Speaker 1: Hello, and welcome to The Credit Edge, a weekly markets podcast.
Speaker 1: My name is James Crombie. I'm a senior editor at Bloomberg.
Speaker 1: This week, we're very pleased to welcome TJ Durkin, head
Speaker 1: of structured credit and Specialty Finance at TPG. Angelo Gordon,
Speaker 1: How are you, Tj?
Speaker 2: Very well, Thank you for having me.
Speaker 1: Thank you so much for joining us, say, very excited
Speaker 1: to have you on the show. Also delighted to welcome
Speaker 1: back co host David Havens from Bloomberg Intelligence.
Speaker 3: Hello, David, Hey, great to be with you all.
Speaker 1: Also joining us with the questions from Bloomberg News, Carmen Arroyo.
Speaker 1: Great to see you, Carmen. How's it going?
Speaker 4: Thank you for having me, James.
Speaker 1: So, just to set the scene a little bit here,
Speaker 1: structure credit markets are booming as rates for the economy
Speaker 1: grows and asset backed securities look relatively cheap compared to
Speaker 1: other parts of fixed income. We've seen huge volumes of
Speaker 1: asset back deal including clos this year, and there's more
Speaker 1: to come in twenty twenty five. Private debt has also
Speaker 1: experienced a meteoric rise. It's now a one point six
Speaker 1: trillion market, but it could well be worth tens of
Speaker 1: trillions of dollars more when you wrap in asset based finance,
Speaker 1: very tight credit spreads, tons of issuance, and rising fund inflows.
Speaker 1: That doesn't mean that there's no risk out there. The
Speaker 1: FED started to cut rates, but yields remain high, and
Speaker 1: the stated aims of the next government all sound quite inflationary,
Speaker 1: signaling a period of higher for longer debt costs. That's
Speaker 1: going to hurt borrowers across the board, especially the weak ones.
Speaker 1: We're also seeing signs of private credit stress in the
Speaker 1: form of amendments, extensions and increasing number of loans being
Speaker 1: repaid with more debt, plus a rise into faults. In
Speaker 1: the background, we have a lot of geopolitical risk, which
Speaker 1: will only get worse as the Trump trade wars continue.
Speaker 1: Plus the threat of recession hasn't gone away entirely. A
Speaker 1: major downturn would cause more distress in credit markets. So TJ,
Speaker 1: let's start with you. I'm interested in your views on
Speaker 1: structured finance. To start with you, you've been doing that
Speaker 1: for a long time. Why the boom this year?
Speaker 5: Yeah, Well, listen, I think the main street economy, if
Speaker 5: you will, is still doing quite well. Public market spreads
Speaker 5: have certainly recovered from the wides of twenty twenty two,
Speaker 5: and you know that's usually a healthy environment for issue
Speaker 5: and so you've got a healthy economy, cooperative spreads, and
Speaker 5: capital looking for other places to go other than corporate credit.
Speaker 1: So record issuance volumes this year, does it continue next year?
Speaker 1: And what sustains it?
Speaker 5: Well, again, I think it's that same theme. So can
Speaker 5: it be sustained? I think absolutely. I think when you
Speaker 5: have healthy capital markets, you see the emergence of either
Speaker 5: newer issuers or newer products that maybe haven't been funded
Speaker 5: via the abs markets, and that's really the time to
Speaker 5: come to market. And so, you know, provided sort of
Speaker 5: the rest of the financial markets macroeconomic things stay in
Speaker 5: tune with where we are, I would expect heavy issuance
Speaker 5: to continue.
Speaker 4: You mentioned something that was interesting, which was like newer issuers,
Speaker 4: newer type of products. We've seen also a rice on
Speaker 4: esoterics this year. Is that new or are we going
Speaker 4: to continue to see that? And by that I mean
Speaker 4: like music royalties, like art bonds, like really weird stuff.
Speaker 5: Well, listen, I think some of the more niche products
Speaker 5: are probably still living in the private markets, whereas some
Speaker 5: of the more mainstream, if you will, products of today
Speaker 5: that weren't of yesterday. At things like data centers right
Speaker 5: or fiber to home. Those are probably more scalable assets
Speaker 5: that it makes sense to do the work to get
Speaker 5: public market funding because it's repeatable. And so I think
Speaker 5: there's a bifurcation between the very esoteric versus what might
Speaker 5: have been esoteric five years ago versus maybe becoming more
Speaker 5: mainstream today.
Speaker 4: And data centers are part of it, and I think
Speaker 4: that's AI related chips, all that world.
Speaker 5: Yeah, I mean that's clearly the probably most talked about
Speaker 5: theme in the market.
Speaker 4: You mentioned also like how a lot of this is
Speaker 4: going to the private markets. Can you talk us through
Speaker 4: a little bit of what you're seeing in private credit
Speaker 4: where that asset class is kind of growing or where
Speaker 4: is it going to?
Speaker 5: Yeah, So I think most people know private credit as
Speaker 5: direct lending right sponsoring sponsor backed private equity companies funding
Speaker 5: those purchases. I think that's where most investors got their
Speaker 5: toe hold in private credit. What's been happening under the
Speaker 5: surface is really the private assetbect finance space where I live,
Speaker 5: and that's been really slowly happening under the surface for
Speaker 5: a decade plus, right, there's been this natural evolution of
Speaker 5: what I'll call that the main street economy. So I
Speaker 5: think auto loans, real estate finance that were primarily traditionally
Speaker 5: funded by banks, depositories, the specialty finance universe has slowly
Speaker 5: been gaining market share, right, And that's just been how
Speaker 5: happening very organically, and that's where we have traditionally deployed
Speaker 5: private credit in the asset based space. We're either lending
Speaker 5: to those specially financed companies or we're buying their production.
Speaker 5: And then you had twenty twenty three happen, right, And
Speaker 5: I think that was the big wake up call of
Speaker 5: investors primarily saying, like, what's happening over there? Is there
Speaker 5: an opportunity for me to deploy capital and make good returns.
Speaker 5: And that's what got everyone's attention, right, And so this
Speaker 5: is something that's been happening, but certainly the events of
Speaker 5: March twenty twenty three created a lot more interest that
Speaker 5: we've seen, you know, going on eighteen months now, and
Speaker 5: we think that this is structural and we're in the
Speaker 5: early ennings of it.
