2: because of how fast it's grown today. So is getting

457
00:24:31,880 --> 00:24:37,400
Speaker 2: to ten or twenty percent of those addressable markets really

458
00:24:38,080 --> 00:24:42,280
Speaker 2: something we should be striving for or do you not

459
00:24:42,320 --> 00:24:46,080
Speaker 2: think that might make people even more cautious about private credit?

460
00:24:46,800 --> 00:24:50,040
Speaker 4: Well, I'd say I'll say two things. The FIRSTUS private

461
00:24:50,080 --> 00:24:53,960
Speaker 4: equity has grown faster than private credit in the corporate world,

462
00:24:54,720 --> 00:24:58,879
Speaker 4: So that's one. And two is I think when I

463
00:24:59,040 --> 00:25:02,680
Speaker 4: talk about a share take, what I mean by that

464
00:25:03,160 --> 00:25:05,960
Speaker 4: is that if you have nine trillion dollars of investment

465
00:25:06,000 --> 00:25:10,399
Speaker 4: grade corporate and you have a large ABF market, you

466
00:25:10,440 --> 00:25:15,640
Speaker 4: could imagine that portions of that market would flow towards

467
00:25:15,680 --> 00:25:19,040
Speaker 4: private lenders. And in the end, who are those private lenders?

468
00:25:19,080 --> 00:25:22,000
Speaker 4: There are LPs and their insurance companies and pension funds,

469
00:25:22,040 --> 00:25:22,440
Speaker 4: et cetera.

470
00:25:23,840 --> 00:25:28,159
Speaker 1: You are obviously a storied firm, one of the first

471
00:25:28,160 --> 00:25:31,760
Speaker 1: movers in this We've written a lot about the history.

472
00:25:32,720 --> 00:25:35,480
Speaker 1: But I'm curious as to how you differentiate yourself in

473
00:25:35,520 --> 00:25:38,960
Speaker 1: this space that has become so you know, relatively mainstream

474
00:25:39,000 --> 00:25:41,119
Speaker 1: in such a short space of time, everybody's doing it.

475
00:25:41,160 --> 00:25:42,600
Speaker 1: So what keeps your head?

476
00:25:42,960 --> 00:25:46,080
Speaker 4: Yeah, I think a couple of things. I think, you know,

477
00:25:46,119 --> 00:25:49,440
Speaker 4: we were early in the market, and so we've become

478
00:25:49,480 --> 00:25:51,320
Speaker 4: a pretty scaled provider of credit.

479
00:25:52,440 --> 00:25:52,680
Speaker 3: One.

480
00:25:52,840 --> 00:25:56,000
Speaker 4: Two is we a lot of our a lot of

481
00:25:56,040 --> 00:26:01,440
Speaker 4: our vehicles and our investments, our underlying investments are non

482
00:26:01,480 --> 00:26:05,119
Speaker 4: sponsor oriented and are not just the sponsor oriented market,

483
00:26:05,320 --> 00:26:11,359
Speaker 4: which which I think is a huge differentiator. So and

484
00:26:11,640 --> 00:26:15,640
Speaker 4: so early mover, non sponsor. And then three would be scale,

485
00:26:15,920 --> 00:26:20,719
Speaker 4: where we're competing in a universe that's not as competitive

486
00:26:20,840 --> 00:26:24,040
Speaker 4: as what we've seen in terms of broad the number

487
00:26:24,040 --> 00:26:25,720
Speaker 4: of players are coming into the private world.

488
00:26:26,200 --> 00:26:29,000
Speaker 1: Do you fail the new competitors? Do you worry about

489
00:26:29,119 --> 00:26:31,720
Speaker 1: the aggressive nature of some of the newcome as I

490
00:26:31,760 --> 00:26:32,120
Speaker 1: do on.

491
00:26:32,119 --> 00:26:35,240
Speaker 4: The smaller size of the companies that are being underwritten,

492
00:26:35,359 --> 00:26:37,159
Speaker 4: And certainly when you look at sort of some of

493
00:26:37,160 --> 00:26:41,320
Speaker 4: the sort of more club type deals in smaller businesses,

494
00:26:41,800 --> 00:26:44,840
Speaker 4: where those are being effectively syndicated to a number of

495
00:26:44,840 --> 00:26:47,640
Speaker 4: private credit folks, I think that's where, you know, if

496
00:26:47,680 --> 00:26:50,080
Speaker 4: one were to see stress in the market in general,

497
00:26:50,359 --> 00:26:52,440
Speaker 4: that would be a first place where you might see

498
00:26:52,440 --> 00:26:55,399
Speaker 4: stress because in those deals that are held by a

499
00:26:55,440 --> 00:26:58,680
Speaker 4: whole host of private credit folks, where there's not one

500
00:26:58,760 --> 00:27:02,880
Speaker 4: person that can control that tranch and sort of help

501
00:27:03,000 --> 00:27:07,400
Speaker 4: help to create a better outcome. I think that that

502
00:27:07,520 --> 00:27:10,919
Speaker 4: looks a lot more like a syndicated deal in the

503
00:27:10,960 --> 00:27:14,960
Speaker 4: liquid market. And so in those instances where that market

504
00:27:15,000 --> 00:27:17,720
Speaker 4: is very competitive and those deals are held by a

505
00:27:17,760 --> 00:27:20,399
Speaker 4: lot of people and they are not controlled by a

506
00:27:20,560 --> 00:27:24,280
Speaker 4: universal party, I think there's more risk in those. And

507
00:27:24,280 --> 00:27:26,359
Speaker 4: and by the way, you know, we've seen that in

508
00:27:26,400 --> 00:27:29,320
Speaker 4: the liquid markets a ton, right, because I've seen a

509
00:27:29,320 --> 00:27:32,320
Speaker 4: lot more on these liability management exercises now that it's

510
00:27:32,359 --> 00:27:35,359
Speaker 4: interesting because I will say on the liquid side, the

511
00:27:35,840 --> 00:27:41,720
Speaker 4: liability management exercise, those transactions have actually been declining somewhat

512
00:27:41,760 --> 00:27:46,119
Speaker 4: in the last In the last year, we saw so many,

513
00:27:47,400 --> 00:27:50,439
Speaker 4: you know, in terms of these liability management exercises that

514
00:27:50,480 --> 00:27:53,240
Speaker 4: were starting to take place. I would say that you

