WEBVTT - Frisky Dentists 0:00:02.759 --> 0:00:07.560 Bloomberg Audio Studios, podcasts, radio news. 0:00:07.960 --> 0:00:12.600 I am so tickled that Bloomberg just has like loose 0:00:12.840 --> 0:00:16.079 starbursts is a snack option, at least for this week. 0:00:16.320 --> 0:00:19.040 I'm most tickled by the chocolate covered Swedish fish. Yeah, 0:00:19.079 --> 0:00:22.360 my children are occasional Swedish fish eaters. Katie's going to 0:00:22.440 --> 0:00:23.959 unwrap and chew a Star Wars. 0:00:23.680 --> 0:00:27.160 On this podcast. Amazing. We're gonna silk the mic away 0:00:27.200 --> 0:00:27.960 as I chew it. 0:00:28.400 --> 0:00:30.560 I haven't headline, and I have a bucket of Star Wars. 0:00:30.640 --> 0:00:32.360 I'm hoping you're going to talk for like at least 0:00:32.400 --> 0:00:33.400 fifteen seconds. 0:00:33.120 --> 0:00:35.080 So I can heap this fifteen seconds. I feel like 0:00:35.080 --> 0:00:37.640 a Star Wars. There's like a two minute proposition anyway. 0:00:37.720 --> 0:00:40.960 Swedish fish, chocolate covered Swedish fish. I'm killing time now 0:00:41.000 --> 0:00:44.360 with Katie cheese chocolate covered Swedish fish just loose in 0:00:44.400 --> 0:00:47.360 a big tank. My children are sort of Swedish fish eaters, 0:00:47.360 --> 0:00:50.680 and I want to bring to them the imubious pleasures 0:00:50.680 --> 0:00:53.720 of chocolate covered Swedish fish. But I can't just take a. 0:00:53.600 --> 0:00:57.360 Handful of No, you gotta wrap in a napkin or something. 0:00:58.160 --> 0:01:00.000 To figure it out. Transporting the chocolate cover. 0:01:00.400 --> 0:01:03.400 Fish to your point on time about starbursts, I eat 0:01:03.400 --> 0:01:07.080 a lot of starbursts. I keep a bag of star Wars. Yeah, 0:01:07.120 --> 0:01:10.560 pretty much in my car. So I pretty much optimized 0:01:10.760 --> 0:01:12.800 my process and I. 0:01:12.760 --> 0:01:15.839 Have not time. I'm not going to attempt the starbursts 0:01:15.959 --> 0:01:16.720 during this podcast. 0:01:16.720 --> 0:01:18.360 That's going to take you a while. You've got a 0:01:18.400 --> 0:01:19.360 lot of starburst there. 0:01:19.400 --> 0:01:21.800 So do you tell about real estate? Is it boring? 0:01:22.440 --> 0:01:25.119 No, it's been pretty cutthroat. This past week has been 0:01:25.200 --> 0:01:28.920 pretty harrowing in terms of, you know, the tight ropeer' 0:01:28.959 --> 0:01:31.080 walking when it comes to our real estate dealings. Right now, 0:01:31.720 --> 0:01:34.400 I can't care about anything. I don't know. I just 0:01:35.000 --> 0:01:38.240 like if it's not interrupting the flow of nutrients to 0:01:38.280 --> 0:01:40.440 my placenta. Like I just I can't make myself care 0:01:40.480 --> 0:01:41.120 about anything. 0:01:42.640 --> 0:01:44.960 Hello, and welcome to podcast. 0:01:46.400 --> 0:01:50.440 I think that listen, I'm here. It's amazing that I'm here. 0:01:51.400 --> 0:01:54.800 We're not going to call the episode of nutrients to Santova. 0:01:54.920 --> 0:01:59.240 It's pretty good though, right all right, Hello. 0:01:59.000 --> 0:02:01.800 And welcome to The Money's Podcast, your weekly podcasts where 0:02:01.800 --> 0:02:04.240 we're talk about stuff and Katie doesn't care about we're 0:02:04.240 --> 0:02:06.960 talking about stuff related to money. I'm Matt Levine. And 0:02:07.000 --> 0:02:09.040 I write the money Stuff column for Bloomberg Opinion. 