Speaker 3: So those events in March twenty twenty three were the
Speaker 3: failure of some of the US regional banks. Credit Swiss
Speaker 3: imploded at that time as well. So it was an
Speaker 3: interesting time and it created a lot of opportunity. That
Speaker 3: vacuum seemed to have been filled pretty quickly in the
Speaker 3: in the market, just in in terms of the lack
Speaker 3: of volatility that we're seeing this year. But I'm curious
Speaker 3: where you're seeing the greatest opportunity right now, Like, what
Speaker 3: is when you throw your remit out into this sort
Speaker 3: of giant asset backed area, what's most interesting and how
Speaker 3: is that evolving?
Speaker 5: Well, I think what people thought was going to happen
Speaker 5: and coming out of March twenty twenty three was there,
Speaker 5: It's going to be a lot of asset sales, forced
Speaker 5: asset sales out of the regional banks. And to your point,
Speaker 5: there was some government intervention, the balance sheets were sort
Speaker 5: of short up, if you will, pretty quickly, and the
Speaker 5: volatility dissipated. And so if you fast forward today, we've
Speaker 5: seen maybe less than two handfuls of what I would
Speaker 5: call big forced asset sales coming out of the banks,
Speaker 5: and those have been I would say, very well attended.
Speaker 5: I think where we're seeing opportunity is lending to those
Speaker 5: on bank originators as they're scaling their business and taking
Speaker 5: market share. We think the risk adjusted returns there are
Speaker 5: just much better because there's less competition than fighting over
Speaker 5: assets coming out of the bank balance sheets.
Speaker 3: Yeah, what why aren't the banks chasing this market?
Speaker 5: Well, I mean I think of I buyfrecate the banks
Speaker 5: into two groups. You've got like the top fifteen that
Speaker 5: control pretty much the same amount of assets as the
Speaker 5: next four thousand, Right, So you've got the g SIPs
Speaker 5: if you will, that I think are optimizing capital, and
Speaker 5: then you've got the regional banks that are not deploying capital.
Speaker 5: So you know that's where there's opportunity in filling that
Speaker 5: gap again in the main street economy. So if you
Speaker 5: look at the regional bank balance sheets, you know eighty
Speaker 5: percent of that balance sheet is non corporate credit. It's
Speaker 5: these asset classes that my team and I focus on,
Speaker 5: and so with the healthy economy, there's a need for
Speaker 5: non bank capital to help bolster that origination.
Speaker 1: What kind of assets we're talking about here? Is it
Speaker 1: consumer loans? Is it car loans? Is it credit cards?
Speaker 1: What sort of deals?
Speaker 5: Yeah, I think it's everything from from the consumer oriented
Speaker 5: products to real estate related products, whether it's you know,
Speaker 5: commercial or residential, down to more hard assets like equipment finance.
Speaker 1: And that's all in good shape. I mean, the consumer
Speaker 1: at the lower end is not doing well. There's this
Speaker 1: perception in you know, direct lending as you call it,
Speaker 1: that you know, the weaker credits need to go private
Speaker 1: because you know that they don't really have the public option.
Speaker 1: Is it the same in the asset based markets, that
Speaker 1: you know, the weaker borrowers need to go to the
Speaker 1: asset based private markets.
Speaker 5: I don't know that to be the case. I think
Speaker 5: I think there's there's different things to sort of unpack there.
Speaker 5: I think, you know, the the weaker consumer demographic is
Speaker 5: certainly feeling the pain of inflation more a large part
Speaker 5: of that segment is actually not really even in the
Speaker 5: financial market, so sort of live paycheck to paycheck, you're
Speaker 5: not seeing that necessarily in terms of delinquencies and the
Speaker 5: like that you would see in auto finance as an example,
Speaker 5: we're definitely seeing i would say deviation in performance between
Speaker 5: different sponsors or different origination companies, and so that's where
Speaker 5: you really need to do the work. It's not a
Speaker 5: sort of beta trade, if you will, of auto finance
Speaker 5: is interesting, let's go all in. You have to really
Speaker 5: be discerning and who you're partnering with because as the
Speaker 5: economy starts to season more and you're seeing deviation between channels,
Speaker 5: that's really where you need somebody that's been in the
Speaker 5: space long enough to be able to tease that out
Speaker 5: during the underwriting and underwriting phase.
Speaker 4: So the growth of facet based finance is directly linked
Speaker 4: to what banks are doing, as you were saying, and
Speaker 4: as you mentioned, like last year we saw a lot
Speaker 4: of like asset sales, and this year we've seen a
Speaker 4: lot of like forward flow agreements and thanks kind of
Speaker 4: like pursuing more like synthetic risk transfers or bonds that
Speaker 4: help them kind of like strengthen their balance sheet. What
Speaker 4: do you expect to see next year?
Speaker 5: Yeah, no, I think things are are moving in concert.
Speaker 5: And so like if you if you break those two
Speaker 5: themes up right, there's there's CRT and SRT. I think
Speaker 5: what's being miscategorized is that that's an asset class that's
Speaker 5: really just a risk mechanism, no different than selling the
Speaker 5: loans or doing a securitization, right, So it's a different
Speaker 5: it's a different transaction mechanism, and so what we're focused
Speaker 5: on is staying very disciplined on making sure the CRT
Speaker 5: or SRT opportunities that we're looking at are core to
Speaker 5: our expertise. My team, for example, is not going to
Speaker 5: wander into looking at a CRT transaction off corporate revolvers.
Speaker 5: That's that's not our DNA, that's not where we have
Speaker 5: an edge. And so I think what you've seen this
Speaker 5: year has been a lot of leverage finance type opportunities
Speaker 5: and CRT. I think as the big banks move through
Speaker 5: that pipeline, as we cross into twenty twenty five, we're
Speaker 5: hopeful that we will get to our asset classes of
Speaker 5: consumer finance or real estate related and so I think
Speaker 5: that's more on the come. With regards to forward flows,
Speaker 5: that's really a technology or a concept that especially finance
Speaker 5: companies have used for a long time that now the
Speaker 5: regional banks are starting to utilize. And if you think
Speaker 5: about a regional bank, it's really just a consortium of
Speaker 5: origination platforms, right.
Speaker 2: And so the.
Speaker 5: Sophisticated ones, the sophisticated banks are saying, we keep reading
Speaker 5: about all this private credit capital formation, We've got the
Speaker 5: clients we've got the plumbing. We might not have the
Speaker 5: right type of capital anymore or the right quantum of
Speaker 5: capital anymore, but it seems like there's a marriage to
Speaker 5: be made. And so you're seeing it again and maybe
Speaker 5: start maybe with corporate credit, and I think it will
Speaker 5: continue to move into asset based I.
