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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to

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Speaker 1: another episode of the All Thoughts Podcast. I'm Tracy Alloway.

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Speaker 2: And I'm Joe.

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Speaker 3: Wasn't that Joe?

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Speaker 1: Do you remember deal toys? Did you ever see those?

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Speaker 2: I never got a deal I never I do know

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Speaker 2: what they were.

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Speaker 1: You wouldn't get a deal toy unless you were working.

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Speaker 2: Out, so I'm aware that they existed, but I don't

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Speaker 2: never had one. I never saw one.

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Speaker 1: I used to be slightly obsessed with them.

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Speaker 2: Were they toys like or were they like like were

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Speaker 2: they those sort of looseight Uh?

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Speaker 1: Yeah, that's pretty much it. So if you are working

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Speaker 1: in capital markets or in mergers and acquisitions and you

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Speaker 1: completed a deal, you would mark the end of that

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Speaker 1: transaction by, you know, adding some sort of swag I guess.

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Speaker 1: And it could be really boring. It could just be

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Speaker 1: a looseight block or something like that. But some of

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Speaker 1: them were really interesting and fun. And one of the

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Speaker 1: ones I remember seeing was someone it must have been

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Speaker 1: working in like capital markets. It was a little toggle,

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Speaker 1: like an actual like think of like a railroad I

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Speaker 1: kind of toggle, and it was to celebrate the first

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Speaker 1: ever pick toggle transaction.

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Speaker 2: So can I say something you know we talked to

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Speaker 2: First of all, it's amazing. Second of all, you know,

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Speaker 2: we talked to a lot of investors on the podcast.

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Speaker 2: We talked to a lot of people whose job in

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Speaker 2: some way resembles our job, which is looking at screens

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Speaker 2: all day or maybe looking at data. I think if

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Speaker 2: I ever had gone into finance, I would have some

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Speaker 2: job that looked involved a lot of looking at screens

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Speaker 2: and a lot of maybe looking at data, but mostly

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Speaker 2: just looking at screens. We don't often talk talk to

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Speaker 2: a lot of people who are in the world of

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Speaker 2: actually talking to other people about making things happen. I

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Speaker 2: never think i'd be good at that. No one wants

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Speaker 2: to hang out with me, you know, stuff like that.

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Speaker 2: And so I want to learn and talk to more

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Speaker 2: people about how actually things in finance, whether we're talking

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Speaker 2: about a deal, whether we're talking about a new issuance,

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Speaker 2: et cetera, how that actually happens, how an instrument or

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Speaker 2: security actually comes into the world.

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Speaker 1: Well, I'm very pleased to say, Joe that we do,

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Speaker 1: in fact have the perfect guest for this topic. We're

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Speaker 1: going to be speaking to someone who's day to day

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Speaker 1: business is talking to people sourcing and finding deal and

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Speaker 1: someone who also knows exactly about that Pictoggle deal toy

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Speaker 1: that I mentioned earlier. So I'm very excited we're going

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Speaker 1: to be talking. We're going to try to thread the

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Speaker 1: needle between sourcing deals and also something else we've been

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Speaker 1: interested in lately, which is private. That's right, all right,

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Speaker 1: So without further ado, we're speaking with Millwood Hobbes. He

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Speaker 1: leads Oak Trees Sourcing, an originations group. So really again

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Speaker 1: the perfect person, Millwood, thank you so much for coming

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Speaker 1: on all thoughts, Thank you for having me. So I'm

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Speaker 1: right right about the pictogle toy. You've seen this toy.

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Speaker 3: Yes, I've seen it. My favorite deal toys. There's two

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Speaker 3: that stick out when Ford spun out Hurts in two

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Speaker 3: thousand and five, I was part of that transaction, and

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Speaker 3: so I have a set of car keys and there's

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Speaker 3: from Hurts and it's it's a it's they're called loose Heights. Yeah.

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Speaker 3: And then the other one, which was pretty cool. I

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Speaker 3: did the Mars regularly deal with Byron Trott, and so

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Speaker 3: I have two eminem amazing guys that sort of they

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Speaker 3: lay out.

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Speaker 2: The train a room in your house that's sort of

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Speaker 2: like I'm imagining high school athletes trophies.

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Speaker 3: So so you know, I have we moved there in

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Speaker 3: Covid in twenty twenty and we bought a house and

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Speaker 3: I have like a real library. And then that library

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Speaker 3: are two things from investment banking that I have. I

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Speaker 3: have bank books from deals we used to we used

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Speaker 3: to go to a printer and we used to draft.

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Speaker 3: Oh like the pitch that well, it's like a it's

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Speaker 3: like an actual it's a glossy picture book of of

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Speaker 3: the deal. The transaction goes through transaction over youw, it

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Speaker 3: goes through company, it goes through business, and that was

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Speaker 3: what folks used to actually underwrite deals back in early

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Speaker 3: two thousands. Yeah, and then I have loose sites, so

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Speaker 3: I have a lot of loose sights.

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Speaker 1: So the unit that you're leading at oak Tree that

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Speaker 1: was created I think relatively recently, it was like twenty

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Speaker 1: What was the thinking behind that?

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Speaker 3: So the market private credit in origination and financing of

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Speaker 3: deals has evolved quite a bit. If you just go

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Speaker 3: back to kind of pre Dot Frank, most private equity

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Speaker 3: firms didn't have what we call capital markets professionals, and

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Speaker 3: post Dot Frank and the migration and creation of a

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Speaker 3: robust private credit mark. Most of the private equity firms

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Speaker 3: have capital markets professionals who really spend time drafting, creating,

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Speaker 3: structuring financings for the private equity buyouts. And what we

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Speaker 3: figured out oak Tree we were founded in nineteen ninety five,

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Speaker 3: we managed a couple hundred billion dollars. What we were

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Speaker 3: figuring out when I first started in twenty thirteen. Every

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Speaker 3: strategy within oak Tree kind of did its own thing.

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Speaker 3: So if a deal came into one strategy and it

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Speaker 3: didn't work, it just kind of died in that strategy.

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Speaker 3: So what we decided as the market evolved and moved

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Speaker 3: towards capital solution provider versus this fund does this and

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Speaker 3: this fund does that. We created my group with the

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Speaker 3: real purpose of a couple of things. Number one is

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Speaker 3: making sure we were focused on providing capital solutions versus

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Speaker 3: trying to figure out what fit a particular strategy. Yeah,

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Speaker 3: and then the second reason we really did it is that,

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Speaker 3: you know, capital is the commodity in our business. Everyone

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Speaker 3: has a lot of money, but how do you get

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Speaker 3: the first call in the last call? And that's the relationship.

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Speaker 3: So my team is meant to really spend time and

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Speaker 3: develop relationships with the counting parties because look, the reality

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Speaker 3: of it is, we shouldn't. We're not agreeing on We

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Speaker 3: have different investors, So a private equity firm has a

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Speaker 3: different investor base than we have. The goal in my

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Speaker 3: group is to one make sure the entire firm sees

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Speaker 3: a transaction, and two we're involved in the art of

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Speaker 3: the deal, right, And so the goal is no one

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Speaker 3: really should win. Both parties should be just mildly annoyed.

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Speaker 3: And how do you do that? How do you do that?

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Speaker 3: In a way you do it the relationship.

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Speaker 1: That's funny because we say that in journalism sometimes, like

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Speaker 1: the goal is for everyone to be like slightly dissatisfied

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Speaker 1: in the story, because if everyone's happy, then you basically

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Speaker 1: put out a press.

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Speaker 3: Release somebody's wrong. If one side is really happy, the

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Speaker 3: other side is probably wrong.

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Speaker 2: I know Tracy already more or less ask this question,

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Speaker 2: but I'll just put it in a different way. What

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Speaker 2: do you just give us a sort of brief overview.

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Speaker 2: If someone says, what do you do and how'd you

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Speaker 2: get here? What did you do and how you get here?

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Speaker 3: Yeah, so you don't want you don't want my full

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Speaker 3: full background.

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Speaker 1: Oh, I actually do, because you've been in the market

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Speaker 1: for a really.

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Speaker 4: Long time.

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Speaker 2: Childhood.

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Speaker 3: But okay, okay, I'll start from what I'll start from.

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Speaker 3: So so look, my my dad was in public accounting,

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Speaker 3: and originally so I got a fool. I could a

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Speaker 3: scholarship to Rutgers to go to law school. I sat

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Speaker 3: in political science and I would fall asleep and wake

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Speaker 3: up and they were talking about the same thing. So

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Speaker 3: I said, I don't think I can do four years

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Speaker 3: of political science. So I switched to accounting. Because my generation,

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Speaker 3: you did what the adult said to do. And so

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Speaker 3: I switched to public into accounting, and my dad said,

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Speaker 3: don't do public accounting, do banking. So I started out

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Speaker 3: at a firm called Nation's Bank, which is now is

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Speaker 3: a predecessor to Bank of America. And the most interesting

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Speaker 3: job I had at Nations Banking, I was a controller

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Speaker 3: for leverage finance. I was de controlling, the youngest controller

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Speaker 3: in the firm, and I said, I want to be

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Speaker 3: a leverage finance banker, you know. And the reason why

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Speaker 3: it sounds silly when you're at my age, but they

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Speaker 3: wore a nice time, They were nice shoes, They were

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Speaker 3: in big in finance, and at that time Nation's Bank

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Speaker 3: was a pretty big terminobe lender, and so the head

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Speaker 3: of the group basically said, look, right now, you're just

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Speaker 3: an accountant. He said, go get a sales job and

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Speaker 3: then go to the school. So again I went to

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Speaker 3: g Capitol and I financed commercial equipment, so rolling stock assets, cars, trucks, forklifts.

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Speaker 3: Did that for one year to today, and then went

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Speaker 3: to Columbia Business School. I summered at first Boston and

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Speaker 3: I summered in asset backs and leverage finance, and then

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Speaker 3: doing deoutsche Bank in two thousand full time. And during

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Speaker 3: that time period I structured a lot of lbo's sun Guard, Nema,

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Speaker 3: Marcus Us foods.

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Speaker 1: Irridium, first Demon, Marcus being the first ever pick Togles. Yes,

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Speaker 1: and so you had that deal toy.

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Speaker 3: I have it, you know, I'll be honest with you.

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Speaker 3: I think I gave it to someone more senior. Oh.