0:02:09.160 --> 0:02:12.320 Okay, I definitely care about money. My name is Katie Greifeld. 0:02:12.320 --> 0:02:14.480 I'm a reporter for Bloomberg News and an anchor for 0:02:14.520 --> 0:02:15.440 Bloomberg Television. 0:02:18.240 --> 0:02:20.520 Should I read my favorite news story of the week, 0:02:20.560 --> 0:02:22.320 which he was really a new story of last week, 0:02:22.360 --> 0:02:23.720 but we didn't get to it because you were out. 0:02:24.280 --> 0:02:25.320 GameStop is by. 0:02:26.840 --> 0:02:30.400 Amazingly. This wasn't a huge topic of conversation at Milkin, 0:02:30.600 --> 0:02:31.680 but I would have liked it to be. 0:02:32.040 --> 0:02:34.720 It should have been Michael Milkan. He neted the highly 0:02:34.760 --> 0:02:37.400 confident letter, which in my time as a mergers and 0:02:37.400 --> 0:02:39.400 acquisitions lawyer, he did not see a lot of highly 0:02:39.400 --> 0:02:45.600 confident letters because they were replaced by commitment letters. But 0:02:47.000 --> 0:02:49.880 game Stuff is brought back the highly confident letter. But yeah, 0:02:49.880 --> 0:02:51.840 so games up, I guess last week put in a 0:02:51.880 --> 0:02:56.239 bid to buy Evey for half cash half stock. Game 0:02:56.280 --> 0:02:58.880 Stuff has neither the cash nor the stock, which is funny. 0:02:58.880 --> 0:03:00.720 People are like, well, game Stuff doesn't enough stuck because 0:03:00.720 --> 0:03:03.480 ebased so much bigger. That's not a real thing. You 0:03:03.520 --> 0:03:05.480 can issue as much stock as you want in the 0:03:05.520 --> 0:03:09.040 general case, but game Stop can't because it doesn't have 0:03:09.120 --> 0:03:11.840 enough authorized shares. No, it's trying to authorize more shares. 0:03:12.000 --> 0:03:14.040 But yeah, so it's going to pay twenty eight billion 0:03:14.080 --> 0:03:18.800 in cash for eBay, which requires borrowing twenty billion dollars 0:03:18.840 --> 0:03:22.200 from TV Bank. Yeah, gave it a highly confident letter 0:03:22.240 --> 0:03:24.080 saying that we could probably raise that money, no problem, 0:03:24.200 --> 0:03:26.880 no commitments, and then I was going to issue stock 0:03:26.919 --> 0:03:30.240 for the rest, and they lobbed in that bid. Last week, 0:03:30.280 --> 0:03:34.200 everyone scratched their heads. This week Evey said no, thank you. 0:03:34.320 --> 0:03:34.560 Yeah. 0:03:34.720 --> 0:03:38.000 The latest news is that Ryan Cohen, the CEO of 0:03:38.040 --> 0:03:40.880 game Stop, is going around giving interviews and sending letters 0:03:40.880 --> 0:03:42.880 to EVA saying no, no, no, you you should take 0:03:42.960 --> 0:03:43.760 my bid seriously. 0:03:43.960 --> 0:03:45.880 So, man, I aren't allowed to talk unless we're in 0:03:45.920 --> 0:03:47.960 this room with microphones in front of us. So it's 0:03:48.000 --> 0:03:53.000 been interesting through your columns, watching your sort of like 0:03:53.000 --> 0:03:55.560 wrestling with the idea of this a fag takeover offer. Two. 0:03:55.640 --> 0:03:57.760 Maybe this was a job application all along. 