Speaker 1: Mean, just in the sort of interplay between the so
Speaker 1: called asset back securities market and the asset based finance market.
Speaker 1: Some people think of these as you know, almost interchangeable,
Speaker 1: that one is private and illiquid and the other is public,
Speaker 1: you know, and traded. Is that the correct way of
Speaker 1: looking at it? Does and does one shift to the
Speaker 1: other as we get all this private deck growth.
Speaker 5: Well, I think they're linked right in the sense of
Speaker 5: there is not public ABS creation without some form of
Speaker 5: private capital being ahead of that in terms of a
Speaker 5: warehouse financing or other types of aggregation vehicles to get
Speaker 5: to that critical mass where you can issue an ABS securitation.
Speaker 5: No one does twenty million dollar ABS steals. They do
Speaker 5: five hundred million dollar ABS steals, And so private capital
Speaker 5: is on that sort of value chain or conveyor belt
Speaker 5: before you get to the public ABS markets. And I
Speaker 5: think what you're seeing too is especialty finance companies are
Speaker 5: looking to diversify their their funding sources, and so when
Speaker 5: you have public markets really fall out of bed like
Speaker 5: they did in twenty twenty two, maybe solely relying on
Speaker 5: that for one hundred percent of your financing is not
Speaker 5: a good business strategy. And so you know, two years later,
Speaker 5: we're seeing more openness of saying we should have thirty
Speaker 5: percent of our origination funded privately or via forward flow,
Speaker 5: and the other seventy can go to the public abs
Speaker 5: markets or whatever. That right ratio is that necessarily wasn't
Speaker 5: in the mindset of CFOs or CEOs, especially finance companies
Speaker 5: prior to twenty twenty two.
Speaker 1: But when we talk about the esset based finance market
Speaker 1: coming into the tens of trillions, I mean Apoul's talking
Speaker 1: about forty trillion, Blacksman is talking about thirty trillion. Is
Speaker 1: that basically just taking all of the public abs market
Speaker 1: and putting it into the private market.
Speaker 5: Well, it's a combination of the public markets and then
Speaker 5: how much leaves the bank balance sheets, right, So it's
Speaker 5: a combination of those two.
Speaker 3: Okay, but you're outbeating the bushes with these sort of
Speaker 3: smaller well, a wide array of producers, but you're not
Speaker 3: solely focused and some of the large producers, like the
Speaker 3: public market is. You're looking at at sort of small producers,
Speaker 3: finance companies, specialty finance companies, captive finance companies, that sort
Speaker 3: of thing.
Speaker 5: Yeah, but again, even routine repeat abs or shares need
Speaker 5: that bridge capital, that warehouse capital in our in our
Speaker 5: vocabulary to scale to get to those critical masses. And
Speaker 5: so what we offer them is effectively revolver. So they'll
Speaker 5: originate those auto loans, get to that critical mass, the
Speaker 5: issue of the abs, they pay us down.
Speaker 2: And they start all over again.
Speaker 5: And so more mature scale companies may do four issuances
Speaker 5: a year, and so we'll according up and down four times.
Speaker 5: A less scale company may do that once a year, right,
Speaker 5: And so we're providing that capital to get them to
Speaker 5: what their end state desire is, which is public abs,
Speaker 5: which should be a cheaper cost of funding.
Speaker 3: So you're looking at a wide array of the economy,
Speaker 3: a wide array of asset classes, you know, sort of
Speaker 3: in that asset backed area. Commercial real estate is an
Speaker 3: area that's been a hot button, particularly the office segment,
Speaker 3: maybe not other areas to the same extent. So I
Speaker 3: think a lot if you look at the public markets,
Speaker 3: you look at where spreads are, it seems to be
Speaker 3: all rainbows and unicorns. Are you seeing rainbows and unicorns
Speaker 3: or are there a few black clouds out there as well?
Speaker 2: Well?
Speaker 5: I would say one observation that we have is that
Speaker 5: in general, risk seems to be priced in a pretty
Speaker 5: tight cluster. That's one thing that the team and I
Speaker 5: are very wary of, right in terms of what we
Speaker 5: like to say, in the public markets, their credit curve
Speaker 5: is very flat, and you're seeing that in terms of
Speaker 5: sort of private market pricing.
Speaker 3: As well, spread compression, spread.
Speaker 5: Compression, and quality isn't necessarily being rewarded, or certainly dangerous
Speaker 5: situations aren't being priced appropriately with regards to office and SIRI.
Speaker 5: I mean, ironically, I would tell you in the public markets,
Speaker 5: I think CNBS is probably the most interesting asset class
Speaker 5: because there's a lot of price disparity and discrepancy. I
Speaker 5: think there's a lot of historic holders who are sort
Speaker 5: of risk off at any level, just maybe based on
Speaker 5: what else is in their portfolio and legacy asset management issues,
Speaker 5: and so coming in with fresh capital and opportunistic lens.
Speaker 5: I think that's the most interesting space that we're seeing
Speaker 5: in the public market.
Speaker 3: Yeah, I mean that CIRA space seems to be, or
Speaker 3: the office areas is an interesting area because it really
Speaker 3: is a situation where location, location, location matters, and you
Speaker 3: really need to know the specifics of the asset itself,
Speaker 3: because you know, you can have one building next to
Speaker 3: one another, you know, across the street on Park Avenue
Speaker 3: or something or Broadway, and one is underwater and one
Speaker 3: is going gangbusters just because they've got the right rent
Speaker 3: roles and the right you know, amenities, facilities and things
Speaker 3: like that.
Speaker 2: No, we agree.
Speaker 5: I mean that's why you know, granular analysis is necessary.
Speaker 5: I mean, and there's a huge focus on what we
Speaker 5: call the saasby space, a single acset, single borrower where
Speaker 5: you can do that kind of private equity type underwrite
Speaker 5: even though it's a debt instrument. And I think that's
Speaker 5: where we've spent a lot of time over the last
Speaker 5: couple of years as it's been again a fertile hunting
Speaker 5: ground for I would say performing but discounted securities. I
Speaker 5: think the CMBs space where we see opportunity is not
Speaker 5: in terms of credit risk, where we can stay at
Speaker 5: the top of the capital structure. We've been seeing. The
Speaker 5: risk is the duration risk, meaning the loan may have
Speaker 5: a legal maturity of three years including all its extensions,
Speaker 5: but in reality, if the sponsor's paying that special service,
Speaker 5: is probably going to grant another extension. And so the
Speaker 5: market is trying to guess what's the duration of the
Speaker 5: cash flow, not necessarily the credit worthiness of it at
Speaker 5: the triple A level or the double A level.