515
00:27:53,280 --> 00:27:57,320
Speaker 4: know that number is you know, it's down from what

516
00:27:57,560 --> 00:28:00,400
Speaker 4: was sixty eight percent of overall defaults down to forty

517
00:28:00,440 --> 00:28:04,240
Speaker 4: two percent. And I think it's down because if you

518
00:28:04,359 --> 00:28:08,080
Speaker 4: look at twenty three, twenty four and year to date

519
00:28:08,119 --> 00:28:12,880
Speaker 4: this year, they don't work, these libilary management exercises and

520
00:28:12,920 --> 00:28:16,280
Speaker 4: In fact, you know this year, ten out of the

521
00:28:16,320 --> 00:28:20,159
Speaker 4: thirty defaults year to date are repeat issuers of defaultedt

522
00:28:20,320 --> 00:28:23,840
Speaker 4: In twenty twenty three and twenty twenty four, it range

523
00:28:23,840 --> 00:28:26,080
Speaker 4: from sort of twenty five percent to a third will

524
00:28:26,119 --> 00:28:29,480
Speaker 4: repeat default issuers. And so what you're seeing there is

525
00:28:29,520 --> 00:28:32,000
Speaker 4: that just isn't working. So there's a lot of money

526
00:28:32,000 --> 00:28:34,400
Speaker 4: and fees going out the door, and there's a lot

527
00:28:34,400 --> 00:28:38,040
Speaker 4: of brain damage and creditors and recovery rates have been

528
00:28:38,080 --> 00:28:41,280
Speaker 4: totally demolished, and it didn't work anyway.

529
00:28:41,880 --> 00:28:44,440
Speaker 2: How do you say then that investors would get round that?

530
00:28:44,560 --> 00:28:48,640
Speaker 2: Because usually the reason that I guess many would agree

531
00:28:48,720 --> 00:28:52,120
Speaker 2: to go through the whole enemy process is because they

532
00:28:52,120 --> 00:28:56,280
Speaker 2: want to avoid the potentially also costly process of going

533
00:28:56,320 --> 00:29:00,400
Speaker 2: through a full bankruptcy and so on. So why would

534
00:29:00,400 --> 00:29:03,360
Speaker 2: you say the happy medium is? Do you think that

535
00:29:03,560 --> 00:29:06,080
Speaker 2: lemis just need to be better structured or do you

536
00:29:06,120 --> 00:29:09,400
Speaker 2: think that the issuers should just be pushed through the

537
00:29:09,400 --> 00:29:10,440
Speaker 2: bankruptcy process.

538
00:29:11,160 --> 00:29:12,800
Speaker 4: I mean, I think in a lot of these issues,

539
00:29:12,800 --> 00:29:14,680
Speaker 4: in a lot of these instances where you're seeing a

540
00:29:14,720 --> 00:29:19,040
Speaker 4: third of these default and exercises be repeated issued as

541
00:29:19,040 --> 00:29:20,840
Speaker 4: they should be pushed through from the beginning I think

542
00:29:20,840 --> 00:29:22,160
Speaker 4: it would have saved a lot of money to the

543
00:29:22,160 --> 00:29:26,520
Speaker 4: creditor group, but they weren't, so I think, you know,

544
00:29:26,880 --> 00:29:29,960
Speaker 4: what you're seeing, what these lemies have been have been

545
00:29:30,000 --> 00:29:33,520
Speaker 4: stripping apart assets into basically good assets and less goods

546
00:29:33,920 --> 00:29:37,960
Speaker 4: or bad assets, and moving some creditors along with some

547
00:29:38,080 --> 00:29:41,400
Speaker 4: senior secured financing into a new box and leaving others behind.

548
00:29:41,840 --> 00:29:45,560
Speaker 4: And I think it touches on a really important point here,

549
00:29:45,560 --> 00:29:47,880
Speaker 4: which is that you know, people focus a lot on

550
00:29:47,920 --> 00:29:52,000
Speaker 4: default rates. I think what's changed dramatically is recovery rates.

551
00:29:52,000 --> 00:29:54,560
Speaker 4: I mean, we used to have a market where recovery

552
00:29:54,640 --> 00:29:57,600
Speaker 4: rates on senior secured loans and unsecured high year bonds,

553
00:29:57,640 --> 00:30:00,800
Speaker 4: there was a huge differentiator, like the diferential was quite

554
00:30:00,880 --> 00:30:04,960
Speaker 4: large that differentially. That's that differential is not so large anymore.

555
00:30:05,000 --> 00:30:08,000
Speaker 4: In fact, it's roughly in line with one another in

556
00:30:08,080 --> 00:30:11,000
Speaker 4: terms of what you're seeing for unsecured and secured recovery rates.

557
00:30:11,880 --> 00:30:16,200
Speaker 4: You know LTM high yield recovery rates or sixty cents

558
00:30:16,240 --> 00:30:19,040
Speaker 4: and that includes distress ex changes and LTM for the

559
00:30:19,080 --> 00:30:21,720
Speaker 4: loan side is fifty four cents. So you know, they're

560
00:30:21,760 --> 00:30:25,200
Speaker 4: really converging. And it used to be that loans recovered

561
00:30:25,240 --> 00:30:27,280
Speaker 4: seventy to eighty cents on the dollar. That's we're not

562
00:30:27,320 --> 00:30:28,440
Speaker 4: really seeing that anymore.

563
00:30:28,920 --> 00:30:30,320
Speaker 1: And you mentioned there were a lot of them and

564
00:30:30,320 --> 00:30:32,040
Speaker 1: now there haven't been that many. Maybe we're just in

565
00:30:32,080 --> 00:30:34,120
Speaker 1: a summer slow down. But do you think we're getting

566
00:30:34,120 --> 00:30:37,160
Speaker 1: to a point where there is some reputational risk on

567
00:30:37,240 --> 00:30:39,720
Speaker 1: the part of the advisors and the law firms that

568
00:30:39,760 --> 00:30:42,560
Speaker 1: are really pushing the most aggressive forms of these things.