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Speaker 1: Oh, should have given it to me.

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Speaker 3: I know somebody who has one. And then in two

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Speaker 3: thousand and seven I left Deutsche Bank. And really you

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Speaker 3: sort of say, why would you leave Deutsche Bank? And

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Speaker 3: if you go back to two thousand and seven, the

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Speaker 3: market was very concentrated so versus today. There were eight

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Speaker 3: underwriters who owned all the leverage finance, right, so you

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Speaker 3: could see the market. You know, when I got a

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Speaker 3: call to say, hey, what leverage would you provide on

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Speaker 3: a deal? I'd ask the private equity firm, well, what

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Speaker 3: do you think the business work, and they'd say, well,

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Speaker 3: it's based on you know, leverage, and so you could

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Speaker 3: see that coming to a head. So in two thousand

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Speaker 3: and seven I went to Goldman Sachs. I did LBOs

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Speaker 3: at Goldman Sachs and also did high you sales and

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Speaker 3: joined oak Tree in twenty thirteen.

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Speaker 2: It's always interesting to hear someone's background, but I like

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Speaker 2: how there's dovetails with the actual development of the industry

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Speaker 2: itself and this idea that at one point there were

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Speaker 2: just a handful of very small or a handful of

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Speaker 2: banks that ran leverage finance, and then of course we

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Speaker 2: know about the proliferation of all that. So it's pretty useful.

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Speaker 1: Yeah, with that background, well, why don't we dive into

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Speaker 1: that a little bit more so, talk to us about

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Speaker 1: how the credit market, the capital market has evolved over

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Speaker 1: the course of your career.

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Speaker 3: Yeah, so, look, when I first started, covenants were pretty

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Speaker 3: standard amendments to deals were actually fairly standard, and as

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Speaker 3: you moved forward, by two thousand and seven, the majority

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Speaker 3: market was cove light. The one interesting thing about pre

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Speaker 3: Dodd Frank was in the credit agreement, which is a

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Speaker 3: document that sort of governs the loan if you will,

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Speaker 3: you had to hedge fifty percent of your floating rate risk.

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Speaker 3: And so going into the cycle, two things that made

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Speaker 3: since then is one folks were hedged fifty percent, and

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Speaker 3: then the other thing is lightboar if you remember back

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Speaker 3: in two thousand and seven was at five percent, so

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Speaker 3: the spread to deals was two hundred and fifty to

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Speaker 3: get to that seven and a half percent average LBO. Well,

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Speaker 3: what happened at when Dodd Frank, when the markets cried

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Speaker 3: the world the global financial crisis, rates went to zero, right,

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Speaker 3: So companies actually generated cash flow in that cycle. The

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Speaker 3: challenge or difference we have today is we've been in

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Speaker 3: no rate environment, so no one really hedged one and

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Speaker 3: then two there because there was zero percent base rates,

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Speaker 3: the spread on deals was much higher. Instead of two

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Speaker 3: or fifty, you had for fifty five hundred, six hundred.

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Speaker 3: So when twenty two when rates started to move up,

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Speaker 3: you actually had a situation where a lot of companies

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Speaker 3: couldn't support the cash flows because no one predicted that

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Speaker 3: race will movement, and most folks were not hedged like

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Speaker 3: they were in two thousand and seven.

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Speaker 2: Can you talk a little bit, you know, it's a

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Speaker 2: theme that obviously comes up with every private credit but

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Speaker 2: also other episodes as well. Talk to us a little

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Speaker 2: bit more about like the post the immediate the passage

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Speaker 2: of Dodd Frank and how it's set into people's brands,

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Speaker 2: that this is going to restructure the financial industry, that

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Speaker 2: there are to be various activities, whether we're talking about trading,

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Speaker 2: whether we're talking about lending, et cetera. Right, these are

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Speaker 2: not to be part of the banks anymore. Right, talk

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Speaker 2: to us a little bit about those sort of early

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Speaker 2: posting you know, and they were talking to two thousand

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Speaker 2: and nine, twenty ten, those initial conversations that people were

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Speaker 2: having about something new, New opportunities are going to emerge

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Speaker 2: from them.

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Speaker 3: Right. Well, well, if you go back to two thousand

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Speaker 3: and seven, when a portfolio manager and a public side

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Speaker 3: was selling risk in the market, the banks were the

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Speaker 3: shock absorber to that risk. Yeah, right, So you know

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Speaker 3: when I was sitting at Goldman Sachs, it wasn't unusual

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Speaker 3: for us to buy two hundred million dollars of an

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Speaker 3: issue and it would be on your balanchie and it'd

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Speaker 3: be on our balance sheet. Right post what Dodd Frank

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Speaker 3: did effectively has said, okay, if you go back to

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Speaker 3: the leverage. And I hope I'm not being too technical, but.

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Speaker 2: No, there's great.

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Speaker 3: Banks were levered roughly thirty times pre global financial crisis.

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Speaker 3: Post they're fifteen times levered. Right, So once you shrunk

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Speaker 3: that liquidity or capital out of the banks, they can

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Speaker 3: no longer absorb the deals. And so what happens is

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Speaker 3: and this is why liquidity is really an important phenomenon.

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Speaker 3: So when a PM calls the desk and says, hey,

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Speaker 3: I have to move five, ten, fifteen million, you're not

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Speaker 3: really sure what their real size is because they know

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Speaker 3: the market's not liquid. When I was in sales and trading,

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Speaker 3: Pimco or somebody would call and say, hey, I've got

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Speaker 3: several million to move, and I'd say, well, this is

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Speaker 3: your first call or a last call, and they laugh

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Speaker 3: and they say why, I said, because I give you

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Speaker 3: two different prices. And so what happens in a market

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Speaker 3: that's less liquid is as they're trying to sell, they

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Speaker 3: call relative different banks, and every time they make a call,

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Speaker 3: a bank then assumes that there's more behind that to go,

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Speaker 3: and so they rerack the pricing. And so in a

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Speaker 3: public security, which is different than private, a public security

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Speaker 3: can actually move pricing wise without anything really trading, but

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Speaker 3: on the anticipation that there's their supply out there, and

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Speaker 3: so that created you know, and if you go back

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Speaker 3: to two thousand and nine, private credit market was like

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Speaker 3: three hundred billion dollars, right, most of that was more

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Speaker 3: mes or off the run, not what we call our

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Speaker 3: regular way direct lending private credit, which we were active in,

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Speaker 3: but we're doing it more on the distress or opportunistic

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Speaker 3: credit side, and over time, because of the liquidity and

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Speaker 3: capital requirements of banks, more of that has just migrated

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Speaker 3: to the private credit market, supplemented by the fact that

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Speaker 3: there are these private equity professionals who are very efficient

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Speaker 3: at looking at both markets and figuring out where they

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Speaker 3: should play or where they should place their credit or

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Speaker 3: their deals.

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Speaker 1: I'm getting a lot of flashbacks to writing about corporate

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Speaker 1: bond inventories that the dealers like around twenty twelve, so

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Speaker 1: just on this note, is the pitch from private credit?

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Speaker 1: Is it basically execution? Like you don't need to worry

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Speaker 1: about us actually being able to do or complete this deal.

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Speaker 1: Where is it a bank? You know they're taking into

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Speaker 1: into account leverage considerations, regulatory requirements and all that, right.

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Speaker 3: Right, So what a proper deal should be? Right? If

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Speaker 3: you're sitting in private equity, your job is to find

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Speaker 3: the most efficient, best price capital for your deal. Right.

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Speaker 3: The public market, what they're very good at doing is saying,

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Speaker 3: here is the indicative rate for a deal. And let's

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Speaker 3: just say the indicative on a term loan is sofur

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Speaker 3: plus four hundred. Right, then the private equity firm comes

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Speaker 3: to us and says, where will you actually own that risk? Right?

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Speaker 3: So they get a level where we're owning, which won't

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Speaker 3: be the indicative because remember the banks are marketing, Hey,

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Speaker 3: we can get you the best rate and best execution.

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Speaker 3: We're in the storage business. The banks are in the

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Speaker 3: moving business, so they're trying to move the risk, and

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Speaker 3: we own the risk, and so we price the risk

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Speaker 3: where we'll hold it. And if those two are not aligned,

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Speaker 3: what then? And then once you add to that four

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Speaker 3: hundred is you ad what we call flex. So if

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Speaker 3: you take the indicative plus flex, that gives you an

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Speaker 3: idea of what the banks are willing to say that

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Speaker 3: this debt will price. So let's say the flex is

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Speaker 3: one hundred and fifty basis points, so they know on

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Speaker 3: the private equity side, they know worst case the banks

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Speaker 3: will own it at SOFA five point fifty, which the

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Speaker 3: banks have gotten that sort of flex number based on

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Speaker 3: their discussions with us to know where we would actually

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Speaker 3: own that risk.

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Speaker 1: I see.

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Speaker 3: Yeah, So the process is how do you create an

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Speaker 3: efficient auction to have the debt in the right market

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Speaker 3: at the right pricing with the right structure.

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Speaker 1: Okay, so here's my other question. When you are about

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Speaker 1: to do a deal, or when you find a deal,

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Speaker 1: who are you actually talking to? Is it the banks

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Speaker 1: or is it like the companies that are borrowing in

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Speaker 1: the market.

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Speaker 3: So so generally in a.

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Speaker 2: Yeah, oh wow, so sorry answer questions, but I'm just

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Speaker 2: sort of like I'm talking question.

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Speaker 3: I'm talking to both, right, everyone was my friend. And

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Speaker 3: the goal is the more conversations I have, the more

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Speaker 3: informed I am of where the market is right. You know,

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Speaker 3: the interesting thing about public markets is that market reprices

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Speaker 3: risk faster than private credit because there's a secondary market.

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Speaker 3: Private credit doesn't really have a secondary market. So what

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Speaker 3: we're always trying to make sure we're understanding is relative

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Speaker 3: value between public and private. And so my conversation, let's

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Speaker 3: say XYZ sponsor wants to buy a business, right and

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Speaker 3: let's say it's a public company. The first call, I'll

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Speaker 3: get his front that sponsor and say, hey, Millwood, we

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Speaker 3: like you guys to look at a financing opportunity for

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Speaker 3: public company we're looking to buy. I'm like great, I say, look,

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Speaker 3: I'll put my compliance on the email and we'll do

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Speaker 3: a conflicts checks on that business because we don't know

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Speaker 3: if we own the stock or there's existing debt outstanding.