Speaker 4: So another concern in the commercial real estate market was
Speaker 4: at least last year, was how many of these loans
Speaker 4: are in banks balance sheets? And we haven't really seen
Speaker 4: any stressed asset sales on CRE especially in office. When
Speaker 4: is that going to happen? Is it going to take years?
Speaker 5: Or I mean, if you go back to twenty twenty three, right,
Speaker 5: you've seen, I say, a very accommodative regulatory regime when
Speaker 5: it comes to the banks and their balance sheets and
Speaker 5: the capital ratios.
Speaker 2: Right.
Speaker 5: I remember we used to come in every morning and
Speaker 5: we get a new research reports, you know, sorted by
Speaker 5: percent office, percent non performing percent of their Tier one capital,
Speaker 5: and like that's obviously not been the case for late
Speaker 5: So it feels to me like there's this long play
Speaker 5: going on that there's an organic way for them to
Speaker 5: sort of de risk out of it versus a rip
Speaker 5: the band aid approach that people honestly may have been
Speaker 5: hoping for in terms of distressed asset sales. Sitting in
Speaker 5: our seat, maybe we can just switch gears a little bit.
Speaker 5: As you may know, there was an election in this
Speaker 5: country just to few weeks ago. When when you all
Speaker 5: came in on Wednesday or later that week after the election,
Speaker 5: what sort of conversations did you have? How does it
Speaker 5: change your strategy?
Speaker 4: What?
Speaker 2: What?
Speaker 3: How do you see the market changing, the opportunities, the
Speaker 3: risks changing as the new administration comes in with some
Speaker 3: of the some of the policies that they're talking about,
Speaker 3: and some of the people coming into that might be
Speaker 3: coming into the cabinet.
Speaker 5: Well, I think, just from a regime perspective, I think
Speaker 5: the FTC loosening of M and A is good for
Speaker 5: what we're looking at, which is the banks. Right, there's
Speaker 5: clearly too many banks in this country. You get a
Speaker 5: more relaxed M and A environment that should help both
Speaker 5: solve the problems of their their balance sheets and their
Speaker 5: capital ratios. But probably more exciting for US is and
Speaker 5: I've seen this throughout my career. As good markets are bad,
Speaker 5: bank M and A almost always creates asset sales, and
Speaker 5: so that to us might be the catalyst versus stressed
Speaker 5: markets of twenty twenty three sort of you know, productive
Speaker 5: mergers but still creating asset sales.
Speaker 2: So that's what's exciting to us. I think.
Speaker 5: The rest of it is not. I think a lot
Speaker 5: of the other policies you ran on not necessarily to
Speaker 5: affect this market, right right.
Speaker 1: Interested in what you said earlier bills about some dangers
Speaker 1: of potentially you know, risk isn't being priced. We're seeing
Speaker 1: that a lot in the public markets across the bulge
Speaker 1: and triple c's to you know, double B bonds. What
Speaker 1: are you saying in structed markets? That stands out.
Speaker 5: Again, I think as you get into certain spaces, the
Speaker 5: auto space as an example, or the consumer finance space,
Speaker 5: there's a lot of different origination platforms and that performance
Speaker 5: tiering is becoming more and more prevalent, but the pricing
Speaker 5: on those assets or those securities does not reflect it, right,
Speaker 5: And we've been very surprised that they're sort of has
Speaker 5: not been a rerating, if you will, some of the
Speaker 5: lower tier originators versus the upper tier.
Speaker 3: So you're talking about the maybe some of the subprime
Speaker 3: and non prime borrowers used car markets things exactly.
Speaker 5: And you know, even if you look at the non
Speaker 5: prime auto space, there's some originators that are performing as
Speaker 5: they normally have, right they've had they had good control
Speaker 5: on their credit. Maybe some of the smaller, newer or
Speaker 5: faster growing company has lost a little control on that.
Speaker 5: But yet the asset pricing, if you were to look
Speaker 5: in the public markets, the triple B bonds, they don't
Speaker 5: really price that differently, and we don't see the rationale
Speaker 5: behind that. So we're being patient, and that's not a
Speaker 5: space where we're overly active on price compression.
Speaker 4: It's interesting what you were saying is especially and I'm
Speaker 4: going to use this example but feel free to change.
Speaker 4: But in this as our team market, we've seen some
Speaker 4: of those bonds kind of priced really really really tight,
Speaker 4: and still we are seeing a lot of buyers coming
Speaker 4: in and you know, willing to take on that risk
Speaker 4: for maybe like not that much like you know, payment
Speaker 4: or like you know, pricing. How tight does it have
Speaker 4: to get for buyside to stop deploying so much?
Speaker 5: Well, I think I think that space, the the SRT
Speaker 5: and the CRT space is interesting because you're in the
Speaker 5: early innings of of what I think will be a
Speaker 5: continued wave of issuance, and it doesn't fit the natural
Speaker 5: buyer base of credit risk. Meaning if you think about
Speaker 5: rated abs bonds or corporate credit securities that are going
Speaker 5: into daily liquidity bond funds or ETFs, they these instruments
Speaker 5: are a bit more liquid, they might not have a
Speaker 5: rating despite the fact that on an underwriting perspective it's
Speaker 5: really good risk, right, it just doesn't It doesn't take
Speaker 5: the box of traditional issuance.
Speaker 2: And so.
Speaker 5: I think that's why buyers are still interested in the
Speaker 5: space despite it tightening from you know, twelve months ago,
Speaker 5: because on a relative value, it's off and compelling returns.
Speaker 5: So I think there's probably still room to run.
Speaker 1: Actually, what about other parts of structure though, TJ. You know,
Speaker 1: you've heard the whole year people saying structure products are great,
Speaker 1: we have to start buying more of them because you know,
Speaker 1: investment grade bonds just got so tight and everything's so
Speaker 1: expensive in the other markets. Does that continue? Is there's
Speaker 1: still that kind of gap between the two in terms
Speaker 1: of prising and you've got all this new money piling in.
Speaker 1: You know, there's just a ton of bid for fixing
Speaker 1: come across the board. Everyone wants yield at this point.
Speaker 1: Does that gap between the two markets get.