569
00:30:43,280 --> 00:30:45,440
Speaker 4: If there's reputational risk, because I think if you're a

570
00:30:45,480 --> 00:30:47,880
Speaker 4: private equity sponsor, your job is to keep a business,

571
00:30:47,920 --> 00:30:49,880
Speaker 4: you know, to keep an option alive if there's a

572
00:30:49,960 --> 00:30:53,800
Speaker 4: chance to do that. And I think that creditors, I mean,

573
00:30:53,840 --> 00:30:56,960
Speaker 4: you have creditor docs and eyes wide open. So but

574
00:30:57,040 --> 00:30:59,320
Speaker 4: what I do think is becoming more apparent is they're

575
00:30:59,360 --> 00:31:02,440
Speaker 4: not working. That's what I think is happening. Is you

576
00:31:02,520 --> 00:31:05,800
Speaker 4: haven't seen these things work well, So maybe that's what

577
00:31:06,000 --> 00:31:07,600
Speaker 4: Maybe that's more the issue.

578
00:31:07,360 --> 00:31:09,480
Speaker 1: Unless you've seen that the only intention is just to

579
00:31:09,680 --> 00:31:10,640
Speaker 1: buy a bit more time.

580
00:31:11,360 --> 00:31:13,920
Speaker 4: Yeah, and if the and by the way, that might

581
00:31:13,960 --> 00:31:17,680
Speaker 4: have worked if you saw if you saw an environment

582
00:31:17,960 --> 00:31:21,360
Speaker 4: where maybe rates had come in quicker, right, and you've

583
00:31:21,400 --> 00:31:25,040
Speaker 4: got floating raid heavy capital structures and decent businesses like

584
00:31:25,280 --> 00:31:28,000
Speaker 4: there are scenarios where that might have actually that might

585
00:31:28,000 --> 00:31:29,840
Speaker 4: have actually worked. I think there's a second thing going

586
00:31:29,880 --> 00:31:33,600
Speaker 4: on in liquid markets that that I worry about, which.

587
00:31:33,400 --> 00:31:35,400
Speaker 3: Is these disqualified lenderless Yeah.

588
00:31:35,480 --> 00:31:41,440
Speaker 4: So you know, you're starting to see some sponsors not want,

589
00:31:42,600 --> 00:31:46,040
Speaker 4: you know, as a manswer is to accumulate their debt

590
00:31:46,200 --> 00:31:49,280
Speaker 4: and own the process in the syndicated world, and some

591
00:31:49,360 --> 00:31:52,040
Speaker 4: of those disqualified lender lists are quite large. So I

592
00:31:52,120 --> 00:31:54,720
Speaker 4: worry about that in terms of liquidity. Now we haven't

593
00:31:54,760 --> 00:31:58,680
Speaker 4: seen that in a pervasive way, but that's weird, it's

594
00:31:58,760 --> 00:31:59,440
Speaker 4: yead Also.

595
00:31:59,280 --> 00:32:02,520
Speaker 1: Yeah, is that they tend to be around you know,

596
00:32:02,760 --> 00:32:04,760
Speaker 1: a dozen maybe two dozen names max.

597
00:32:04,880 --> 00:32:08,720
Speaker 4: We actually saw one recently that had one hundred names. Yes,

598
00:32:09,000 --> 00:32:10,080
Speaker 4: one hundred names.

599
00:32:10,120 --> 00:32:11,520
Speaker 1: Isn't that most of the market company?

600
00:32:11,720 --> 00:32:11,920
Speaker 3: Yeah?

601
00:32:12,160 --> 00:32:15,320
Speaker 4: Yeah, I mean now that was one, yes, but yes,

602
00:32:15,400 --> 00:32:16,720
Speaker 4: normally they're in the ten to fifteen.

603
00:32:16,800 --> 00:32:17,040
Speaker 1: Yes.

604
00:32:18,040 --> 00:32:21,200
Speaker 2: I guess one issue then, and I guess it links

605
00:32:21,240 --> 00:32:25,280
Speaker 2: in to your point on disqualified lender lists and so on,

606
00:32:25,840 --> 00:32:31,800
Speaker 2: is getting different creditors that may have different risk profiles,

607
00:32:31,800 --> 00:32:36,520
Speaker 2: I guess, or risk tolerances to work together. So how

608
00:32:36,520 --> 00:32:40,240
Speaker 2: do you how can you suggest that issuers get around

609
00:32:40,280 --> 00:32:44,080
Speaker 2: that then, because you will have those that are more

610
00:32:44,120 --> 00:32:46,840
Speaker 2: on the opportunistic end of the scale, I guess, and

611
00:32:46,880 --> 00:32:49,200
Speaker 2: then you will have those that would have invested in

612
00:32:49,240 --> 00:32:52,520
Speaker 2: the issue at par and are hoping to get most

613
00:32:52,560 --> 00:32:55,400
Speaker 2: of that back as quickly as possible. So how do

614
00:32:55,440 --> 00:32:58,400
Speaker 2: you get round the issue? And how do you think

615
00:32:58,440 --> 00:33:01,760
Speaker 2: issuers should try to make the creditors work together?

616
00:33:01,840 --> 00:33:03,680
Speaker 1: Should they try to do that at all?

617
00:33:04,360 --> 00:33:07,920
Speaker 4: Well, I think you're getting you're you're referencing is the

618
00:33:08,000 --> 00:33:10,880
Speaker 4: sort of co op groups, right, these lender formation, these

619
00:33:10,960 --> 00:33:13,080
Speaker 4: lender groups that are being formed, and I think there

620
00:33:13,080 --> 00:33:16,040
Speaker 4: are issuers that are trying to block the formation of

621
00:33:16,120 --> 00:33:20,200
Speaker 4: co op groups. So so that's one. But ultimately, when

622
00:33:20,200 --> 00:33:23,080
Speaker 4: you have a capital structure and you have senior secured

623
00:33:23,160 --> 00:33:26,560
Speaker 4: lenders and unsecured lenders, you will have different motivations in

624
00:33:26,640 --> 00:33:28,840
Speaker 4: terms of how these companies look in a pro form

625
00:33:28,880 --> 00:33:32,080
Speaker 4: a you know, post restructuring format. So I'm not sure

626
00:33:32,080 --> 00:33:34,440
Speaker 4: you can get around it. When you have seen your

627
00:33:34,480 --> 00:33:38,080
Speaker 4: secured loans and you have unsecured bonds and maybe there's

628
00:33:38,080 --> 00:33:41,480
Speaker 4: old copaper and then you you know, the question becomes

629
00:33:41,480 --> 00:33:43,880
Speaker 4: how much value there is in the entity and how

630
00:33:43,920 --> 00:33:46,560
Speaker 4: to split that value up. So I don't know that

631
00:33:46,600 --> 00:33:49,480
Speaker 4: there's a way to get around it. You're right that

632
00:33:49,520 --> 00:33:51,960
Speaker 4: there are issuers that are trying to trying to block

633
00:33:52,000 --> 00:33:52,640
Speaker 4: that formation.