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Speaker 3: So it goes through a process where that company is

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Speaker 3: actually vetted from a conflicts perspective. Once it's vetted and

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Speaker 3: that clears the process, then we get initial information on it.

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Speaker 3: And that information could be a selling memoranda, it could

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Speaker 3: be an initial model, and so then we start the process.

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Speaker 3: And what the sponsor wants to be able to do

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Speaker 3: is from the preliminary information is get a sense for

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Speaker 3: do you want do you like the asset or not?

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Speaker 3: Do you want to finance it, where do you want

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Speaker 3: to finance it at, and what's your leverage and what

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Speaker 3: you're pricing. So there's some high level indication that they

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Speaker 3: get from us to determine if they if we should

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Speaker 3: move forward with a more robust diligence process. So that's

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Speaker 3: that's how it starts. And then at that point we

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Speaker 3: do a due diligence process on the asset. Right, so

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Speaker 3: we may have we may call third party consultants, we

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Speaker 3: may do some background on it. We have a call

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Speaker 3: with a sponsor, we understand their investment thesis, like why

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Speaker 3: are they making the investment, and then we talk internally

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Speaker 3: and we have an investment committee and we discuss it,

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Speaker 3: and then we'll iterate with the sponsor on diligence questions.

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Speaker 3: And then at that point it becomes are you in

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Speaker 3: a you out? And so then once the sponsor kind

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Speaker 3: of has a sense for who's in and who's out,

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Speaker 3: now their goal is to get the right terms, and

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Speaker 3: so there's a process around sending us their thoughts on

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Speaker 3: the terms right and our job is to figure out

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Speaker 3: which of those we want to negotiate and which are

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Speaker 3: we fine with.

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Speaker 2: First of all, this fantastic stuff. I want to talk

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Speaker 2: more about, you know what, or get to what it takes,

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Speaker 2: what it takes to be the first call, because you

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Speaker 2: said that's that's important, and I'm like curious, Like, you know,

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Speaker 2: Tracy and I are competitors, how does one of us

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Speaker 2: get the first call out? But but even before we get

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Speaker 2: into that question, and it occurs to me that you know,

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Speaker 2: because you work for oak Tree and there are multiple

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Speaker 2: strategies within it, and you work ass with like different

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Speaker 2: people on different committees and different funds, et cetera, is

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Speaker 2: there ever tension that arises between your recognition of the

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Speaker 2: need to make the get that first call versus what

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Speaker 2: people on investment committees see as the fair price right.

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Speaker 2: Because if the investor is always trying to get every

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Speaker 2: penny fun right, then at some point I'm going to

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Speaker 2: stop calling talk to us about reconciling that. And I

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Speaker 2: also have to imagine, just to sort of add on

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Speaker 2: a part read to this question. You know, it would

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Speaker 2: be one thing if like it was a small shop

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Speaker 2: and one strategy, but you're looking at this holistically correct,

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Speaker 2: Where's the investor who's running a specific line there, cares

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Speaker 2: about their returns and doesn't care so much about the

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Speaker 2: returns of the other fund or just the general So

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Speaker 2: talk to us about reconciling some of these tensions.

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Speaker 3: Right. So the biggest tension is, like I said earlier,

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Speaker 3: we don't necessarily agree on price, structure, leverage. Right. But

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Speaker 3: what we're doing is I'm talking to that sponsor or

401
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Speaker 3: that client or that company all the time. Hey, how's

402
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Speaker 3: your family? I know where they get is go to school.

403
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Speaker 3: I may do zooms with their kids.

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Speaker 2: Hey, Milwolle really is a part of my big.

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Speaker 3: He say, no, I want to I want to go

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Speaker 3: to Ocean Prime. I know you know the manager. I'm

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Speaker 3: bringing a family. So yeah, so we are full service here.

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Speaker 3: And again, like I said, the relationship is getting the

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Speaker 3: first call and the last call. And by the way,

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Speaker 3: out of twenty deals, I only care about the last two.

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Speaker 3: So how do I pass eighteen times so I can

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Speaker 3: see the last two? So it really is a form

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Speaker 3: of art, if you will. And what we're trying to

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Speaker 3: do is demystify the negotiation and we're institutionalizing relationships. So

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Speaker 3: if XYZ sponsors in LA, they'll call me and say, hey, mil,

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Speaker 3: what who should I talk to the Okay, let me

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Speaker 3: give you a list of folks. Because the more that

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Speaker 3: that private equity firm or that sponsor or whatever client

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Speaker 3: is feels like they understand our firm, the better the relationship.

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Speaker 3: So we spend time making sure that they know who

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Speaker 3: our CEO Army is or Bob o'lary, that they know

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Speaker 3: the pms at the different strategies, so it's not a

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Speaker 3: scary monster. You know, when I when I joined in

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Speaker 3: originally oak Tree, remember we were more opportunistic and as

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Speaker 3: the market has evolved, and as we have evolved as

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Speaker 3: a firm, we're sort of private credit and opportunists. And

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Speaker 3: by the way, the client will say, no, I don't

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Speaker 3: really care about one side of the house versus the other.

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Speaker 3: Your oak Tree, right, So we have to sort of

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Speaker 3: in your oak Tree. I'm oak Tree, right, And so

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Speaker 3: I have to go to the market as one as

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Speaker 3: one firm.

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Speaker 1: Wait, talk to us a little bit more about what

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Speaker 1: negotiations are actually like, because I will say, we just

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Speaker 1: had Suji endap On wrote a great book about the

436
00:22:34,920 --> 00:22:41,439
Speaker 1: Caesar's Palace LBO. Yeah, you're in that, not you specifically,

437
00:22:41,440 --> 00:22:44,399
Speaker 1: but oak Tree certainly is. And there's certainly like there

438
00:22:44,400 --> 00:22:47,280
Speaker 1: are some very dramatic negotiations that take place in sure.

439
00:22:47,320 --> 00:22:49,840
Speaker 3: Oh yeah, I mean look, sometimes you just you get up,

440
00:22:49,920 --> 00:22:51,320
Speaker 3: you throw your pencil in air, and you walk out

441
00:22:51,320 --> 00:22:53,600
Speaker 3: of room. And sometimes you know, so you know, at

442
00:22:53,640 --> 00:22:56,359
Speaker 3: the art of negotiation is what I say to what

443
00:22:56,440 --> 00:22:59,960
Speaker 3: I say to my team is it's not the negotiating

444
00:23:00,040 --> 00:23:03,520
Speaker 3: point you're discussing at the moment, it's the points that

445
00:23:03,560 --> 00:23:07,440
Speaker 3: are coming two points later. Right, You're always thinking ahead

446
00:23:07,960 --> 00:23:11,280
Speaker 3: on the negotiation. You know, we did a deal for

447
00:23:11,400 --> 00:23:15,119
Speaker 3: a business that wasn't really loved in the leverage finance market.

448
00:23:15,800 --> 00:23:18,000
Speaker 3: And I knew that the type of business because I

449
00:23:18,000 --> 00:23:21,359
Speaker 3: had done an LBO and the market really didn't understand it.

450
00:23:21,359 --> 00:23:24,480
Speaker 3: But it was a great management team. Sometimes sometimes deals

451
00:23:24,520 --> 00:23:26,359
Speaker 3: do well because the management team is very good and

452
00:23:26,440 --> 00:23:29,040
Speaker 3: very articulate. And I knew this deal would struggle at

453
00:23:29,040 --> 00:23:32,439
Speaker 3: a bank, and so when it was hung, which means

454
00:23:32,480 --> 00:23:33,919
Speaker 3: the bank had the funded.

455
00:23:33,680 --> 00:23:34,520
Speaker 1: They got stuck with it.

456
00:23:34,560 --> 00:23:38,440
Speaker 3: They got stuck with it. I called in and I said, hey, sorry,

457
00:23:39,680 --> 00:23:43,520
Speaker 3: but I'll buy fifty million at ninety okay, right, Oh gosh,

458
00:23:43,720 --> 00:23:46,159
Speaker 3: what ninety Wow, that's that's a deep discount. Da da

459
00:23:46,200 --> 00:23:48,560
Speaker 3: da da dah. I said, well, you know, I think

460
00:23:48,560 --> 00:23:51,280
Speaker 3: as you now realize that business is not it's a

461
00:23:51,359 --> 00:23:54,000
Speaker 3: little tricky business. And it was a public tool private.

462
00:23:54,359 --> 00:23:56,920
Speaker 3: So a private equity firm was taking a public company

463
00:23:57,520 --> 00:23:59,840
Speaker 3: and making it private. And even though it was a

464
00:24:00,160 --> 00:24:03,400
Speaker 3: climing margin business, there was a view that the public

465
00:24:03,440 --> 00:24:08,040
Speaker 3: company expenses were high. So you could sort of map

466
00:24:08,480 --> 00:24:11,320
Speaker 3: you can map a scenario where over twelve months they

467
00:24:11,320 --> 00:24:13,679
Speaker 3: were going to cut some of the public company calls

468
00:24:13,720 --> 00:24:18,000
Speaker 3: and create a more efficient which would create more ebadah yep. Right,

469
00:24:18,480 --> 00:24:20,800
Speaker 3: So they sold it to us. So now I'm a

470
00:24:20,840 --> 00:24:23,919
Speaker 3: top five lender right with the right responsor. You had

471
00:24:23,960 --> 00:24:28,040
Speaker 3: the right relationship right, well, sponsor, which you know they're

472
00:24:28,080 --> 00:24:32,160
Speaker 3: they're meant to be opportunistic too. Cap structure ibadadh gru

473
00:24:32,440 --> 00:24:37,160
Speaker 3: cap structure looked good. So they wanted to do a dividend. Now, again,

474
00:24:37,280 --> 00:24:40,680
Speaker 3: in a negotiation, if you're doing a dividend, that means

475
00:24:40,680 --> 00:24:42,400
Speaker 3: you're putting more debt on my capital structure.

476
00:24:42,680 --> 00:24:44,080
Speaker 2: Right, that's money that could go to you.

477
00:24:44,119 --> 00:24:46,240
Speaker 3: That's money that could go to anybody with them, right.