Speaker 5: Squashed Historically No, Historically the asset based space always has
Speaker 5: a little bit of a spread premium to the corporate space.
Speaker 5: I don't see that, you know, inverting anytime soon. But
Speaker 5: with that being said, I think there's plenty of issuance
Speaker 5: to sort of sort through. I think again, we actually
Speaker 5: probably think the top of the capital structure is more
Speaker 5: compelling than the bottom, kind of going back to that
Speaker 5: comment on the credit card being flat and so, you know,
Speaker 5: a flexible capital we're able to kind of dial up
Speaker 5: or down the credit risk and wait for better opportunities
Speaker 5: maybe at the bottom of the capital structure.
Speaker 4: I have a question on the lpiece. We've kind of
Speaker 4: like heard all year how limited partners were asking money
Speaker 4: managers to go a little bit more into esoterics or
Speaker 4: into asset based finance because they were already like kind
Speaker 4: of like very like very present or write and direct lending.
Speaker 4: What are the LPs asking now where do they want
Speaker 4: to go? Like do they want to buy more infraud.
Speaker 4: Do they what are they interested in?
Speaker 5: Well, I think they're looking for diversification, right, They're looking
Speaker 5: for diversification because they might feel over exposed to corporate credit.
Speaker 5: They're looking for diversification because there's sort of tearing going
Speaker 5: on with pick or LME and when you think about
Speaker 5: the premise of asset base, some of that just can't happen, right,
Speaker 5: My SPV can't be stripped of the assets, and so
Speaker 5: I think there's appealing aspects of private abs. The duration
Speaker 5: profiles generally are different, right, we're generally looking at two
Speaker 5: to three year duration profiles. There's a lot of amorization,
Speaker 5: there's a lot of cash flow, it's d risking in
Speaker 5: nature versus five year bullet maturities. So I think you
Speaker 5: add all that up, it's compelling. I think there's still
Speaker 5: a huge education process going on, and so there's certainly
Speaker 5: been some first movers, but we're spending a lot of
Speaker 5: time with LPs are really across the globe and sort
Speaker 5: of helping them understand how the US asset based finance
Speaker 5: sector is emerging. And then it kind of trickles out
Speaker 5: across the globe in different ways.
Speaker 3: Are there various classes of buyers that are sort of emerging.
Speaker 3: Is it family offices, is it insurance companies who've been
Speaker 3: involved for years. You know, banks have obviously been involved,
Speaker 3: sovereign wealth funds.
Speaker 5: Yeah, I think everyone's got a different need, right, So
Speaker 5: going to insurance as an example, we spend a lot
Speaker 5: of time with large insurance companies that have a public
Speaker 5: market presence, right, So they're interacting with the cell side
Speaker 5: every day on ig parts of the capital structure, but
Speaker 5: they maybe haven't built out the team in a way
Speaker 5: that can source the private side, so source underwrite asset
Speaker 5: matters the private side, and so those have been great
Speaker 5: partnerships to develop. I think the you know, the sovereigns
Speaker 5: or the pensions are looking for more absolute return and
Speaker 5: just really kind of a brute force comparison to what
Speaker 5: they're seeing in direct lending, just as sort of the
Speaker 5: natural comp And then I think it's probably an even
Speaker 5: more complicated story to explain to retail, So they're probably
Speaker 5: last on the journey of maybe getting exposure holistically. But
Speaker 5: I think everyone generally, after a few meetings, feels under
Speaker 5: exposed to the asset class when you think about it
Speaker 5: in comparison to the size of the economy, people are
Speaker 5: generally under allocated.
Speaker 3: So if we're talking you know, sort of top of
Speaker 3: the stack, like a triple A security, like what sort
Speaker 3: of a risk dreamium. You know, does the private ABS
Speaker 3: deliver versus a public ABS?
Speaker 5: Just generically yeah, So I mean I think the private
Speaker 5: ABS market doesn't get tranched as much as the public
Speaker 5: So I would think of it as sort of IG
Speaker 5: and non IG risk. We on both sides of that
Speaker 5: coin generally see double the spread of the public market equivalent.
Speaker 5: And that's derived from really three things. One is the liquidity, right,
Speaker 5: so it can't go into some of the homes that
Speaker 5: public securities go, the ETFs, the bond funds, I would say,
Speaker 5: the human complexity of sourcing underwriting it right, you have
Speaker 5: to put the docks together versus by the syndicated bond,
Speaker 5: so you've got to build that infrastructure on the sourcing side.
Speaker 5: And then third is the operational complexity. It's very different
Speaker 5: than direct lending and the fund and it's a horrible
Speaker 5: at maturity in five years. Generally, what we're doing is
Speaker 5: revolving facilities. We're funding our borrow or twice weekly, we're
Speaker 5: checking the covenants, ability criteria, the borrowing base, and so
Speaker 5: you need to build up that operational capability, and so
Speaker 5: for all that put together, you get roughly double the
Speaker 5: public market equivalent across the cycle.
Speaker 4: So in the past couple of years, we've been talking
Speaker 4: a lot about the rise of insurance, which is what
Speaker 4: you were mentioning earlier, and most people kind of mentioned
Speaker 4: always Apollo and the Theme and other like insurance tie
Speaker 4: ups that we've been seeing with asset managers, like Blackstone
Speaker 4: has its own, and like all the large asset managers do.
Speaker 4: What should we expect for like the next twelve months,
Speaker 4: Are we going to continue to see like asset managers
Speaker 4: chase those tie ups or is that kind of like
Speaker 4: played out already.
Speaker 2: No, I don't.
Speaker 5: I don't think anyone's chasing. I think insurance companies would
Speaker 5: probably say they're overweight to corporate credit as well. I
Speaker 5: think they see the risk adjusted returns are compelling in
Speaker 5: the asset base base. I think they're trying to figure
Speaker 5: out how to access it, and so I don't think
Speaker 5: we're near the end of that journey. I think they'll
Speaker 5: continue to be partnerships, whether they're exclusive or not be formed.
Speaker 5: I mean, we I spend a lot of time personally
Speaker 5: with insurance companies and helping them understand our platform and
Speaker 5: how we can compliment what they're maybe doing internally, and
Speaker 5: that's where they're looking to, I would say, expand the
Speaker 5: balance sheet on the private side of the ABS side.