0:03:57.920 --> 0:04:00.960 Yeah. My thinking is about because obviously I know, I 0:04:01.000 --> 0:04:03.600 know and love game Stop as a meme stock, and 0:04:04.640 --> 0:04:07.880 this feels very stunty in a lot of ways, one 0:04:07.880 --> 0:04:09.520 of which is that they don't have the money. In 0:04:09.560 --> 0:04:11.400 other words, they don't have the stock, which is hard 0:04:11.440 --> 0:04:13.680 to do. You have to like work hard to not 0:04:13.720 --> 0:04:16.080 have the ability to issue stock for a takeover that 0:04:16.120 --> 0:04:18.920 you're planning to do. Another is that Ryan Cohen has 0:04:18.960 --> 0:04:20.680 did a little stunt where he listed some of his 0:04:20.760 --> 0:04:24.640 personal possessions, including his socks, on eBay as like research 0:04:24.680 --> 0:04:26.160 slash financing for the takeover. 0:04:28.160 --> 0:04:30.800 I feel like you're maybe going to bid on those socks. 0:04:30.839 --> 0:04:35.400 You've mentioned them so many times. The socks are they used? 0:04:38.160 --> 0:04:39.800 I think they are, but I'm trying not to think 0:04:39.839 --> 0:04:41.479 about that now. I'm not gonna been on the socks 0:04:41.480 --> 0:04:43.400 in any case. But so so I was like, this 0:04:43.480 --> 0:04:44.920 is like a joke, This is a fake takeover. This 0:04:44.960 --> 0:04:46.800 is poorly thought out. But the more I think about it, 0:04:46.800 --> 0:04:49.080 and this is based in part on interviews that Cohen 0:04:49.160 --> 0:04:51.880 has given. He wants to be CEO of eBay, and 0:04:53.320 --> 0:04:58.080 this is a convoluted, poorly thought out way for him 0:04:58.080 --> 0:05:00.720 to say, make me CEO of eBay. His case for 0:05:00.800 --> 0:05:03.840 being CEO of eBay is not crazy, right, He ran well, Okay, 0:05:03.880 --> 0:05:06.599 Katie's Rolling Rise and it's crazy. But but like he 0:05:06.680 --> 0:05:08.520 ran a big he like founded and ran a big 0:05:08.520 --> 0:05:12.520 e commerce company, Chewy. He I don't think that you 0:05:12.560 --> 0:05:15.880 would say that he has succeeded in his dreams of 0:05:15.920 --> 0:05:19.640 making GameStop a serious competitor to Amazon, but he's cut 0:05:19.640 --> 0:05:21.760 costed games. If you've turned around the business a little bit. 0:05:21.800 --> 0:05:24.520 He's had a good run running game Stop, and now 0:05:24.520 --> 0:05:28.520 he wants to run eBay, and this is his application 0:05:28.720 --> 0:05:31.080 to run eBay. The handy ret is, if you offer 0:05:31.120 --> 0:05:33.880 to buy a company for cash, it doesn't matter what 0:05:33.960 --> 0:05:36.840 your plans for the company. You might say them because 0:05:37.080 --> 0:05:40.040 you know it might be might appeal to someone, but ultimately, 0:05:40.040 --> 0:05:42.080 if you're like, I'm gonna pay you cash, then the 0:05:42.120 --> 0:05:44.200 shareolders are like, okay, I'll take cash, and then I'll 0:05:44.240 --> 0:05:45.719 be out of the company, and whatever you do with 0:05:45.720 --> 0:05:48.080 the company is your problem, not mine. Right. If you're 0:05:48.160 --> 0:05:51.160 like Meta and you're offering to buy a small startup 0:05:51.240 --> 0:05:54.000 for stock, it's almost the same thing. What Meta does 0:05:54.040 --> 0:05:56.680 with that startup sort of doesn't matter to the startups 0:05:57.200 --> 0:06:00.400 owners because they're just getting stock in this giant entity. 