478
00:24:46,520 --> 00:24:49,400
Speaker 3: And so you know the job of a sponsor at

479
00:24:49,400 --> 00:24:52,600
Speaker 3: that moment is to call the top five lenders and say, hey,

480
00:24:52,640 --> 00:24:54,360
Speaker 3: I'm doing a dividend deal, and they take me from

481
00:24:54,440 --> 00:24:58,760
Speaker 3: violently upset to miley annoyed. That's the job. So this

482
00:24:58,840 --> 00:25:02,520
Speaker 3: sponsor did not call it on that dividend deal, and

483
00:25:02,600 --> 00:25:05,000
Speaker 3: so now I have a I'm in a unique situation.

484
00:25:05,560 --> 00:25:08,040
Speaker 3: They went to other lenders and got the fifty one

485
00:25:08,119 --> 00:25:10,520
Speaker 3: percent to do the deal, and I felt some kind

486
00:25:10,520 --> 00:25:14,720
Speaker 3: of way about that, some kind of way, and so

487
00:25:15,040 --> 00:25:18,320
Speaker 3: I proceeded to try to figure out why folks would

488
00:25:18,320 --> 00:25:20,800
Speaker 3: agree to this dividend deal. And so I called the

489
00:25:20,840 --> 00:25:25,080
Speaker 3: market and a sponsor sort of said, you know, he

490
00:25:25,160 --> 00:25:27,680
Speaker 3: calls me and he says, no, what I hear? You're

491
00:25:27,680 --> 00:25:30,240
Speaker 3: working against me on my dividend deal. I said, well,

492
00:25:30,680 --> 00:25:32,800
Speaker 3: that's not actually true, because you didn't call me when

493
00:25:32,800 --> 00:25:34,920
Speaker 3: you launched it. So he said, but I thought we

494
00:25:34,960 --> 00:25:36,800
Speaker 3: had a good relationship. I said, we do. I thought

495
00:25:36,840 --> 00:25:39,840
Speaker 3: so too, but you didn't call me, all right, And so,

496
00:25:40,240 --> 00:25:44,679
Speaker 3: long story short, the dividend didn't go through, right, and

497
00:25:44,760 --> 00:25:47,439
Speaker 3: so then we changed the structure of the dividend to

498
00:25:47,560 --> 00:25:49,879
Speaker 3: allow we shrunk the size of the dividend, We changed

499
00:25:49,880 --> 00:25:54,560
Speaker 3: the original issue discount, and I told the sponsor, I said, look, unfortunately,

500
00:25:54,600 --> 00:25:58,159
Speaker 3: I'm going to sell the position when this closes. And

501
00:25:58,600 --> 00:26:02,160
Speaker 3: the point of that story is sometimes it's life's too

502
00:26:02,200 --> 00:26:05,439
Speaker 3: short and not all, not all relationships are meant to

503
00:26:05,480 --> 00:26:09,480
Speaker 3: go on forever. We still talk, I'm still a good friend,

504
00:26:09,520 --> 00:26:11,639
Speaker 3: he's still a good friend, but we haven't done a

505
00:26:11,640 --> 00:26:15,480
Speaker 3: lot together since then, because sometimes you know, in our

506
00:26:15,520 --> 00:26:18,280
Speaker 3: in our in a negotiation, if you don't see IDI

507
00:26:19,200 --> 00:26:21,399
Speaker 3: and that deal worked out, what happens if it doesn't

508
00:26:21,440 --> 00:26:25,959
Speaker 3: work out? Yeah, right, So sometimes sometimes you're managing relationships

509
00:26:26,320 --> 00:26:29,959
Speaker 3: to keep, and sometimes you're managing relationships to not do

510
00:26:30,080 --> 00:26:32,040
Speaker 3: on a business side, but you always want to be

511
00:26:32,119 --> 00:26:34,920
Speaker 3: friendly in this market because you're usually one person away

512
00:26:34,920 --> 00:26:37,040
Speaker 3: from somebody that matters in business.

513
00:26:37,640 --> 00:26:40,120
Speaker 2: Actually, since we're on this point, that strikes me as

514
00:26:40,200 --> 00:26:43,480
Speaker 2: very savvy and very wise and like probably a lesson

515
00:26:43,520 --> 00:26:46,720
Speaker 2: many of us should learn in many realms that sometimes

516
00:26:46,720 --> 00:26:49,560
Speaker 2: it's okay to uh take the l or let a

517
00:26:49,920 --> 00:26:53,240
Speaker 2: proposal fall apart because life is long and other things

518
00:26:53,240 --> 00:26:56,960
Speaker 2: happen at some point. We have listeners who are in

519
00:26:57,040 --> 00:27:00,360
Speaker 2: college or young and they think about, you know, career trajectories,

520
00:27:00,400 --> 00:27:03,919
Speaker 2: et cetera. I'm curious, just from your perspective, this is

521
00:27:03,960 --> 00:27:06,280
Speaker 2: probably a sort of attitude that you would hope the

522
00:27:06,320 --> 00:27:10,200
Speaker 2: people who work for you cultivate, internalize, so to speak.

523
00:27:10,320 --> 00:27:13,440
Speaker 2: How do you recognize who has that? And like, when

524
00:27:13,440 --> 00:27:16,800
Speaker 2: you think about like people that you want on your team,

525
00:27:17,160 --> 00:27:20,280
Speaker 2: are you able to sort of like build intuitions about Yeah,

526
00:27:20,359 --> 00:27:22,760
Speaker 2: the people who can think that way.

527
00:27:23,080 --> 00:27:26,640
Speaker 3: Yeah, So good, good question. So I would say, on

528
00:27:26,680 --> 00:27:30,920
Speaker 3: my team, everyone is uniquely different, and everyone's exceptional at

529
00:27:30,960 --> 00:27:33,680
Speaker 3: something and very good at everything else. And I think

530
00:27:33,720 --> 00:27:36,280
Speaker 3: where you make a mistake in building teams, especially in

531
00:27:36,560 --> 00:27:38,880
Speaker 3: our business, is you try to find someone who can

532
00:27:38,880 --> 00:27:41,200
Speaker 3: be exceptional at more than one thing. So I'll tell

533
00:27:41,200 --> 00:27:44,040
Speaker 3: you a good story. So when I was first starting out,

534
00:27:44,160 --> 00:27:46,840
Speaker 3: I would fly to Dallas, Texas, and I would meet

535
00:27:46,880 --> 00:27:49,439
Speaker 3: with folks in Texas, and I thought I was a

536
00:27:49,480 --> 00:27:53,600
Speaker 3: pretty charming, knowledgeable person on the markets, and everyone in

537
00:27:53,600 --> 00:27:57,280
Speaker 3: Texas was friendly. But what I figured out was by

538
00:27:57,320 --> 00:27:59,240
Speaker 3: the time the deals made it to me in New York,

539
00:28:00,040 --> 00:28:03,120
Speaker 3: in Texas, that already passed. So it's almost like wrong

540
00:28:03,160 --> 00:28:10,680
Speaker 3: way risk and so well, because you're in Texas, right,

541
00:28:10,680 --> 00:28:14,359
Speaker 3: it's a different culture, different in New York and and

542
00:28:14,359 --> 00:28:17,080
Speaker 3: and in some markets folks want to do business with

543
00:28:17,400 --> 00:28:19,520
Speaker 3: folks they may see on the weekend or see in

544
00:28:19,520 --> 00:28:22,560
Speaker 3: the gym or you know, and so it's it's more

545
00:28:22,600 --> 00:28:25,320
Speaker 3: of a that person sits in New York. They don't

546
00:28:25,359 --> 00:28:29,439
Speaker 3: really know me, right ye. So but if people in

547
00:28:29,480 --> 00:28:33,080
Speaker 3: Texas didn't really like the deal, then you call the

548
00:28:33,160 --> 00:28:37,720
Speaker 3: people in New York. So so I decided that I

549
00:28:37,760 --> 00:28:40,200
Speaker 3: needed to put someone in Texas. So how do you

550
00:28:40,280 --> 00:28:43,120
Speaker 3: hire people? Right? So this is for the year young audience.

551
00:28:43,400 --> 00:28:45,080
Speaker 3: So I went to a conference and he was kind

552
00:28:45,120 --> 00:28:47,239
Speaker 3: of managing a room really nicely. So I gave him

553
00:28:47,240 --> 00:28:48,760
Speaker 3: my business card. I said, hey, we'd love to spend

554
00:28:48,760 --> 00:28:51,760
Speaker 3: some time with you. So I called him and we

555
00:28:51,840 --> 00:28:54,760
Speaker 3: set up two days and meetings. Well, he didn't realize

556
00:28:54,800 --> 00:28:57,520
Speaker 3: I was actually interviewing him for two days. Because everyone

557
00:28:57,560 --> 00:29:00,880
Speaker 3: says they have great relationships, right, says, oh, yeah, I've

558
00:29:00,880 --> 00:29:03,240
Speaker 3: got the best relationship, Da da da da, But how

559
00:29:03,240 --> 00:29:05,760
Speaker 3: do you actually test that? So I spent two days

560
00:29:05,760 --> 00:29:08,760
Speaker 3: with this person, and look, you know, high school football

561
00:29:08,760 --> 00:29:11,040
Speaker 3: matters in Texas. I didn't play high school for I

562
00:29:11,080 --> 00:29:13,960
Speaker 3: played high school baseball. This person plays high school football.

563
00:29:14,320 --> 00:29:18,160
Speaker 3: And so you put someone in that territory that understands

564
00:29:18,200 --> 00:29:20,760
Speaker 3: the local culture. And what we're trying to do is

565
00:29:20,880 --> 00:29:24,360
Speaker 3: have a hub and spoke origination model where we where

566
00:29:24,360 --> 00:29:28,240
Speaker 3: we where. We have a global firm, but we try

567
00:29:28,280 --> 00:29:31,800
Speaker 3: to talk on a more regional, local level, and that's

568
00:29:31,800 --> 00:29:35,200
Speaker 3: what I think makes our sourcing origination a little bit different.

569
00:29:35,720 --> 00:29:39,560
Speaker 3: And again, people matter in this business, and again the

570
00:29:39,560 --> 00:29:41,200
Speaker 3: goal is to get the first call. On the last call,

571
00:29:41,560 --> 00:29:44,440
Speaker 3: that person may spend a lot of time, you know,

572
00:29:44,560 --> 00:29:49,520
Speaker 3: going to events, spending time with the families, and ultimately,

573
00:29:49,520 --> 00:29:51,920
Speaker 3: what you want folks to do is to show you

574
00:29:51,960 --> 00:29:52,720
Speaker 3: deals because they.