634
00:33:52,760 --> 00:33:53,400
Speaker 3: Though for sure.

635
00:33:54,280 --> 00:33:56,680
Speaker 1: What comes up a lot in the context of enemies

636
00:33:56,720 --> 00:33:58,520
Speaker 1: from the investment side is you need to have scale

637
00:33:58,560 --> 00:34:01,680
Speaker 1: to survive them. I mean, is that your edge in

638
00:34:01,720 --> 00:34:04,080
Speaker 1: these situations? Is that what you use going in?

639
00:34:04,960 --> 00:34:06,320
Speaker 3: I think you need to. I don't.

640
00:34:06,360 --> 00:34:09,359
Speaker 4: I don't think that it's always the biggest who can

641
00:34:09,400 --> 00:34:14,640
Speaker 4: survive them, but I think it is oftentimes investors that

642
00:34:14,719 --> 00:34:17,799
Speaker 4: have different types and pools of capital to help be

643
00:34:17,840 --> 00:34:21,440
Speaker 4: part of a solution. So you know, maybe there's a

644
00:34:21,640 --> 00:34:26,440
Speaker 4: rescue financing opportunity or a senior secured opportunity where you

645
00:34:26,480 --> 00:34:28,840
Speaker 4: can be part of a solution for an issuer to

646
00:34:28,960 --> 00:34:32,280
Speaker 4: continue to survive or help sort of you know, recap

647
00:34:32,320 --> 00:34:37,640
Speaker 4: the capital structure. I think that's probably the most important thing.

648
00:34:37,719 --> 00:34:40,000
Speaker 4: So that goes a little bit to your scale, but

649
00:34:40,120 --> 00:34:47,480
Speaker 4: it's it's not necessarily scale in the debt instrument that

650
00:34:47,480 --> 00:34:50,920
Speaker 4: that might be impacted negatively. I think it's being able

651
00:34:51,000 --> 00:34:54,040
Speaker 4: to bring scale to a solution for an issue.

652
00:34:55,040 --> 00:34:58,719
Speaker 1: Going back to the private credit side of liquidity side

653
00:34:58,719 --> 00:35:00,759
Speaker 1: of that, because there is an the hope that these

654
00:35:00,800 --> 00:35:03,359
Speaker 1: things will start trading at some point. How's that going.

655
00:35:03,400 --> 00:35:06,480
Speaker 1: You've seen a lot of secondary market, is that a

656
00:35:06,520 --> 00:35:07,440
Speaker 1: big focus for you?

657
00:35:07,520 --> 00:35:12,200
Speaker 4: We've seen runs, you know, we have not seen a

658
00:35:12,200 --> 00:35:15,600
Speaker 4: lot of trading. I think that, you know, I suspect

659
00:35:15,640 --> 00:35:18,239
Speaker 4: you will eventually see some of that. Again, it goes

660
00:35:18,280 --> 00:35:21,239
Speaker 4: back into these different buckets of size and where people

661
00:35:21,280 --> 00:35:24,359
Speaker 4: are trafficking and what their average hold size are. When

662
00:35:24,360 --> 00:35:27,920
Speaker 4: we look at our book, I mean we're controlling. We

663
00:35:27,960 --> 00:35:33,279
Speaker 4: control over eighty percent of our tranches that we've invested in,

664
00:35:33,360 --> 00:35:35,680
Speaker 4: so you know, I think for some of the larger

665
00:35:35,719 --> 00:35:39,840
Speaker 4: folks that want to be in a position to control

666
00:35:39,920 --> 00:35:42,759
Speaker 4: the tranche and potentially control outcomes, you're not going to

667
00:35:42,760 --> 00:35:45,560
Speaker 4: see that as much. But we've certainly seen some of

668
00:35:45,600 --> 00:35:46,960
Speaker 4: these lists come out. I don't think it's been a

669
00:35:47,040 --> 00:35:49,680
Speaker 4: robust trading market as yet.

670
00:35:50,239 --> 00:35:52,440
Speaker 1: But is that the intention over time to just become

671
00:35:52,480 --> 00:35:55,160
Speaker 1: as liquid as syndicated loans for example?

672
00:35:55,320 --> 00:35:59,120
Speaker 4: Well, I've read what you've read on that, you know,

673
00:35:59,160 --> 00:36:01,759
Speaker 4: and we've seen some of these bank partnerships and all

674
00:36:01,760 --> 00:36:06,040
Speaker 4: that in terms of sort of effectively syndicating private credit loans.

675
00:36:06,880 --> 00:36:09,239
Speaker 4: I don't have a great answer to it right now.

676
00:36:09,280 --> 00:36:12,000
Speaker 4: What I can tell you is that for folks who's

677
00:36:12,080 --> 00:36:16,840
Speaker 4: part of their core business model is to control their investment,

678
00:36:17,280 --> 00:36:18,920
Speaker 4: they don't think you're going to see it in that

679
00:36:19,080 --> 00:36:21,960
Speaker 4: segment of the market because one of the biggest protective

680
00:36:22,000 --> 00:36:27,200
Speaker 4: features for private credit is for those investors that are

681
00:36:27,280 --> 00:36:30,960
Speaker 4: large enough to own or control the entire trunch.

682
00:36:30,920 --> 00:36:35,000
Speaker 1: Right, yeah, okay, And as the whole market kind of

683
00:36:35,040 --> 00:36:39,560
Speaker 1: opens up, people use the word democratization and they talk about,

684
00:36:39,640 --> 00:36:44,160
Speaker 1: you know, new investors and all this stuff. ETFs are

685
00:36:44,160 --> 00:36:47,480
Speaker 1: more frequently coming up as a subject for private credit.

686
00:36:47,520 --> 00:36:48,920
Speaker 1: What do you make of that concept?

687
00:36:49,440 --> 00:36:51,760
Speaker 4: I think if you can match duration to what holders

688
00:36:51,760 --> 00:36:54,000
Speaker 4: and investors need, it's a pretty good place to earn

689
00:36:54,080 --> 00:36:56,880
Speaker 4: yield for any kind of investor, as long as you

690
00:36:56,880 --> 00:36:58,000
Speaker 4: can hold onto your credit.