0:06:02.040 --> 0:06:05.599 But when you are game Stop offering to buy eBay 0:06:05.640 --> 0:06:09.520 for stock, and eBay is really quite a lot bigger 0:06:09.560 --> 0:06:12.760 than game Stop, Owen's math is like eBay would ownt 0:06:12.760 --> 0:06:14.760 twice as much of the company as game Stop. But 0:06:14.800 --> 0:06:18.240 it's like, really more than that. But so in that scenario, 0:06:18.480 --> 0:06:21.600 the only thing that matters to eBay shareholders is what 0:06:21.640 --> 0:06:23.960 are your plans for eBay? Would you do a better 0:06:24.040 --> 0:06:27.320 job of running eBay than eBay's current management would And 0:06:27.440 --> 0:06:29.760 you know, Coen is making that case. He's like, yeah, 0:06:29.800 --> 0:06:32.080 I've provided over a value to collide and I will 0:06:32.120 --> 0:06:36.560 do you know, jazzy memestock stuff. So that's where we are. 0:06:36.640 --> 0:06:38.240 He's making the case that he could run it better 0:06:38.279 --> 0:06:42.360 than eBay does. And all this stuff about half cash, 0:06:42.400 --> 0:06:47.279 half stock, takeovers, one hundred and twenty five dollars, takeover 0:06:47.440 --> 0:06:49.080 for sure of takeover, p has all that is kind 0:06:49.080 --> 0:06:51.719 of fake. It's really do you want him to be 0:06:51.960 --> 0:06:52.520 your CEO? 0:06:52.880 --> 0:06:53.040 Then? 0:06:53.080 --> 0:06:57.280 I don't get the sense that eBay shareholders are clamoring from. 0:06:58.160 --> 0:07:00.560 It's more of a game Stop old thing. 0:07:00.640 --> 0:07:03.120 But first of all, I have to commend you for 0:07:03.360 --> 0:07:06.640 watching the Ryan Cohen interview with the Reddit. You did 0:07:06.640 --> 0:07:08.520 you didn't watch the palm video. 0:07:08.880 --> 0:07:14.800 I didn't do that. No, well, okay, not Coen did, 0:07:14.800 --> 0:07:17.720 because it's you know, eliciting materials. 0:07:17.960 --> 0:07:21.440 I did think it's interesting in that that interview. First 0:07:21.440 --> 0:07:23.440 of all, he was appealing that he should be a 0:07:23.520 --> 0:07:28.000 CEO of eBay, that he gives a hoot. Basically, yeah, 0:07:30.840 --> 0:07:32.840 he said a bad word, but basically he put his 0:07:32.880 --> 0:07:34.600 money where his mouth is. You do on a lot 0:07:34.600 --> 0:07:35.800 of eBay shares, et cetera. 0:07:36.040 --> 0:07:39.080 This is like such standard activist playbook. Active is always 0:07:39.800 --> 0:07:41.520 five percent, not the doesn't five. 0:07:41.400 --> 0:07:44.960 Percent of Yeah, but he also said that he doesn't 0:07:45.000 --> 0:07:49.040 really want to be game stops. You that's crazy. 0:07:49.400 --> 0:07:50.240 He did say that. 0:07:50.440 --> 0:07:52.320 Yeah, I read that a few times because I'm like, 0:07:52.320 --> 0:07:54.840 that is crazy work. This is what he said. I 0:07:54.880 --> 0:07:58.040 have always long admired eBay's business, and I didn't want 0:07:58.080 --> 0:08:00.520 to be the CEO of game stops. 0:08:00.680 --> 0:08:03.240 Yeah, game stuff to take over EVA. 0:08:03.120 --> 0:08:05.880 But I looked at GameStop share price because then naively 0:08:05.880 --> 0:08:08.160 thought it was like, does anyone care that the CEO 0:08:08.240 --> 0:08:09.720 said that that they don't want to be the CEO 0:08:09.800 --> 0:08:11.280 and it seems like they don't. 0:08:11.600 --> 0:08:12.720 They enjoy being nagged. 0:08:13.000 --> 0:08:16.880 Yeah, apparently, I don't know what sort of psychological experiment 0:08:16.960 --> 0:08:20.320 is going on with game stop shareholders, but it's fascinating. 