575
00:29:52,560 --> 00:30:07,360
Speaker 4: Trust you, and it's still a trust your business.

576
00:30:10,400 --> 00:30:12,600
Speaker 1: One thing I wanted to ask you, just going back

577
00:30:12,640 --> 00:30:15,360
Speaker 1: to something you said about the management of a particular

578
00:30:15,400 --> 00:30:19,920
Speaker 1: company being good in credit. We've spoken about this on

579
00:30:19,960 --> 00:30:22,160
Speaker 1: the podcast before, but we tend to think about it

580
00:30:22,240 --> 00:30:27,080
Speaker 1: as avoiding losers, right, whereas equities are more about finding

581
00:30:27,120 --> 00:30:32,000
Speaker 1: the winners. So I guess my question is, like, when

582
00:30:32,080 --> 00:30:34,960
Speaker 1: you're looking at a particular deal, do you feel that

583
00:30:34,960 --> 00:30:37,920
Speaker 1: you're making a bet on that business or is it

584
00:30:38,000 --> 00:30:40,640
Speaker 1: just about looking at the numbers and making sure that

585
00:30:40,720 --> 00:30:43,000
Speaker 1: you know you're not going to yes?

586
00:30:43,080 --> 00:30:47,280
Speaker 3: So so interesting enough, what we're trying to do in

587
00:30:47,320 --> 00:30:50,480
Speaker 3: a diligence process is figure out where there may be

588
00:30:50,560 --> 00:30:54,160
Speaker 3: holes in that investment. We did one deal with accounter

589
00:30:54,200 --> 00:30:58,600
Speaker 3: party that we required them to switch to CFO just

590
00:30:58,640 --> 00:31:01,680
Speaker 3: because the questions it took too long. The answer like

591
00:31:01,680 --> 00:31:03,840
Speaker 3: if I ask you how many days does it take

592
00:31:03,880 --> 00:31:06,200
Speaker 3: you to close your books? What percentage of that is

593
00:31:06,240 --> 00:31:09,480
Speaker 3: manual versus automated? What do your management letters say in

594
00:31:09,520 --> 00:31:12,560
Speaker 3: the auditor? You know, those types of questions if you

595
00:31:12,640 --> 00:31:14,720
Speaker 3: have to think about them, where you say, I'll come

596
00:31:14,760 --> 00:31:17,240
Speaker 3: back to you as a CFO, that would be concerning.

597
00:31:17,320 --> 00:31:20,560
Speaker 3: So you know, our job is to protect our investors. Yeah,

598
00:31:20,600 --> 00:31:24,120
Speaker 3: that's our job, and what we're trying to do is

599
00:31:24,280 --> 00:31:27,520
Speaker 3: make sure we understand the investment. And no one bats

600
00:31:27,520 --> 00:31:29,160
Speaker 3: a thousand, right. If you look at the top ten

601
00:31:29,200 --> 00:31:31,640
Speaker 3: hitters in Major League Baseball, they strike out as much

602
00:31:31,640 --> 00:31:34,440
Speaker 3: as they hit. So you know, our job is to

603
00:31:34,560 --> 00:31:37,760
Speaker 3: avoid losers, like you said, and we have to manage

604
00:31:37,800 --> 00:31:38,840
Speaker 3: that through a process.

605
00:31:39,600 --> 00:31:40,920
Speaker 2: Can you say actually a little more. I thought that

606
00:31:41,000 --> 00:31:43,400
Speaker 2: was really interesting about some of the questions that you

607
00:31:43,560 --> 00:31:46,120
Speaker 2: asked and the idea like why can't the CFO just

608
00:31:46,160 --> 00:31:47,720
Speaker 2: quickly answer how long it takes to you.

609
00:31:47,840 --> 00:31:49,680
Speaker 3: Would think that would be an easy Yeah.

610
00:31:49,480 --> 00:31:51,880
Speaker 2: I'm always surprised. Also, just generally there's a bit of

611
00:31:51,920 --> 00:31:54,080
Speaker 2: a tangent that even you know, in twenty twenty four

612
00:31:54,200 --> 00:31:57,640
Speaker 2: with like all the computer and accounting systems, that like

613
00:31:58,160 --> 00:32:00,360
Speaker 2: fraud still happens, that there are still way or you know,

614
00:32:00,400 --> 00:32:02,800
Speaker 2: companies like we have a material weakness and we're gonna

615
00:32:02,800 --> 00:32:06,280
Speaker 2: have to it. I'm always a little surprised that that curious,

616
00:32:06,400 --> 00:32:08,720
Speaker 2: like how you like this world of things just being

617
00:32:08,720 --> 00:32:11,160
Speaker 2: wrong or ambiguous at companies. And I'd love to hear

618
00:32:11,160 --> 00:32:12,160
Speaker 2: you talk more about that.

619
00:32:12,240 --> 00:32:15,320
Speaker 3: When you're when you buy a business as a platform

620
00:32:15,600 --> 00:32:19,440
Speaker 3: and then you then buy successive businesses, more than likely

621
00:32:19,520 --> 00:32:22,680
Speaker 3: they didn't have all the same financial stea and the

622
00:32:22,760 --> 00:32:25,640
Speaker 3: integration process depending on how quickly you want to grow,

623
00:32:25,680 --> 00:32:28,840
Speaker 3: it drives how long you actually integrate and so time

624
00:32:28,920 --> 00:32:31,840
Speaker 3: what time. What happens sometimes is you don't fully integrate

625
00:32:31,880 --> 00:32:35,880
Speaker 3: these businesses and systems. If you go back to failures

626
00:32:35,880 --> 00:32:40,000
Speaker 3: of businesses in our market SAP, integration is a big

627
00:32:40,160 --> 00:32:43,479
Speaker 3: sort of point of contention. And so businesses you focus

628
00:32:43,560 --> 00:32:47,040
Speaker 3: on risk that you see time and time. So fraud fraud,

629
00:32:47,120 --> 00:32:49,720
Speaker 3: you know, there was a water business that was you

630
00:32:49,760 --> 00:32:53,080
Speaker 3: know that was fraud fraudulent that you know, some banks

631
00:32:53,120 --> 00:32:54,960
Speaker 3: lost a lot of money. You know, if you go

632
00:32:55,040 --> 00:32:58,200
Speaker 3: back to like Collins and Aikman, which was an LBO

633
00:32:58,840 --> 00:33:01,600
Speaker 3: long time ago, there was some fraud and you could

634
00:33:01,640 --> 00:33:04,520
Speaker 3: see what you're doing in a diligence process. You are

635
00:33:04,560 --> 00:33:07,960
Speaker 3: looking for sort of what I call inherent weaknesses. And

636
00:33:08,000 --> 00:33:11,280
Speaker 3: the information you get back and management letters which the

637
00:33:11,320 --> 00:33:14,680
Speaker 3: auditors produced is a good document that sort of highlights

638
00:33:14,680 --> 00:33:18,960
Speaker 3: the risk of accounting systems, financial systems, and that's a

639
00:33:19,080 --> 00:33:22,240
Speaker 3: pretty systems tends to be a big driver of sort

640
00:33:22,280 --> 00:33:23,640
Speaker 3: of integration issues.

641
00:33:24,200 --> 00:33:27,640
Speaker 1: So this isn't necessarily fraud. But you just reminded me

642
00:33:27,960 --> 00:33:31,920
Speaker 1: of ad backs and deals and you know, adjusted earnings

643
00:33:31,960 --> 00:33:35,080
Speaker 1: and things that can be inflated to make a transaction

644
00:33:35,160 --> 00:33:38,200
Speaker 1: look a lot better than it actually is. The last

645
00:33:38,200 --> 00:33:41,160
Speaker 1: time I remember writing about this was I guess, gosh,

646
00:33:41,200 --> 00:33:44,160
Speaker 1: five or six years ago, and the feeling back then

647
00:33:44,360 --> 00:33:47,920
Speaker 1: was that there was more sketchy stuff happening on the

648
00:33:48,000 --> 00:33:51,720
Speaker 1: valuation side of credit deals. Is that still the case

649
00:33:51,840 --> 00:33:53,960
Speaker 1: or has that been your observation over the years.

650
00:33:54,240 --> 00:33:59,080
Speaker 3: Well, so, the ad backs, it's an assumption and it's

651
00:33:59,160 --> 00:34:01,400
Speaker 3: an ask to get credit for something that may happen

652
00:34:01,440 --> 00:34:05,720
Speaker 3: in the future, right, or it's saying something's happened previously

653
00:34:05,800 --> 00:34:09,279
Speaker 3: that hasn't fully been flown through the financial statements, and

654
00:34:09,320 --> 00:34:11,400
Speaker 3: we want to get credit or we don't want it

655
00:34:11,440 --> 00:34:15,279
Speaker 3: to affect our earnings. Every deal has adjustments, okay, so

656
00:34:15,840 --> 00:34:19,520
Speaker 3: just start with the premise that adjustedy badah will exist.