691
00:36:58,080 --> 00:37:00,000
Speaker 3: Yeah yeah.

692
00:37:00,040 --> 00:37:02,360
Speaker 1: Let me talk about other products that you might be

693
00:37:02,440 --> 00:37:06,240
Speaker 1: involved in or looking at getting involved in, for example,

694
00:37:06,280 --> 00:37:10,680
Speaker 1: fund finance, nav loans, collateralized fund obligations, that kind of thing.

695
00:37:10,719 --> 00:37:12,680
Speaker 1: Is that an opportunity for HPS.

696
00:37:12,360 --> 00:37:13,440
Speaker 3: It's a huge opportunity.

697
00:37:13,440 --> 00:37:16,160
Speaker 4: We've done a lot in fun financing, We've done a

698
00:37:16,160 --> 00:37:21,799
Speaker 4: lot in GPLP solutions and the fun financing, you know,

699
00:37:22,440 --> 00:37:25,879
Speaker 4: has had a nice premium in terms of against other

700
00:37:25,960 --> 00:37:30,000
Speaker 4: investment grade type assets, and we've started to build a

701
00:37:30,000 --> 00:37:31,080
Speaker 4: pretty nice business there.

702
00:37:31,560 --> 00:37:34,000
Speaker 1: Can you kind of give us the sense of the

703
00:37:34,040 --> 00:37:35,840
Speaker 1: scale of it and what I.

704
00:37:35,840 --> 00:37:38,080
Speaker 4: Mean, I can tell you we want to investment committee.

705
00:37:39,040 --> 00:37:41,000
Speaker 4: I guess what two or three days ago on something

706
00:37:41,000 --> 00:37:43,080
Speaker 4: that was north of it was a billion one of

707
00:37:44,160 --> 00:37:48,040
Speaker 4: a combination of fund financing and NAP lending, So that

708
00:37:48,120 --> 00:37:49,480
Speaker 4: scale can be quite big.

709
00:37:49,560 --> 00:37:52,800
Speaker 1: And that kind of pipeline you see continuing that that's.

710
00:37:52,640 --> 00:37:54,480
Speaker 3: Not the one up, but I don't think that's going

711
00:37:54,520 --> 00:37:55,439
Speaker 3: to be just a one off.

712
00:37:55,480 --> 00:37:59,360
Speaker 1: I don't know, Okay, So is that the most exciting

713
00:37:59,360 --> 00:38:00,840
Speaker 1: opportunity for you looking ahead?

714
00:38:01,040 --> 00:38:04,600
Speaker 4: I think fun financing is a huge opportunity, and NAVE lending,

715
00:38:04,640 --> 00:38:07,000
Speaker 4: by the way, and I think it's a huge opportunity

716
00:38:07,200 --> 00:38:09,560
Speaker 4: because I think we're in a moment in time where

717
00:38:09,960 --> 00:38:14,080
Speaker 4: exits for private act responsors has been somewhat limited and

718
00:38:14,120 --> 00:38:16,120
Speaker 4: it's a one way to get some capital back to

719
00:38:16,160 --> 00:38:19,760
Speaker 4: their investor group, which I think is super important, and

720
00:38:19,880 --> 00:38:21,440
Speaker 4: I think you're going to see more and more of that.

721
00:38:21,640 --> 00:38:25,080
Speaker 1: I'm just also interested in another part of private credit

722
00:38:25,080 --> 00:38:28,520
Speaker 1: that people seem to worry about, which is software lending

723
00:38:29,000 --> 00:38:32,480
Speaker 1: a big focus for private funds, but has been impacted

724
00:38:32,480 --> 00:38:34,800
Speaker 1: by AI. Some people have said that, you know, a

725
00:38:34,840 --> 00:38:37,480
Speaker 1: lot of the software that was created is now redundant

726
00:38:37,480 --> 00:38:41,560
Speaker 1: because of AI. Are a bunch of private loans for

727
00:38:41,600 --> 00:38:42,960
Speaker 1: software at risk because of that.

728
00:38:43,600 --> 00:38:45,560
Speaker 4: I mean, I think there's a lot of that argument

729
00:38:45,600 --> 00:38:48,480
Speaker 4: could sort of extend to any number of companies that

730
00:38:48,520 --> 00:38:51,120
Speaker 4: are going to be impacted by AI. I think that

731
00:38:51,160 --> 00:38:53,600
Speaker 4: what happened with software was that there is a lot

732
00:38:53,640 --> 00:38:57,440
Speaker 4: of folks that lent to a bunch of software businesses

733
00:38:57,880 --> 00:39:00,520
Speaker 4: where they did not generate cash flow, and I think

734
00:39:00,560 --> 00:39:04,800
Speaker 4: the slowing of the top line impacted the timeline between

735
00:39:05,080 --> 00:39:06,759
Speaker 4: the time of the loan and when they were going

736
00:39:06,800 --> 00:39:09,360
Speaker 4: to generate cash flow, and so you started to see

737
00:39:09,400 --> 00:39:13,040
Speaker 4: some stress in that system. And it's a very big

738
00:39:13,080 --> 00:39:17,320
Speaker 4: percentage of the non investment grade market as it is

739
00:39:17,320 --> 00:39:20,000
Speaker 4: in the SMP. It's forty technology and large as forty

740
00:39:20,040 --> 00:39:22,640
Speaker 4: percent of the SMP. So I mean, we never had

741
00:39:22,680 --> 00:39:25,760
Speaker 4: a disproportionate share of software, and we tended to focus

742
00:39:25,800 --> 00:39:28,799
Speaker 4: on companies that actually generate cash flow. I think that

743
00:39:29,160 --> 00:39:32,480
Speaker 4: you know, the AI comment on just software versus other businesses.

744
00:39:32,520 --> 00:39:34,320
Speaker 4: I think you can extend it across the board.

745
00:39:35,080 --> 00:39:38,560
Speaker 1: So let's talk about the edge your specifically, all the

746
00:39:38,560 --> 00:39:40,520
Speaker 1: things we talked about, all the great opportunities. I was

747
00:39:40,560 --> 00:39:42,800
Speaker 1: talking about, what is the you know, where is the

748
00:39:42,840 --> 00:39:44,600
Speaker 1: best relative value right now? And why?