Speaker 4: Also, like I have another question on this. Basically, it's
Speaker 4: very We've seen a lot of asset managers when they
Speaker 4: want to grow in acid based finance, they go out
Speaker 4: and kind of like buy a shop instead of building
Speaker 4: one out, and we've seen a few of this in
Speaker 4: many transactions this year. Do you have any shops in
Speaker 4: mind that do you think like now we're going to
Speaker 4: have to they're going to have to go out and
Speaker 4: buy another asset manager, or we're gonna they're going to
Speaker 4: be hiring, or how competitive is it getting in that space?
Speaker 5: Well, I think we were just on the other side
Speaker 5: of a transaction, right, So you know, I'm happy to
Speaker 5: say we're a year into the TPG transaction, and so
Speaker 5: I recall some of their line of questioning when we
Speaker 5: were we were going through through diligence. So it's a
Speaker 5: space that it takes a long time to penetrate, and
Speaker 5: so I can understand why people are buying it versus
Speaker 5: building it. If you want access to that exposure, organic
Speaker 5: is going to take you a while. So I see
Speaker 5: the the rationale. I can't comment really on what other
Speaker 5: people are thinking, but but I mean we we obviously
Speaker 5: saw a firsthand in terms of our transaction with TPG.
Speaker 3: Yeah, you you you invoke the the TPG transaction. It
Speaker 3: it did happen a year ago. TPG has you know,
Speaker 3: been a pretty significant force across the market, as as
Speaker 3: is Angela Gordon over the years, and it definitely seems
Speaker 3: like a complementary fit between the two. I'm sort of
Speaker 3: interested in what uh what new tools uh TPG may
Speaker 3: bring to your toolkit that you didn't have prior to
Speaker 3: the transaction.
Speaker 2: Yeah.
Speaker 5: I mean they have subject matter expert teas in very
Speaker 5: deeply in certain spaces, and so the one that probably
Speaker 5: is most relevant to my business is in the climate space, right,
Speaker 5: and so they've got a tremendous franchise and their private
Speaker 5: equity business called Rise Climate, and so a lot of
Speaker 5: that infrastructure or even consumer type products actually gets funded
Speaker 5: in the debt market, and you know, tangentially with ABS. So,
Speaker 5: I mean the easiest example is RESI Solar, right, Like
Speaker 5: that's kind of the most generic one I can point to.
Speaker 5: But as things continue to emerge, the fact that our
Speaker 5: investment team on my side can now tap into that
Speaker 5: really subject matter expertise on the technology, on the competitive landscape,
Speaker 5: that's where that's where we've been spending time.
Speaker 2: Now.
Speaker 3: It's interesting bringing up residential solar because and this sort
Speaker 3: of gets back to the change in administrations. The incoming administration,
Speaker 3: I don't know, it just seems like it might be
Speaker 3: a little less interested in supporting climate change and understand it.
Speaker 3: There's a there's you know, fairly significant amount of government
Speaker 3: financial backing that goes into that into that segment. Is
Speaker 3: that the sort of thing where you might see change
Speaker 3: over the next four years.
Speaker 5: Yeah, I mean, listen, there can definitely be change with
Speaker 5: anything that has tax credits or sort of other you know, softer,
Speaker 5: harder regulatory aspects. I mean, I think if people still want,
Speaker 5: you know, solar power, a lot of that is quite
Speaker 5: honestly made in the Red States, right in terms of
Speaker 5: where the jobs are, and so I'd be surprised if
Speaker 5: it's as blunt force as as maybe the rhetoric is.
Speaker 5: So I don't think we're particularly worried about that, but
Speaker 5: we'll see how this plays out.
Speaker 1: I think that's what you were saying TJ about talking
Speaker 1: to the insurance companies and other new types of investors
Speaker 1: about this asset class. How do you talk to them
Speaker 1: about valuing the assets over time and monitoring for stress
Speaker 1: and you know, any particular words on liquidity. I mean,
Speaker 1: do you just tell them you can't try it, you
Speaker 1: go to stuck with it for the next seven years
Speaker 1: and just hold on to it and be happy.
Speaker 5: Well, no, I think people are looking to take advantage
Speaker 5: of the illiquidity premiums, right So. I think most investors
Speaker 5: are going into that eyes wide open. It's not being misallocated,
Speaker 5: if you will, into a liquid vehicle, right so, especially
Speaker 5: the insurance companies, as you mentioned. So, I mean, the
Speaker 5: fact of the matter is is most of these asset
Speaker 5: classes have been around for decades and decades, and there's
Speaker 5: a tremendous amount of performance history to effectively when you're
Speaker 5: underwriting the initial transaction as well as sort of doing
Speaker 5: your asset management work, understanding where.
Speaker 2: The trajectory of the performance is going.
Speaker 5: It's not a surprise if you will like where things
Speaker 5: are today, whether you think they're trending twelve months from now.
Speaker 2: We shouldn't be.
Speaker 5: That far off based on all the tools we have
Speaker 5: available to us. And that's really where sort of the infrastructure,
Speaker 5: the asset management, the analytics come in. And that goes
Speaker 5: back to why we have not seen a tremendous amount
Speaker 5: of competition because you need to build us and it
Speaker 5: costs a lot of money, it takes a lot of time,
Speaker 5: and there's a little bit of an incumbency bias to
Speaker 5: this business versus maybe some other products that are more
Speaker 5: easily accessible.
Speaker 1: So is it safer than in relative terms than direct lending?
Speaker 5: I think the risks are different, right, I think the
Speaker 5: risks are different. We talked about duration, we talked about
Speaker 5: the cash flow profile, we talked about having the assets secured.
Speaker 5: The downside, maybe there's probably more direct lenders than there
Speaker 5: are sypacks finance providers, So in terms of thinking about
Speaker 5: their refinancing risk, you might say that it's better opportunity
Speaker 5: in the direct lending space. But from our seat, when
Speaker 5: we look at our borrowers or counterparts, we have a
Speaker 5: very high recapture rate on those financings. Right, there's less
Speaker 5: competition if both sides are happy there's a high switching
Speaker 5: costs versus direct lending. Meaning we've got the SPV setup,
Speaker 5: we've got the trustees in place, we've got the borrowing base,
Speaker 5: we've got the legal docs. If it's working for both counterparties,
Speaker 5: we generally see pretty hybrid nual rates.
Speaker 3: We should also be able to cut stamize things for
Speaker 3: the buyers as well, right, more so than you know,
Speaker 3: sort of just direct lending would.