657
00:34:19,840 --> 00:34:22,120
Speaker 3: And part of our job is to trust our partners

658
00:34:22,120 --> 00:34:26,000
Speaker 3: that they're adjusting the right things. What happens is if

659
00:34:26,040 --> 00:34:30,000
Speaker 3: you watch the financial statements over time, sometimes the adjustments

660
00:34:30,000 --> 00:34:33,240
Speaker 3: never go away, right, and then you start to say, okay,

661
00:34:33,280 --> 00:34:36,239
Speaker 3: this is recurring, not RecA. Right. We did a deal

662
00:34:36,280 --> 00:34:39,000
Speaker 3: for a sponsor and we were and it was near

663
00:34:39,120 --> 00:34:43,160
Speaker 3: your end, and the sponsors going through each line item

664
00:34:43,280 --> 00:34:45,839
Speaker 3: of what they wanted to add back, and you know what,

665
00:34:45,960 --> 00:34:47,839
Speaker 3: I said, Wow, we could we could go through this

666
00:34:47,880 --> 00:34:50,279
Speaker 3: for three days, right, explaining one to add I say,

667
00:34:50,360 --> 00:34:53,319
Speaker 3: you know what, you can add back five million, call

668
00:34:53,320 --> 00:34:56,080
Speaker 3: it whatever you want. Right. So, at the end of

669
00:34:56,080 --> 00:35:00,200
Speaker 3: the day, what we're trying to do is understand the

670
00:35:00,320 --> 00:35:03,560
Speaker 3: rationale for the ad back in a market like today,

671
00:35:03,600 --> 00:35:07,680
Speaker 3: the problem is the rationale isn't fully explained all the time,

672
00:35:08,080 --> 00:35:09,520
Speaker 3: and the amount of time you want to add it

673
00:35:09,560 --> 00:35:13,960
Speaker 3: back it's kind of almost infinite. So you start to

674
00:35:13,960 --> 00:35:17,680
Speaker 3: say okay, and the sponsor's perspective would be I'm paying

675
00:35:17,760 --> 00:35:21,600
Speaker 3: for that right, because I'm paying off that Adjustinbadasa, you

676
00:35:21,640 --> 00:35:26,120
Speaker 3: should leverage against that. The counter would be I'm capped

677
00:35:26,160 --> 00:35:29,120
Speaker 3: upside right, I'm capped at par And if you go

678
00:35:29,200 --> 00:35:32,680
Speaker 3: back to seven, A lot of the ad backs in

679
00:35:32,680 --> 00:35:36,680
Speaker 3: some of the largelbos never truly came to fruition. So

680
00:35:37,000 --> 00:35:39,720
Speaker 3: if you take cap structures that will leverage seven times.

681
00:35:40,040 --> 00:35:42,840
Speaker 3: If you're adding back one hundred million a seven hundred

682
00:35:42,840 --> 00:35:45,520
Speaker 3: million more debt, that if one hundred million ever comes

683
00:35:45,520 --> 00:35:48,120
Speaker 3: through at some level, you could be over levered. So

684
00:35:48,160 --> 00:35:50,520
Speaker 3: that's why you have to look at ad backs. And

685
00:35:50,560 --> 00:35:55,640
Speaker 3: in the one notion, folks say documents are loose, well,

686
00:35:55,680 --> 00:35:59,920
Speaker 3: I would argue it's about asset selection, right. A document

687
00:36:00,440 --> 00:36:03,040
Speaker 3: is not going to help you if you just underwrote

688
00:36:03,040 --> 00:36:07,160
Speaker 3: the wrong asset. At the same time, a document, if

689
00:36:07,200 --> 00:36:10,319
Speaker 3: you're doing well and I'm not letting you lend more,

690
00:36:11,200 --> 00:36:12,319
Speaker 3: what do you think I'm going to do. If you're

691
00:36:12,320 --> 00:36:13,879
Speaker 3: doing well, I'm probably going to figure out a way

692
00:36:13,880 --> 00:36:15,680
Speaker 3: to fix the document to allow you to lend more.

693
00:36:15,760 --> 00:36:18,520
Speaker 3: So I think part of our you know, business, You're

694
00:36:18,560 --> 00:36:21,360
Speaker 3: right on app bats, but you know cove like the

695
00:36:21,400 --> 00:36:24,440
Speaker 3: market is mostly cove light. And even when you think

696
00:36:24,480 --> 00:36:27,680
Speaker 3: about structures with a covenant, a lot of times if

697
00:36:27,680 --> 00:36:30,560
Speaker 3: you actually hit that covenant, it's unclear that business right

698
00:36:31,400 --> 00:36:33,399
Speaker 3: is a is a going concern at that point.

699
00:36:33,400 --> 00:36:36,040
Speaker 2: If you need the document to save you, right, then

700
00:36:36,080 --> 00:36:38,000
Speaker 2: you've got a problem. You've already got a problem.

701
00:36:38,120 --> 00:36:39,680
Speaker 3: You're you're you're in.

702
00:36:39,680 --> 00:36:42,040
Speaker 2: Well, since we're actually talking about documents, and we have

703
00:36:42,160 --> 00:36:45,040
Speaker 2: done a recent episode about so called creditor on credit

704
00:36:45,120 --> 00:36:47,759
Speaker 2: or violence and how that works, et cetera. One thing

705
00:36:47,800 --> 00:36:50,560
Speaker 2: that came up with that, and I'm also curious about it.

706
00:36:50,560 --> 00:36:50,920
Speaker 3: It's like.

707
00:36:52,360 --> 00:36:55,680
Speaker 2: Legal expenses and you will detail, like you know, every

708
00:36:55,719 --> 00:36:59,400
Speaker 2: comma and all that stuff in these documents. I'm just curious, like,

709
00:36:59,480 --> 00:37:03,920
Speaker 2: over the course of your career, yes, how much have

710
00:37:04,040 --> 00:37:07,640
Speaker 2: you seen and to the perhaps to the point that

711
00:37:07,840 --> 00:37:14,240
Speaker 2: it extends exchanges, your expected return on investment, legal costs,

712
00:37:14,680 --> 00:37:17,239
Speaker 2: and the sort of rising lawyer fees, et cetera. To

713
00:37:17,320 --> 00:37:20,080
Speaker 2: check those documents regardless of how many covenants they have

714
00:37:20,360 --> 00:37:23,120
Speaker 2: in them, and if you've seen an evolution over time

715
00:37:23,239 --> 00:37:26,120
Speaker 2: since you've just been in the business of how much

716
00:37:26,160 --> 00:37:28,839
Speaker 2: of a deal resources end up going to the legal sete.

717
00:37:28,960 --> 00:37:31,200
Speaker 1: Yeah, how much do the lawyers bill you everywhere?

718
00:37:31,320 --> 00:37:31,919
Speaker 2: What have you seen?

719
00:37:32,080 --> 00:37:34,359
Speaker 3: So while I while I said I'm going to now

720
00:37:34,520 --> 00:37:37,879
Speaker 3: counter myself, okay, while I said the document won't save

721
00:37:37,960 --> 00:37:41,440
Speaker 3: you any deal, it's very important you have a document

722
00:37:41,840 --> 00:37:45,960
Speaker 3: that sort of expressly documents what what it is, the

723
00:37:46,000 --> 00:37:50,600
Speaker 3: intentions of the transaction. And it's very it's very good

724
00:37:50,600 --> 00:37:53,560
Speaker 3: to have governance in a document. Right. So if you

725
00:37:53,640 --> 00:37:56,720
Speaker 3: just think about public versus private markets, in a public

726
00:37:56,760 --> 00:38:00,200
Speaker 3: market situation, you're given two to three days to review

727
00:38:00,400 --> 00:38:02,839
Speaker 3: a three hundred pay lead to a document. Now, if

728
00:38:02,840 --> 00:38:06,359
Speaker 3: the deal is going very very well, arguably there isn't

729
00:38:06,360 --> 00:38:08,560
Speaker 3: a lot of opportunity for you to push back on

730
00:38:08,600 --> 00:38:11,480
Speaker 3: the document, right, so you kind of take the document

731
00:38:11,520 --> 00:38:13,799
Speaker 3: as is. In the public market and the issue with that,

732
00:38:13,880 --> 00:38:16,080
Speaker 3: there's a lot of and you said credit and current balance,

733
00:38:16,120 --> 00:38:18,719
Speaker 3: but there are a lot of opportunities for you to

734
00:38:18,800 --> 00:38:22,640
Speaker 3: take assets out of a restricted group, create new ass

735
00:38:22,680 --> 00:38:26,240
Speaker 3: new co and lending against that and take value away

736
00:38:26,280 --> 00:38:29,080
Speaker 3: from existing lenders. I think one thing that Private Credit

737
00:38:29,120 --> 00:38:31,799
Speaker 3: is very good at, and it's focused on that part

738
00:38:31,840 --> 00:38:35,400
Speaker 3: of the document. We've been very firm on making sure

739
00:38:35,880 --> 00:38:39,360
Speaker 3: that the ability to take assets out and create new

740
00:38:39,440 --> 00:38:42,120
Speaker 3: assets or new financing or new capital. We've limited that

741
00:38:42,200 --> 00:38:44,319
Speaker 3: quite a bit in private credit. But I will tell

742
00:38:44,360 --> 00:38:47,200
Speaker 3: you lawyers what argue inflation is real for them too

743
00:38:47,280 --> 00:38:51,000
Speaker 3: write so you know, and a lot of that deal

744
00:38:51,080 --> 00:38:53,840
Speaker 3: cost gets kind of you know, born at the beginning.

745
00:38:53,840 --> 00:38:56,959
Speaker 3: But yeah, lawyers. But you need lawyers, right, you need them.

746
00:38:57,280 --> 00:38:59,880
Speaker 3: You know, there's two reasons why deal usually gets hung up.

747
00:38:59,880 --> 00:39:02,759
Speaker 3: Is usually illegal or tax reason on the m and

748
00:39:02,800 --> 00:39:06,040
Speaker 3: a side on the financing side. And so lawyers are

749
00:39:06,080 --> 00:39:10,040
Speaker 3: an important part of our process, and we spend a

750
00:39:10,040 --> 00:39:12,480
Speaker 3: lot of time making sure we have the right cancel

751
00:39:12,640 --> 00:39:16,239
Speaker 3: who can understand and be able to move with us

752
00:39:16,320 --> 00:39:18,680
Speaker 3: if this goes sideways. We want to make sure your

753
00:39:18,920 --> 00:39:22,440
Speaker 3: bankruptcy and attorneys are really good. We want to make

754
00:39:22,480 --> 00:39:24,560
Speaker 3: sure that you are put You know, if you're thinking

755
00:39:24,600 --> 00:39:27,520
Speaker 3: about biotech or something where IP is important, how do

756
00:39:27,560 --> 00:39:30,640
Speaker 3: we make sure that IP you can't overlicense it. There's

757
00:39:30,680 --> 00:39:33,960
Speaker 3: a lot of nuances in the document that we find.

758
00:39:34,040 --> 00:39:35,920
Speaker 3: Lawyers are very valuable in our process.

759
00:39:36,080 --> 00:39:38,840
Speaker 1: So I just have one more question. But you know,

760
00:39:38,880 --> 00:39:41,040
Speaker 1: you've had such a long history in this market and

761
00:39:41,080 --> 00:39:44,480
Speaker 1: you've worked on so many interesting transactions. What deal are

762
00:39:44,480 --> 00:39:45,160
Speaker 1: you most proud of?