0:08:21.240 --> 0:08:24.120 Yeah, I'm sure you didn't mean it like that. I mean, 0:08:24.200 --> 0:08:25.440 I don't know how I meant it, but I. 0:08:25.440 --> 0:08:28.440 Mean, neither of us watched the video, so all we're 0:08:28.440 --> 0:08:31.280 doing is reading the naked words. But the naked words 0:08:31.320 --> 0:08:33.839 say I didn't want to be the CEO of game Stop, 0:08:33.960 --> 0:08:36.679 so it's wild I do find it. 0:08:36.960 --> 0:08:38.920 I think it was like he you know, took over, 0:08:39.040 --> 0:08:40.680 like he bought a big position in game Stop and 0:08:40.679 --> 0:08:43.800 gave them some suggestions and then ultimately was like, I 0:08:43.840 --> 0:08:45.000 need to be running this company. 0:08:45.160 --> 0:08:45.439 Yeah. 0:08:45.480 --> 0:08:47.880 It was not like he started an activist campaign to 0:08:47.880 --> 0:08:50.120 put himself in charge in the beginning. It was more 0:08:50.200 --> 0:08:54.240 like he liked, yeah, and then now I need to 0:08:54.240 --> 0:08:54.640 fix it. 0:08:54.720 --> 0:08:54.960 Yeah. 0:08:55.160 --> 0:08:57.560 Also just like he's like retired after two and then 0:08:57.600 --> 0:08:59.920 he was like, no, I need to shake the pups. 0:09:00.480 --> 0:09:03.360 Yeah, well we'll see if it works. It doesn't seem 0:09:03.360 --> 0:09:04.360 like it's going to. No. 0:09:04.760 --> 0:09:06.800 The next thing he do is run a proxy fight. 0:09:06.840 --> 0:09:09.520 But of what's happened here is this is so disorganized 0:09:09.559 --> 0:09:12.000 and not real, Like, you know, he offered to do 0:09:12.040 --> 0:09:15.920 a takeover with enough authorized shares. Their annual meeting is 0:09:15.920 --> 0:09:20.000 coming up, the deadline fornominations is long past. They can't 0:09:20.000 --> 0:09:23.240 actually do a proxy for it for months now at least, 0:09:23.960 --> 0:09:29.720 So it's it's not a real a real activist. It's 0:09:29.760 --> 0:09:32.040 more just sort of like poking around and seeing what 0:09:32.080 --> 0:09:32.520 will happen. 0:09:32.760 --> 0:09:35.440 Yeah, and just stirring it up. I do find it 0:09:35.480 --> 0:09:38.400 interesting that he's so enamored with eBay, like he just 0:09:38.520 --> 0:09:42.160 this is his white whale. He just he just wants eBay, 0:09:42.960 --> 0:09:44.440 which is mostly good. 0:09:44.559 --> 0:09:46.600 You know, start an e commerce company. 0:09:46.760 --> 0:09:47.000 Yeah. 0:09:47.080 --> 0:09:49.240 Also he now runs a I don't know what these 0:09:49.280 --> 0:09:52.920 companies are. He runs a collectibles company. Sure, eBay is 0:09:53.000 --> 0:09:57.199 like the white whale of online collectibles. 0:09:57.480 --> 0:10:00.600 That's where you go for collectibless. That's true, and. 0:10:00.520 --> 0:10:03.440 There's a huge energy where you can both go to 0:10:03.480 --> 0:10:06.400 eBay's website or walk into your local game stop and 0:10:06.440 --> 0:10:10.160 get your collectibles created and auctioned. I watch this space. 0:10:10.559 --> 0:10:12.839 I'm hoping he continues to do nonsense. This is the 0:10:12.880 --> 0:10:15.360 case where even if it just fizzles, it's still interesting 0:10:15.400 --> 0:10:17.520 because game stop owns five percent of the based stock, 0:10:17.600 --> 0:10:19.920 and if it fizzles, they're gonna have to sell that. 0:10:19.920 --> 0:10:21.959 That's going to be kind of awkward if they do it, 0:10:22.080 --> 0:10:24.120 they take over and then sell the stock. You're not 0:10:24.120 --> 0:10:24.920 really supposed to do that. 0:10:25.120 --> 0:10:26.880 Yeah, it's kind of to He gave. 0:10:26.800 --> 0:10:29.040 It interview on the NBAC that was like super super 0:10:29.080 --> 0:10:32.360 super awkward, although honestly it wasn't entirely. 