Speaker 5: Yeah, correct, I mean it's it's still highly covenanted, right,
Speaker 5: Like it's different than direct lending, where I think it's
Speaker 5: a multiple and a and a spread function largely driving.
Speaker 5: And I think it's about eligibility criteria, it's about flexibility.
Speaker 5: Those are things that are important to these specialty finance
Speaker 5: companies much more so than just what's the raw spread?
Speaker 1: Right? How big is the investable opportunity?
Speaker 5: Yeah, the million dollar question. Listen, I think we can
Speaker 5: we can easily kind of get to a seven potentially
Speaker 5: in a dollar market. I know there's numbers flying around
Speaker 5: multiples of that. Yeah, regardless, it's a giant, gigantic opportunity.
Speaker 5: And you know, we're very busy, right to say the least.
Speaker 4: Because the forty trillion number that other estimates just throughout
Speaker 4: what also including infrastructure, energy like other asse of classes.
Speaker 5: Right, Yeah, I mean we always say private credit is
Speaker 5: very loosely defined, So I mean you can you can
Speaker 5: add a whole bunch of ingredients and get to a
Speaker 5: bigger number.
Speaker 1: You've told about more beage finance and also equipment finance offline.
Speaker 1: Can you talk about a bit more about the opportunity then, Well.
Speaker 5: I mean, equipment finance is a space that's kind of
Speaker 5: core to again, kind of the main street economy.
Speaker 2: Right.
Speaker 5: It's been a space that has been dominated by the
Speaker 5: regional banks, and so even an interested investor from the
Speaker 5: private credit side has had a very hard time accessing it.
Speaker 5: That changed in twenty twenty three, and so we've spent
Speaker 5: the last twelve months or so really you know, interviewing counterparties,
Speaker 5: whether they be banks or non bank originators, and figuring
Speaker 5: out how to plug that gap where that borrow or
Speaker 5: that finance, that that financing need was traditionally going to
Speaker 5: regional bank one two three, They can't fulfill that anymore.
Speaker 5: The business is still good, the equipment is still the equipment,
Speaker 5: and so that's a space that we think is in
Speaker 5: the very kind of early intings of transitioning into more
Speaker 5: of a stable private credit subsector. On mortgage finance, that
Speaker 5: is a space where the interest rate move has had
Speaker 5: a profound effect on volumes and how the consumer or
Speaker 5: the borrower utilizes it. And so you know, you sit
Speaker 5: here today and the US is unique and with this
Speaker 5: thirty year fixed rate mortgage product where borrowers have effectively
Speaker 5: locked in their lowest the lowest rate they can get
Speaker 5: on their largest obligation. And that's a good thing, right,
Speaker 5: But now you see someone that's been in their house
Speaker 5: for seven eight years with a three and a half
Speaker 5: percent mortgage saying, you know, I've got hundreds of thousand
Speaker 5: dollars of home equity.
Speaker 2: How do I access that?
Speaker 5: Traditionally you would refinance your firstly and take some cash out.
Speaker 5: That math doesn't make any sense today, and so we're
Speaker 5: seeing the evolution of home equity products. Again, we think
Speaker 5: the credit is pristine at this point. So that's a
Speaker 5: space where we're looking to get deployed quickly. We know
Speaker 5: credit standers can loosen over time as more people, you know,
Speaker 5: look for that opportunity, and so that's a space that
Speaker 5: you know, we expect there could be one hundred and
Speaker 5: fifty to twohentred million of origination per year with a
Speaker 5: call it two trillion dollar really a dressable market there
Speaker 5: on the he looks helocks or secondly as yeah, yeah, okay, So.
Speaker 3: Rates go up, rates go down. I look at the
Speaker 3: the BDCs also on the credit side, and it seems
Speaker 3: to be a double edged sword, at least for business
Speaker 3: development companies. If rates go up, it puts a little
Speaker 3: bit more stress on the borrowers, but it also creates
Speaker 3: you know, more of a I guess of a spread
Speaker 3: opportunity for the for the lender. Rates go down, less
Speaker 3: stress on the borrow but maybe maybe you know, sort
Speaker 3: of less less margin to be had there. How does
Speaker 3: that operate in your business? So I think we're looking
Speaker 3: at probably the consensus points towards about three rate cuts
Speaker 3: over the next twelve months. It's been as high as
Speaker 3: six or seven, you know if you look back a
Speaker 3: few months. So rates go down, three rate cuts next
Speaker 3: twelve months. How does that work in your business?
Speaker 5: I think it's it's less impactful than it is on
Speaker 5: the corporate side.
Speaker 2: I think I think.
Speaker 5: The duration of the product therefore leads to I would
Speaker 5: say more natural resetting. There aren't these big cliff or
Speaker 5: wall events where you're gonna have a whole bunch of
Speaker 5: low cost ig credit from twenty twenty one rollover, Right,
Speaker 5: So most of what we're doing is lending on a
Speaker 5: floating rate basis to these specially financed companies. They're adjusting
Speaker 5: their return on assets, right, So they're what they're charging
Speaker 5: to their consumer moves kind of in tandem, and it's
Speaker 5: resetting really on a daily basis.
Speaker 2: Right.
Speaker 5: So if you're an auto finance company and the FED
Speaker 5: cuts or it doesn't cut, you can kind of naturally
Speaker 5: think of twenty five basis points and rate being passed on.
Speaker 5: So there's not as much of this kind of built
Speaker 5: up a mismatch, if you will. I think I don't
Speaker 5: foresee rates causing a lot of stress in this market.
Speaker 5: I think that really occurred in twenty twenty two and
Speaker 5: there was a giant reset of both rates and spread,
Speaker 5: and I think companies were stress tested then.
Speaker 2: I think things are more on balance today.
Speaker 3: Yeah, they certainly were. Five hundred and twenty five basis
Speaker 3: point increase in base rates and then increase risk premiums
Speaker 3: on top of that was some discombobulation of the banking
Speaker 3: market made for an interesting environment. I think it's actually
Speaker 3: pretty remarkable how well credit managed through all of those changes.
Speaker 5: I mean, listen, it didn't feel great in the second
Speaker 5: or third quarter of twenty two, but you know, most
Speaker 5: people got to the other side. Whether you know, again,
Speaker 5: it was more of a it was more of the
Speaker 5: issuers problem than it was so much the investors problem.
Speaker 5: The investors could kind of patiently wait and see how
Speaker 5: this shakes out. The issuers were the ones that had
Speaker 5: liquidity needs. They were kind of the four sellers of
Speaker 5: twenty twenty two. It wasn't the owners of the bonds.