763
00:39:47,040 --> 00:39:50,759
Speaker 3: So when I was doing LBOs, it's almost like you're

764
00:39:50,800 --> 00:39:55,000
Speaker 3: watching the company and the sponsor get married and you

765
00:39:55,040 --> 00:39:57,839
Speaker 3: sit in the middle of that marriage and you're kind

766
00:39:57,880 --> 00:40:02,080
Speaker 3: of playing consultant. And all of my deals. I still

767
00:40:02,120 --> 00:40:06,040
Speaker 3: talk to the CEOs of those deals because you get

768
00:40:06,040 --> 00:40:08,439
Speaker 3: to know these people, your own planes with them for

769
00:40:08,560 --> 00:40:11,200
Speaker 3: ten days, you know, I know some of the quirks

770
00:40:11,280 --> 00:40:13,600
Speaker 3: or some CEOs. You know, you just get to know people.

771
00:40:13,719 --> 00:40:16,240
Speaker 3: You know, when I was doing the buyout, when Hughes

772
00:40:16,280 --> 00:40:19,759
Speaker 3: spun out direct TV, ROXE and Austin was a rock star, right,

773
00:40:19,760 --> 00:40:23,120
Speaker 3: a female CEO running direct TV a very profitable business,

774
00:40:23,280 --> 00:40:26,200
Speaker 3: and really really get to know interesting people. So I

775
00:40:26,480 --> 00:40:28,759
Speaker 3: would tell you they're all the deals I'm pretty proud.

776
00:40:28,760 --> 00:40:31,320
Speaker 3: There's probably one that was a bit of a disaster

777
00:40:31,480 --> 00:40:33,480
Speaker 3: that that you know. You know, we used to say,

778
00:40:33,520 --> 00:40:36,480
Speaker 3: if you made one bond payment, tell us.

779
00:40:36,400 --> 00:40:38,120
Speaker 1: About the deal that you're at least proud of.

780
00:40:38,440 --> 00:40:41,560
Speaker 2: Yeah, so that was probably It's actually just a question,

781
00:40:41,600 --> 00:40:45,960
Speaker 2: but nobody really wants to ask that.

782
00:40:44,360 --> 00:40:46,640
Speaker 3: That deal was hard. That deal was hard. It made

783
00:40:46,640 --> 00:40:51,680
Speaker 3: one coupon payment and filed it is no okay, I

784
00:40:51,719 --> 00:40:54,680
Speaker 3: want to protect those involved. Okay, Yeah, but good question.

785
00:40:55,920 --> 00:40:58,200
Speaker 3: And I think you know so, I've done a lot

786
00:40:58,239 --> 00:41:01,160
Speaker 3: of deals, and most of them I'm pretty happy about.

787
00:41:01,160 --> 00:41:01,520
Speaker 3: All right.

788
00:41:01,560 --> 00:41:04,600
Speaker 2: I think you mentioned you take all right, you want

789
00:41:04,600 --> 00:41:07,200
Speaker 2: to be the first call, and to some extent, being

790
00:41:07,200 --> 00:41:10,799
Speaker 2: the first call is some combination of, you know, the

791
00:41:10,840 --> 00:41:13,759
Speaker 2: ability to give decent pricing and also just being a

792
00:41:13,760 --> 00:41:15,800
Speaker 2: likable guy that people want to talk to about their family.

793
00:41:15,880 --> 00:41:16,040
Speaker 3: Right.

794
00:41:16,400 --> 00:41:18,400
Speaker 2: But I think you said you take twenty calls and

795
00:41:18,440 --> 00:41:19,800
Speaker 2: you maybe take two. Like what's so?

796
00:41:20,120 --> 00:41:23,440
Speaker 3: So what you're saying what I'm saying is out of

797
00:41:23,680 --> 00:41:26,719
Speaker 3: twenty calls, I get the last two or the most interesting.

798
00:41:26,800 --> 00:41:30,360
Speaker 3: So how do you actually well, like, engage eighteen times

799
00:41:30,400 --> 00:41:31,400
Speaker 3: and it goes nowhere?

800
00:41:31,480 --> 00:41:34,279
Speaker 2: Yeah, but like is there a minimum, like you have

801
00:41:34,360 --> 00:41:36,960
Speaker 2: to say yes to You can't say no forever otherwise

802
00:41:36,960 --> 00:41:38,719
Speaker 2: at some point you'll no longer be the first call.

803
00:41:38,840 --> 00:41:41,160
Speaker 2: Right If I like, yeah, I might like talking to

804
00:41:41,200 --> 00:41:43,839
Speaker 2: Tracy a lot. But if she never, like in the end,

805
00:41:44,040 --> 00:41:46,400
Speaker 2: wants to consummate the deal, eventually she's no longer going

806
00:41:46,480 --> 00:41:47,000
Speaker 2: to be my first one.

807
00:41:47,040 --> 00:41:47,680
Speaker 3: That's how you say no.

808
00:41:48,040 --> 00:41:50,920
Speaker 2: Okay, so talk to us about saying no but still

809
00:41:50,960 --> 00:41:52,080
Speaker 2: maintaining first.

810
00:41:52,000 --> 00:41:54,200
Speaker 3: Sometimes we don't say no, We say here's how we

811
00:41:54,239 --> 00:41:56,520
Speaker 3: can get to a yes. Okay, right, So sometimes you

812
00:41:56,600 --> 00:41:57,759
Speaker 3: give a path to a yes.

813
00:41:57,960 --> 00:41:58,319
Speaker 2: All right.

814
00:41:58,480 --> 00:42:02,239
Speaker 3: Sometimes and I'm more like we're in today, you know,

815
00:42:02,400 --> 00:42:04,520
Speaker 3: I'm not clear, it's not clear that someone takes my

816
00:42:04,640 --> 00:42:07,680
Speaker 3: no offensively. There's a lot of capital, so it's easier

817
00:42:07,719 --> 00:42:09,799
Speaker 3: to say no in this market than a market where

818
00:42:09,800 --> 00:42:12,160
Speaker 3: there's not a lot of capital. And generally we may

819
00:42:12,200 --> 00:42:15,680
Speaker 3: say no. It may be a concentration issue. Maybe we

820
00:42:15,719 --> 00:42:17,239
Speaker 3: feel like we have too much of that type of

821
00:42:17,360 --> 00:42:20,600
Speaker 3: risk on our books. It could be an attachment issue

822
00:42:20,760 --> 00:42:24,479
Speaker 3: like leverage or attachment could be a problem. It could

823
00:42:24,480 --> 00:42:26,600
Speaker 3: be that we had an issue with a similar business

824
00:42:27,040 --> 00:42:29,600
Speaker 3: and maybe our LPs are fatigued in that in that

825
00:42:29,640 --> 00:42:31,399
Speaker 3: type of space, and we don't want to, you know,

826
00:42:31,520 --> 00:42:34,320
Speaker 3: sort of bring it up again. There there hosts of

827
00:42:34,400 --> 00:42:36,560
Speaker 3: reasons why we may say no. We may not get

828
00:42:36,560 --> 00:42:40,400
Speaker 3: there fast enough. Right, That happens in this market. But generally,

829
00:42:40,440 --> 00:42:42,560
Speaker 3: I think we're a pretty quick study. And what we

830
00:42:42,600 --> 00:42:44,799
Speaker 3: are very good at is we do exactly what we

831
00:42:44,840 --> 00:42:47,320
Speaker 3: say we're going to do. So if we put something

832
00:42:47,360 --> 00:42:50,520
Speaker 3: on paper, we're going to stand by that. And I

833
00:42:50,560 --> 00:42:52,600
Speaker 3: think that that goes a long ways. And I think

834
00:42:52,640 --> 00:42:54,279
Speaker 3: if people say, well, why do they call what do

835
00:42:54,400 --> 00:42:57,520
Speaker 3: they call? Oak Tree? I think we price risk right.

836
00:42:57,840 --> 00:43:00,120
Speaker 3: So in some markets that's a real big compe at

837
00:43:00,120 --> 00:43:02,480
Speaker 3: an advantage. And I think we don't. We don't be

838
00:43:02,560 --> 00:43:05,000
Speaker 3: as people. We say what we can do, We do

839
00:43:05,080 --> 00:43:08,399
Speaker 3: what we say, and that's it. And so sometimes our

840
00:43:08,440 --> 00:43:11,799
Speaker 3: answer is yeah, we like it, but we don't love it.

841
00:43:12,239 --> 00:43:14,719
Speaker 3: But if the sponsor or somebody's able to say, well,

842
00:43:14,760 --> 00:43:18,560
Speaker 3: OA Tree's involved, right, that gives credibility to the deal

843
00:43:19,120 --> 00:43:21,160
Speaker 3: and we can help them get it get it done

844
00:43:21,280 --> 00:43:23,840
Speaker 3: by saying we're involved, but we may not be the anchor,

845
00:43:23,920 --> 00:43:26,319
Speaker 3: we may not lead it, you know. And and when

846
00:43:26,360 --> 00:43:29,160
Speaker 3: you're when you're managing the size capital, we need to

847
00:43:29,239 --> 00:43:33,000
Speaker 3: write three to five hundred million dollar checks on most situations.

848
00:43:33,440 --> 00:43:35,480
Speaker 3: So we're always looking at the biggest deals with the

849
00:43:35,560 --> 00:43:39,520
Speaker 3: largest sponsors. Generally those are safer plays than the lower

850
00:43:39,640 --> 00:43:43,160
Speaker 3: lower middle markets. So we think there's less competition when

851
00:43:43,160 --> 00:43:45,879
Speaker 3: there's only seven seven of us that can write large

852
00:43:45,960 --> 00:43:49,080
Speaker 3: checks versus in smaller deals, hundreds of folks can write

853
00:43:49,160 --> 00:43:49,760
Speaker 3: small sex.

854
00:43:50,560 --> 00:43:53,200
Speaker 1: I have one more question. Actually I just remembered, but

855
00:43:53,760 --> 00:43:56,480
Speaker 1: you mentioned earlier that you want to be friendly with everyone,

856
00:43:56,960 --> 00:44:00,520
Speaker 1: including the banks that you know you're ostensibly incompetition with.

857
00:44:00,920 --> 00:44:03,799
Speaker 1: One thing that's been happening recently, it seems, is that

858
00:44:03,880 --> 00:44:06,359
Speaker 1: a lot of deals that were originally done in the

859
00:44:06,360 --> 00:44:10,640
Speaker 1: private credit market are getting refine out in the public market.