749
00:39:45,120 --> 00:39:48,280
Speaker 4: So I think you're kind of legging into the macro

750
00:39:48,320 --> 00:39:50,560
Speaker 4: piece of the pie, which is, you know, we we

751
00:39:50,680 --> 00:39:52,880
Speaker 4: entered the year with a lot of uncertain well, we

752
00:39:53,000 --> 00:39:54,719
Speaker 4: entered the year in a really bullish way, I would say,

753
00:39:54,719 --> 00:39:57,520
Speaker 4: and then and then, and then Liberation Day came, and

754
00:39:57,560 --> 00:40:01,399
Speaker 4: there's a lot of volatility between April second and April ninth,

755
00:40:01,440 --> 00:40:03,840
Speaker 4: and that volatility is dissipated and the SMP is up

756
00:40:03,880 --> 00:40:05,560
Speaker 4: I think as a twenty four percent or something like

757
00:40:05,600 --> 00:40:09,200
Speaker 4: that since the bottom there. So I think the market

758
00:40:09,800 --> 00:40:12,680
Speaker 4: in general, and there's lots of ways to slice it up.

759
00:40:12,719 --> 00:40:18,839
Speaker 4: But the equity market, people justify because it's forty percent technology. Technology,

760
00:40:19,200 --> 00:40:22,560
Speaker 4: that makeup of the SMP has shifted dramatically from prior times.

761
00:40:23,880 --> 00:40:26,320
Speaker 4: That part that segment of the market is higher margins,

762
00:40:26,760 --> 00:40:30,759
Speaker 4: it's less capital intensive, et cetera. I think that for

763
00:40:30,960 --> 00:40:34,799
Speaker 4: us there still remains a lot of uncertainty, and I

764
00:40:34,840 --> 00:40:36,480
Speaker 4: don't know if we go into a recession or not,

765
00:40:36,560 --> 00:40:41,120
Speaker 4: but I think we're sort of assuming a stagflationary case.

766
00:40:41,160 --> 00:40:44,520
Speaker 4: We're assuming the growth slows, and we're assuming that inflation

767
00:40:44,680 --> 00:40:47,200
Speaker 4: is sticky. And what that exact number is I can't

768
00:40:47,239 --> 00:40:51,759
Speaker 4: give you. But under those assumptions, credit actually is not

769
00:40:51,800 --> 00:40:54,160
Speaker 4: so bad. So that doesn't mean that spreads want wide

770
00:40:54,160 --> 00:40:55,680
Speaker 4: now and you won't see volatility and all that. I

771
00:40:55,680 --> 00:40:59,360
Speaker 4: think you probably will. But when you look at the world,

772
00:40:59,520 --> 00:41:04,040
Speaker 4: I actually think when you look at the spectrum of

773
00:41:04,200 --> 00:41:08,200
Speaker 4: anything from investment grade credit which is one hundred basis

774
00:41:08,200 --> 00:41:12,279
Speaker 4: points over to private investment grade, which is depending on

775
00:41:12,320 --> 00:41:14,520
Speaker 4: your flavor, there's a premium to that that could be

776
00:41:14,520 --> 00:41:18,160
Speaker 4: anywhere from an incremental one hundred to two hundred basis

777
00:41:18,160 --> 00:41:22,399
Speaker 4: points to hiyal bonds and loans, which are, you know,

778
00:41:22,520 --> 00:41:26,319
Speaker 4: three hundred to four hundred over to private credit at

779
00:41:26,400 --> 00:41:29,800
Speaker 4: large direct lending and junior capital. I actually think across

780
00:41:29,840 --> 00:41:33,960
Speaker 4: the credit risk spectrum, that's a pretty interesting place. I

781
00:41:33,960 --> 00:41:38,200
Speaker 4: think what is not interesting is triple C liquid credit.

782
00:41:38,280 --> 00:41:40,399
Speaker 4: I think that's not interesting. Why because I think you're

783
00:41:40,880 --> 00:41:43,759
Speaker 4: super dependent on growth to de lever and I think

784
00:41:43,800 --> 00:41:47,239
Speaker 4: you're super dependent on capital markets to be open to refinance,

785
00:41:47,760 --> 00:41:50,560
Speaker 4: and I think you're you've got a big maturity wall

786
00:41:50,600 --> 00:41:52,680
Speaker 4: in that segment of the market, like twenty five percent

787
00:41:52,719 --> 00:41:54,680
Speaker 4: of the triple C markets maturing in a few years.

788
00:41:54,880 --> 00:41:56,960
Speaker 4: And if the capital markets don't open for that, and

789
00:41:57,120 --> 00:42:00,919
Speaker 4: if rates stay high and if growth modern rates, that's

790
00:42:00,920 --> 00:42:02,400
Speaker 4: a segment of the market that's going to be in

791
00:42:02,440 --> 00:42:04,440
Speaker 4: trouble and that, by the way, will widen out the

792
00:42:04,480 --> 00:42:06,040
Speaker 4: highild market just mathematically.

793
00:42:06,320 --> 00:42:08,400
Speaker 3: So I don't I don't think that's a segment that's interesting.

794
00:42:08,680 --> 00:42:12,480
Speaker 4: But I think if you can find ways to compound

795
00:42:12,600 --> 00:42:16,439
Speaker 4: yield across credit, and I think where you even give

796
00:42:16,520 --> 00:42:20,600
Speaker 4: up some yield, meaning maybe not move your portfolio into

797
00:42:20,600 --> 00:42:23,239
Speaker 4: sort of some of these lower rated credits, that's a

798
00:42:23,239 --> 00:42:26,560
Speaker 4: pretty good place to sit. So then you get into

799
00:42:26,800 --> 00:42:29,520
Speaker 4: what risk do you want and what duration do you want?

800
00:42:30,080 --> 00:42:32,360
Speaker 4: And do you want short duration, do you want longer duration?

801
00:42:32,480 --> 00:42:34,040
Speaker 4: How do you want that to look in terms of

802
00:42:34,040 --> 00:42:37,480
Speaker 4: a portfolio. But you know, you really across the board,

803
00:42:37,680 --> 00:42:41,080
Speaker 4: depending on your view on rates, you know, can be

804
00:42:41,160 --> 00:42:43,480
Speaker 4: anywhere from five and a half percent at the low

805
00:42:43,600 --> 00:42:46,880
Speaker 4: end to you know, ten plus percent on direct lending,

806
00:42:46,920 --> 00:42:51,440
Speaker 4: to even higher in terms of junior capital bespoke structured situations.