Speaker 5: It was actually the owners of the loans that needed
Speaker 5: to turn over their facilities, and so you know, it
Speaker 5: wasn't a productive P and L environment for them. But
Speaker 5: to your point, made it to the other side. And
Speaker 5: now I think those companies have sort of reset and
Speaker 5: they've Again that goes back to why there's more demand
Speaker 5: for private credit, because if some of those companies had
Speaker 5: fifty percent of their production already determined to go to counterparty,
Speaker 5: why regardless of where triple A spreads were, they would
Speaker 5: have an easier process getting through twenty twenty two than
Speaker 5: they otherwise did.
Speaker 3: Yeah, yep.
Speaker 1: One thing we've seen on the public side in terms
Speaker 1: of credit spreads, you know, they're incredibly tight, you know,
Speaker 1: decades long loads in terms of you know, IG and
Speaker 1: high yield, and parts of that has been due to
Speaker 1: the fact that supply has been taken out by the
Speaker 1: private markets. To what extent does that happen in asset
Speaker 1: backed markets and how will that affect pricing?
Speaker 2: That's a good question. I think.
Speaker 5: I think the preferred method of funding will still be
Speaker 5: the public markets, just from a cost perspective. I think
Speaker 5: of the private markets as either the means to the end,
Speaker 5: meaning so we're giving that bridging or where house capacity
Speaker 5: to get to that public markets, and so that will
Speaker 5: always be necessary capital. But I don't see many specially
Speaker 5: finance companies completely going to private funding based on where
Speaker 5: the opportunity or where they're funding opportunities are today. So
Speaker 5: it's much more balanced. I think, you know, where we
Speaker 5: set is we're really playing across public and private markets,
Speaker 5: and so that also provides some of our counterparties, we
Speaker 5: provide them more utility than if we were just in
Speaker 5: the public markets or just in the private markets. And
Speaker 5: that's also sort of a sourcing advantage when we think
Speaker 5: about our business.
Speaker 1: Okay, there's probably some listeners out there thinking, you know,
Speaker 1: securitization at the highest levels since the global financial crisis
Speaker 1: and then all of it being bundled up and into
Speaker 1: private hands where you can't see what's going on, sets
Speaker 1: off a few alarm bells, particularly if you're old like
Speaker 1: me and remember the last market catastrophes. What are we
Speaker 1: doing differently this time? Why are we're not going to
Speaker 1: get into the same kind of trouble as we did
Speaker 1: last time?
Speaker 5: Well, I mean, listen, I think the fact that it's
Speaker 5: going to I would tell you private transactions are generally
Speaker 5: pretty discerning in terms of the eligibility criteria, the traps
Speaker 5: if you will, to cut things off if they are
Speaker 5: going bad, and more so than what would be a
Speaker 5: traditional static pool securitization. So the more capital that goes
Speaker 5: into private markets actually probably means there's more control and risk.
Speaker 2: Listen. I think.
Speaker 5: Whether it's the rating agencies or whether it's the sophistication
Speaker 5: of the actual bond buyers versus two thousand and eight,
Speaker 5: I think the whole game has changed and evolved. But
Speaker 5: at the end of the day, I don't think there's
Speaker 5: new credit being created, it's the geography of where that
Speaker 5: credit is. So again, we've talked a lot about the
Speaker 5: auto loans used to live on the regional bank balance sheet.
Speaker 5: That person still needs the auto loan, the car still
Speaker 5: exists as the collateral. It's not being created in thin air.
Speaker 5: So now that it's being funded in the securitization market
Speaker 5: versus the regional bank, that doesn't mean there's sort of access.
Speaker 5: It's just the geography of the funding that's the theme
Speaker 5: of I think twenty twenty three.
Speaker 3: Seems to be a lot less leverage in the system too,
Speaker 3: and less financial weapons of mass destruction in the form
Speaker 3: of CDs.
Speaker 5: Yeah, I was gonna say exactly, like CDs and CDOs
Speaker 5: are no longer a tool.
Speaker 2: To put leverage on leverage, right.
Speaker 5: A lot of that was, you know, manufactured triple a
Speaker 5: risk that I just I don't think whatever fly knowing
Speaker 5: what we know today, but.
Speaker 1: We all still see some signs of synthetic leverage coming up, right,
Speaker 1: I mean, there are some signs out there that you know,
Speaker 1: there is a bit more froth in the muket.
Speaker 5: Well, I mean, if you're talking about the SRT space,
Speaker 5: I mean that's actually the inverse of what happened in
Speaker 5: the GFC. The GFC, the goal was created as much
Speaker 5: triple A cheap financing as possible and export that. I
Speaker 5: think you see now the big banks sort of get
Speaker 5: capital relief throughout, but they still own the assets, they're
Speaker 5: still funding it. It's not necessarily being exported the way.
Speaker 2: It used to be.
Speaker 1: And if you think about everything, you're doing everything, you're
Speaker 1: looking at what's the best relative value, where's the best
Speaker 1: opportunity right now? In credit?
Speaker 5: Well, again, from a deployment perspective, we think lending is
Speaker 5: much better than owning, generally speaking, because there's less people
Speaker 5: that are built to do it. From an asset perspective,
Speaker 5: I think we're focused on housing, we're focused on residential
Speaker 5: real estate. We're generally undersupplied, and so these kind of
Speaker 5: emerging home equity products, if you will, seem very compelling
Speaker 5: right now because if you think about what you just asked,
Speaker 5: the amount of regulation that went into residential mortgages Posts
Speaker 5: two thousand and eight has led to really pristine credit
Speaker 5: quality even fifteen years later, and so I think that
Speaker 5: is the place, if you will, to look for high
Speaker 5: quality assets, even if the spreads are not what they
Speaker 5: once were, you know Twelvey eighteen months ago.
Speaker 1: Great stuff. TJ. Duck and Head of Structured Credit and
Speaker 1: Specialty Finance at TPG, Angelo Gordon, It's been a pleasure
Speaker 1: having you on the Credit Edge, Thanks guys, and of
Speaker 1: course we're very grateful to David Havenes from Bloomberg Intelligence.
Speaker 1: Thanks for much for joining us today.
Speaker 2: Yep.
Speaker 3: Great being with you all.
Speaker 1: And to Carmen Arroyo with Bloomberg News milgratias.
Speaker 4: Thank you.
Speaker 1: Please do follow Carmen on Bloomberg dot com and the
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