860
00:44:10,880 --> 00:44:11,160
Speaker 3: Great.

861
00:44:12,000 --> 00:44:14,400
Speaker 1: Yeah, so first of all, why is that happening? And

862
00:44:14,440 --> 00:44:17,480
Speaker 1: then secondly, like is that a concern for someone like

863
00:44:17,480 --> 00:44:17,879
Speaker 1: oak Tree?

864
00:44:18,000 --> 00:44:21,520
Speaker 3: That is great? Like if we can be on two

865
00:44:21,640 --> 00:44:25,840
Speaker 3: or three year interim capital in most situations, that's good.

866
00:44:26,200 --> 00:44:29,000
Speaker 3: The reason why they're going back to the public market

867
00:44:29,120 --> 00:44:32,040
Speaker 3: is there's a spread between public and private, so there's

868
00:44:32,080 --> 00:44:35,160
Speaker 3: a cost reduction element, and then for the sponsor there's

869
00:44:35,160 --> 00:44:38,200
Speaker 3: more flexibility. Private credit is not meant to be the

870
00:44:38,200 --> 00:44:41,640
Speaker 3: most flexible. It's the most efficient, but it's not necessarily

871
00:44:41,680 --> 00:44:45,799
Speaker 3: the most flexible. And if I can create an institutionalize

872
00:44:46,080 --> 00:44:49,759
Speaker 3: and have a broader investor base, right, sometimes I can

873
00:44:49,800 --> 00:44:52,839
Speaker 3: get more things done if a lot more people own

874
00:44:52,920 --> 00:44:55,960
Speaker 3: it at very small sizes versus five or six owning

875
00:44:56,040 --> 00:44:59,400
Speaker 3: and at chunky sizes. So it's actually you want a

876
00:44:59,440 --> 00:45:03,719
Speaker 3: healthy market public and private, right. And when most folks say, oh,

877
00:45:03,760 --> 00:45:06,160
Speaker 3: you're losing deals to publicer I'm like, we probably should

878
00:45:06,160 --> 00:45:08,560
Speaker 3: have gone to a public market anyway. Right, it's rated,

879
00:45:09,040 --> 00:45:13,080
Speaker 3: it's it's an exten existing issuer. It's been into public markets.

880
00:45:13,520 --> 00:45:15,480
Speaker 3: It's just stay in public markets. You know. If you

881
00:45:15,520 --> 00:45:18,359
Speaker 3: think about the private credit market, we're one point seven

882
00:45:18,400 --> 00:45:21,439
Speaker 3: one point eight trillion going to probably three trillion. There's

883
00:45:21,520 --> 00:45:24,799
Speaker 3: ABF asset based finance, which is a new phenomenon, which

884
00:45:24,800 --> 00:45:27,840
Speaker 3: isn't really new, right. G Capital was a large ABF under.

885
00:45:27,920 --> 00:45:30,319
Speaker 3: But there's three trillion dollars of dry powder at private

886
00:45:30,360 --> 00:45:33,759
Speaker 3: equity firms. There's enough for us all to do and

887
00:45:33,840 --> 00:45:34,640
Speaker 3: be happy.

888
00:45:34,960 --> 00:45:37,120
Speaker 1: All right, Millwood Hobbes, thank you so much for coming

889
00:45:37,120 --> 00:45:40,160
Speaker 1: on all thoughts. Fantastic good Thank you so much.

890
00:45:40,200 --> 00:45:41,120
Speaker 3: I'm so glad we made this.

891
00:45:41,160 --> 00:45:57,680
Speaker 1: Happen, Joe. That was so much fun.

892
00:45:57,840 --> 00:46:01,400
Speaker 2: That was an unusually fun good episodes, even though all

893
00:46:01,440 --> 00:46:04,839
Speaker 2: of our guests are the perfect guest. You know, I'm

894
00:46:05,080 --> 00:46:07,359
Speaker 2: I really like and I think we should do more

895
00:46:07,760 --> 00:46:10,680
Speaker 2: about talking with the people whose job it is to

896
00:46:10,719 --> 00:46:12,080
Speaker 2: be nice to people and hanging.

897
00:46:11,920 --> 00:46:12,560
Speaker 1: Out with other people.

898
00:46:12,640 --> 00:46:15,160
Speaker 2: Yeah, because that's like an element there's a lot. Yeah,

899
00:46:15,200 --> 00:46:17,400
Speaker 2: we could, we could, but that's like an element in

900
00:46:17,480 --> 00:46:19,680
Speaker 2: finance that's still you know, Like I said, we talked

901
00:46:19,680 --> 00:46:22,040
Speaker 2: to a lot of screen people, and I'm as screen people,

902
00:46:22,360 --> 00:46:24,920
Speaker 2: I'm glad that there are still parts of the industry

903
00:46:25,280 --> 00:46:29,359
Speaker 2: where there's a big role for likable people who can

904
00:46:29,520 --> 00:46:31,480
Speaker 2: maintain relationships.

905
00:46:30,719 --> 00:46:31,920
Speaker 1: And stuff like that, play golf.

906
00:46:31,960 --> 00:46:33,160
Speaker 2: But that's part of being human, right.

907
00:46:33,719 --> 00:46:36,280
Speaker 1: Uh don't you have a whole song with the title

908
00:46:36,360 --> 00:46:39,239
Speaker 1: like all my friends are online or something, all my friends.

909
00:46:38,960 --> 00:46:41,120
Speaker 2: Are on my phone? Yeah, like I want to I

910
00:46:41,200 --> 00:46:44,080
Speaker 2: want to know more people who have friends, who.

911
00:46:43,800 --> 00:46:47,480
Speaker 1: Have friends, I RL. Yeah, all right, there's a lot

912
00:46:47,520 --> 00:46:50,520
Speaker 1: to pull out that. I did think like Millwood's early

913
00:46:50,640 --> 00:46:55,080
Speaker 1: point about banks being in the business of like pricing

914
00:46:55,360 --> 00:46:59,800
Speaker 1: end moving risk very quickly was a good one because

915
00:46:59,840 --> 00:47:03,440
Speaker 1: I think like that's kind of a fundamental difference with

916
00:47:03,560 --> 00:47:04,280
Speaker 1: private credit.

917
00:47:04,600 --> 00:47:07,640
Speaker 2: That was really interesting. I also and it was really

918
00:47:07,719 --> 00:47:12,000
Speaker 2: interesting hearing him talk about the tensions that emerge because

919
00:47:12,040 --> 00:47:13,400
Speaker 2: you want to be the first call and you want

920
00:47:13,440 --> 00:47:15,640
Speaker 2: to have a reputation for at least saying yes ten

921
00:47:15,680 --> 00:47:18,160
Speaker 2: percent of the time or something like that. Yeah, with

922
00:47:18,200 --> 00:47:21,919
Speaker 2: the demands of the actual PM who doesn't care about

923
00:47:21,920 --> 00:47:24,200
Speaker 2: all the times you have to say no. You know,

924
00:47:24,239 --> 00:47:27,560
Speaker 2: I think this is probably a sort of asymmetry that

925
00:47:27,680 --> 00:47:30,359
Speaker 2: comes up in a lot of sales based businesses, right

926
00:47:30,719 --> 00:47:34,080
Speaker 2: where you have some salesperson and their job is to

927
00:47:34,160 --> 00:47:36,319
Speaker 2: hit a commission or something like that, and then you

928
00:47:36,360 --> 00:47:38,879
Speaker 2: have like a product manager who's like, no, you can't

929
00:47:38,920 --> 00:47:41,440
Speaker 2: price it at this or we can't move the product

930
00:47:41,600 --> 00:47:43,560
Speaker 2: this fast. Yeah, this is just sort of like an

931
00:47:43,600 --> 00:47:46,640
Speaker 2: interesting dynamic that emerges in all businesses. And I really

932
00:47:46,719 --> 00:47:51,359
Speaker 2: enjoyed hearing him describe how he negotiates that implicitly.

933
00:47:51,040 --> 00:47:54,080
Speaker 1: The negotiations, because a lot of these deals involve like

934
00:47:54,160 --> 00:47:56,400
Speaker 1: so many different entities who are all coming at it

935
00:47:56,440 --> 00:47:58,560
Speaker 1: from a different angle with a different incentive.

936
00:47:59,200 --> 00:48:01,440
Speaker 2: Yeah, so much, so much there, We'll have to talk

937
00:48:01,440 --> 00:48:01,920
Speaker 2: to Melody.

938
00:48:02,000 --> 00:48:03,640
Speaker 1: Yeah we should, all right, shall we leave it there?

939
00:48:03,680 --> 00:48:04,359
Speaker 2: Let's leave it there.

940
00:48:04,480 --> 00:48:07,239
Speaker 1: This has been another episode of the Odd Loots podcast.

941
00:48:07,320 --> 00:48:10,520
Speaker 1: I'm Tracy Alloway. You can follow me at Tracy Alloway.

942
00:48:10,239 --> 00:48:12,920
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.

943
00:48:12,960 --> 00:48:16,040
Speaker 2: Follow our producers Carman Rodriguez at Carman Ermann, dash Ol

944
00:48:16,040 --> 00:48:19,120
Speaker 2: Bennett at Dashbot and Kilbrooks at Kilbrooks. Thank you to

945
00:48:19,120 --> 00:48:22,040
Speaker 2: our producer Moses On On more Oddlots content, go to

946
00:48:22,040 --> 00:48:25,280
Speaker 2: Bloomberg dot com slash odd Lots. We have transcripts, a blog,

947
00:48:25,320 --> 00:48:27,719
Speaker 2: and a daily newsletter. You can chat about all of

948
00:48:27,760 --> 00:48:31,240
Speaker 2: these topics twenty four to seven in our discord Discord

949
00:48:31,280 --> 00:48:32,759
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950
00:48:32,400 --> 00:48:35,680
Speaker 1: Odlats and if you enjoy odd Lots, if you like

951
00:48:35,760 --> 00:48:38,239
Speaker 1: it when we talk about how to source deals in

952
00:48:38,280 --> 00:48:40,960
Speaker 1: the private credit market, then please leave us a positive

953
00:48:41,000 --> 00:48:44,480
Speaker 1: review on your favorite podcast platform. And remember, if you

954
00:48:44,520 --> 00:48:48,799
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955
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958
00:48:58,160 --> 00:49:09,360
Speaker 1: Thanks for listening in