807
00:42:51,480 --> 00:42:53,919
Speaker 4: I think that makes a whole lot of sense visa

808
00:42:54,000 --> 00:42:56,719
Speaker 4: VI the equity market right now, and as lower of

809
00:42:56,719 --> 00:42:59,359
Speaker 4: all than the equity market, if you if you can

810
00:42:59,400 --> 00:43:01,680
Speaker 4: sort of under right into that kind of that kind

811
00:43:01,680 --> 00:43:02,799
Speaker 4: of band, so.

812
00:43:02,840 --> 00:43:06,759
Speaker 2: You painted not so rosy, I guess outlook in terms

813
00:43:06,800 --> 00:43:10,440
Speaker 2: of potential stackfulation and so on. Would you see the

814
00:43:10,480 --> 00:43:14,359
Speaker 2: triple cs that you mentioned as being at the biggest risk,

815
00:43:14,440 --> 00:43:20,080
Speaker 2: I guess in that scenario or are there sectors geographies

816
00:43:20,480 --> 00:43:25,040
Speaker 2: that you think could come under a lot of pressure

817
00:43:25,600 --> 00:43:28,360
Speaker 2: through the rest of this year that we're not thinking

818
00:43:28,400 --> 00:43:29,200
Speaker 2: about at the moment.

819
00:43:29,719 --> 00:43:32,040
Speaker 4: Yeah, well, I think I think number one, Yes, I

820
00:43:32,040 --> 00:43:34,279
Speaker 4: think triple c's are pretty risky because the times that

821
00:43:34,320 --> 00:43:36,680
Speaker 4: you want to move down in quality and liquid credit

822
00:43:36,719 --> 00:43:40,280
Speaker 4: markets are times when you're expecting a bottom in terms

823
00:43:40,320 --> 00:43:44,160
Speaker 4: of in terms of growth, and so I'm not sure

824
00:43:44,160 --> 00:43:47,120
Speaker 4: that we're at the bottom in terms of growth. I

825
00:43:47,160 --> 00:43:49,279
Speaker 4: think too, is that there's a ton of uncertainty in

826
00:43:49,280 --> 00:43:53,400
Speaker 4: the market still with regard to where we land on tariffs,

827
00:43:53,800 --> 00:43:56,160
Speaker 4: what that means in terms of inflation, and what that

828
00:43:56,200 --> 00:43:59,959
Speaker 4: means in terms of uh, you know, global global trade,

829
00:44:00,080 --> 00:44:02,600
Speaker 4: and I think that that uncertainty is very hard to

830
00:44:02,640 --> 00:44:06,040
Speaker 4: box at this moment. I think there's a view that

831
00:44:06,680 --> 00:44:10,759
Speaker 4: perhaps that otional tariffs that come into play and that

832
00:44:10,840 --> 00:44:12,839
Speaker 4: might be kicked out until September. But I think when

833
00:44:12,880 --> 00:44:16,239
Speaker 4: you're operating a land of uncertainty, that's why people want

834
00:44:16,280 --> 00:44:19,920
Speaker 4: to be in higher quality and be able to compound

835
00:44:19,920 --> 00:44:22,480
Speaker 4: because in that higher quality universe of companies, maybe you

836
00:44:22,480 --> 00:44:23,920
Speaker 4: give up a little bit of yield, but you have

837
00:44:23,960 --> 00:44:28,560
Speaker 4: a little bit more ability to underwrite what earning's power

838
00:44:28,600 --> 00:44:32,040
Speaker 4: look like, whether these companies, you know, have some more

839
00:44:32,280 --> 00:44:36,520
Speaker 4: leverage in terms of either raising prices to combat tariffs

840
00:44:36,960 --> 00:44:41,200
Speaker 4: or aligning their cost structures, and whether they have access

841
00:44:41,239 --> 00:44:43,960
Speaker 4: to liquidity. And I think those are really important variables

842
00:44:44,000 --> 00:44:46,879
Speaker 4: when you're operating in this land of uncertainty. You ask

843
00:44:46,960 --> 00:44:50,120
Speaker 4: the question with regard to two sectors that could be

844
00:44:50,200 --> 00:44:52,720
Speaker 4: more in trouble, and I think, you know, the biggest

845
00:44:52,719 --> 00:44:55,280
Speaker 4: sectors that could be in trouble are related to number

846
00:44:55,280 --> 00:44:57,399
Speaker 4: one tariffs, So what is that you know that could

847
00:44:57,440 --> 00:45:02,680
Speaker 4: be retail type sectors, industrial sectors, et cetera. And number

848
00:45:02,760 --> 00:45:06,919
Speaker 4: two related to the consumer. And that's where it's really

849
00:45:06,960 --> 00:45:09,600
Speaker 4: hard to underwrite in terms of where we're sitting today,

850
00:45:10,360 --> 00:45:13,720
Speaker 4: but you're seeing it in terms of travel and leisure

851
00:45:13,880 --> 00:45:15,400
Speaker 4: and discretionary spend.

852
00:45:15,400 --> 00:45:17,520
Speaker 3: You're starting to see signs of that. Now.

853
00:45:18,200 --> 00:45:22,640
Speaker 4: Look, are people are really starting to price in cuts

854
00:45:23,120 --> 00:45:25,839
Speaker 4: that you know, I think very few are pricing in July,

855
00:45:25,960 --> 00:45:28,880
Speaker 4: but people are moving into September and December. You know,

856
00:45:29,280 --> 00:45:32,919
Speaker 4: cuts to begin monthly starting in September and go through

857
00:45:32,960 --> 00:45:38,240
Speaker 4: twenty twenty six. And the million dollar question is always

858
00:45:38,840 --> 00:45:43,320
Speaker 4: is the FED cutting because we've reached an inflation hurdle

859
00:45:43,560 --> 00:45:47,719
Speaker 4: and been able to maintain employment levels, or are we

860
00:45:47,800 --> 00:45:50,759
Speaker 4: cutting as an insurance policy because there's a lot of

861
00:45:50,800 --> 00:45:56,200
Speaker 4: fear around underlying growth. And I think that's the question

862
00:45:56,280 --> 00:45:59,759
Speaker 4: that sort of remains, and people are starting today in

863
00:45:59,800 --> 00:46:02,920
Speaker 4: this might change in a week to be worried about

864
00:46:02,960 --> 00:46:04,640
Speaker 4: the employment picture.

865
00:46:04,800 --> 00:46:07,800
Speaker 1: Or will be cutting because the FED isn't an independent anymore,

866
00:46:07,840 --> 00:46:09,960
Speaker 1: which is another risk on the horizon. But in terms

867
00:46:09,960 --> 00:46:12,080
Speaker 1: of the opportunity, what do you really lean into? It

868
00:46:12,080 --> 00:46:14,080
Speaker 1: sounds like you'll like, I mean.

869
00:46:14,000 --> 00:46:16,000
Speaker 4: Listen, it's like we talk our and this sounds like

870
00:46:16,000 --> 00:46:17,719
Speaker 4: we're talking our book. But I would say, you know,

871
00:46:17,880 --> 00:46:21,480
Speaker 4: high quality credit is a good place to compound yield,

872
00:46:21,840 --> 00:46:26,680
Speaker 4: and I would be much more reticent on lower quality

873
00:46:26,800 --> 00:46:30,399
Speaker 4: triple C credit. I think that what you've seen this year,

874
00:46:30,480 --> 00:46:33,920
Speaker 4: certainly for the liquid guys, is that fifty percent of

875
00:46:33,960 --> 00:46:36,080
Speaker 4: the high yield managers have not been able to keep

876
00:46:36,120 --> 00:46:38,960
Speaker 4: up with the index. And by the way, treasuries are

877
00:46:39,000 --> 00:46:41,239
Speaker 4: a huge portion of what's happened this year for a

878
00:46:41,280 --> 00:46:43,799
Speaker 4: high yield. I mean, the treasury market is up five

879
00:46:43,880 --> 00:46:45,920
Speaker 4: year and ten years up four and a half percent

880
00:46:46,000 --> 00:46:48,719
Speaker 4: this year. The high old market is up four point

881
00:46:48,719 --> 00:46:51,799
Speaker 4: three percent this year. So it's been hard to keep

882
00:46:51,880 --> 00:46:55,680
Speaker 4: up for many managers because a lot of managers argued

883
00:46:55,719 --> 00:46:58,160
Speaker 4: towards higher quality, so they're not holding onto a lot

884
00:46:58,160 --> 00:47:00,719
Speaker 4: of triple C that's in there. And to you as

885
00:47:00,760 --> 00:47:04,200
Speaker 4: these cash, these coupons are high and you've got to reinvest,

886
00:47:04,480 --> 00:47:06,279
Speaker 4: and when you don't have enough paper to reinvest and

887
00:47:06,320 --> 00:47:08,200
Speaker 4: there's not a lot of new issue, it's hard to

888
00:47:08,280 --> 00:47:12,000
Speaker 4: keep invested against these index returns. But the answer is

889
00:47:12,560 --> 00:47:14,920
Speaker 4: what do we like? We like high quality. We like

890
00:47:14,960 --> 00:47:21,680
Speaker 4: high quality credit where we can lower the risk around underwriting,

891
00:47:22,120 --> 00:47:25,720
Speaker 4: and that risk would be either lowering the risk around

892
00:47:25,719 --> 00:47:28,400
Speaker 4: the cost structure i e. Tariffs, so staying away from

893
00:47:28,480 --> 00:47:32,359
Speaker 4: industries that could be hugely highly impacted, lowering the risk

894
00:47:32,440 --> 00:47:36,279
Speaker 4: around super consumer discretionary if you have a big slowdown

895
00:47:37,400 --> 00:47:41,120
Speaker 4: or at least underwriting where you have enough options in

896
00:47:41,200 --> 00:47:44,520
Speaker 4: businesses to access liquidity to weather a period of time.

897
00:47:45,320 --> 00:47:47,279
Speaker 1: And you know, I'm going to ask about black Rock

898
00:47:47,520 --> 00:47:49,680
Speaker 1: because you are being acquired by black Crok, the biggest

899
00:47:49,719 --> 00:47:52,799
Speaker 1: asset manager, which presumably gives you massive scale. I know

900
00:47:52,840 --> 00:47:55,640
Speaker 1: the deal hasn't closed yet as a time of recording,

901
00:47:55,680 --> 00:47:56,480
Speaker 1: but what can you tell us?

902
00:47:56,920 --> 00:47:58,160
Speaker 3: We're super excited about it.

903
00:47:58,640 --> 00:48:01,439
Speaker 1: Great stuff, even Prower from HPS. Many thanks for joining

904
00:48:01,520 --> 00:48:02,319
Speaker 1: us on the Credit Edge.

905
00:48:02,360 --> 00:48:03,479
Speaker 3: Thank you, and of.

906
00:48:03,360 --> 00:48:06,480
Speaker 1: Course we're very grateful to Tolu Ali Mutu with Bloomberg Intelligence.

907
00:48:06,480 --> 00:48:08,840
Speaker 1: Thanks for joining us today. Thank you for having me

908
00:48:09,560 --> 00:48:11,840
Speaker 1: for more credit market analysis and insight. Read all of

909
00:48:11,840 --> 00:48:14,840
Speaker 1: Tolu's great work on the Bloomberg terminal. Bloomberg Intelligence is

910
00:48:14,880 --> 00:48:17,360
Speaker 1: part of our research department, with five hundred analysts and

911
00:48:17,400 --> 00:48:20,920
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912
00:48:20,920 --> 00:48:23,759
Speaker 1: equities and credits, plus outlooks on more than ninety industries

913
00:48:23,960 --> 00:48:27,920
Speaker 1: and one hundred market industries, currencies and commodities. Please do

914
00:48:28,000 --> 00:48:30,759
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915
00:48:30,800 --> 00:48:33,800
Speaker 1: We're on Apple, Spotify, and all other good podcast providers,

916
00:48:33,840 --> 00:48:37,200
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917
00:48:37,200 --> 00:48:39,919
Speaker 1: a review, tell your friends, or email me directly at

918
00:48:40,040 --> 00:48:43,640
Speaker 1: Jcromby eight at Bloomberg dot net. I'm James Cromby. It's

919
00:48:43,640 --> 00:48:45,680
Speaker 1: been a pleasure having you join us again. Next week

920
00:48:45,719 --> 00:49:06,440
Speaker 1: on the Credit Edge.