0:10:32.679 --> 0:10:34.480 I had to take breaks as I was watching it. 0:10:35.080 --> 0:10:39.080 Yeah, one thing that I've written is again, like people's 0:10:39.240 --> 0:10:42.400 initial reaction to this was like, how could game Stop 0:10:43.480 --> 0:10:46.240 pay twenty eight billion dollars of stock for eBay if 0:10:46.280 --> 0:10:48.160 it only has twelve billion dollars stock? And I think 0:10:48.160 --> 0:10:50.240 that's the wrong way to look at it. Like, you 0:10:50.280 --> 0:10:52.640 can issue as much stock as you want, and twenty 0:10:52.640 --> 0:10:54.640 eight billion dollars stack for eBay would just be stock 0:10:54.679 --> 0:10:56.920 of eBay. It would just be like eBay shareolders would 0:10:56.920 --> 0:11:00.240 be given ownership interest in their own company. And the 0:11:00.280 --> 0:11:02.360 thing that would change was it would be one it 0:11:02.400 --> 0:11:05.400 would be smitshed together with game Stop, and two, more importantly, 0:11:05.679 --> 0:11:07.520 Ryan con would run the whole thing. So if you 0:11:07.520 --> 0:11:09.679 think Ryan Cohn running it is a good thing, then 0:11:09.679 --> 0:11:12.000 you'll think, oh great, twenty eight billion dollars of stock 0:11:12.040 --> 0:11:15.080 in this acquisition is valuable. It doesn't have anything to 0:11:15.120 --> 0:11:17.440 do with how much game Stop is currently worth, right, 0:11:17.480 --> 0:11:20.120 It only has to do with what you think the 0:11:20.160 --> 0:11:22.920 future combined company is worth. So my, you know, I 0:11:22.960 --> 0:11:24.440 watched that interview and I was like, why are people 0:11:24.480 --> 0:11:26.360 giving him a hard time about not having enough stock. 0:11:26.840 --> 0:11:28.760 You can issue as much stock as you want. Then 0:11:28.800 --> 0:11:30.760 I went and read their certificate of incorporation and I 0:11:30.800 --> 0:11:33.560 realized he can't actually issue an his stock and in fact, 0:11:33.679 --> 0:11:34.839 no one had thought this through at all. 0:11:36.360 --> 0:11:37.120 It was so good. 0:11:37.400 --> 0:11:40.800 It definitely made me think more that in the socks 0:11:40.840 --> 0:11:44.000 thing made me think, Ah, a fake takeover socks. 0:11:45.240 --> 0:12:00.000 Game bay E Stop Games is not bad, thank you. 0:12:05.559 --> 0:12:11.600 Speaking of Michael Milkin. Yeah, CDOs, No. 0:12:11.559 --> 0:12:15.120 They're not. Closs A slightly different thing. No, I know, 0:12:15.120 --> 0:12:17.679 there's a Bloomberg article that's like Apollo is bringing back 0:12:17.720 --> 0:12:18.439 a thing that looks like. 0:12:19.040 --> 0:12:21.000 Says, there's like CLOS but better. 0:12:21.360 --> 0:12:25.320 Yeah. But there's CLOS in the simple sense that we 0:12:25.400 --> 0:12:28.720 live in a world where there was a giant market 0:12:28.920 --> 0:12:33.400 where companies take out syndicated loans floating rate secured loans, 0:12:33.640 --> 0:12:36.800 and those loans gets packaged into a pool and the 0:12:36.840 --> 0:12:40.640 pool sells rated debt securities on them, and that thing 0:12:40.720 --> 0:12:43.600 is called the CLO right, and Apollo is like, let's 0:12:43.600 --> 0:12:46.319 do that, but instead of with probably syndicated loans, we're 0:12:46.320 --> 0:12:48.440 going to do it with private credit loans. It's a 0:12:48.440 --> 0:12:50.800 CLO yeah, I think it's a CDO in the sense 0:12:50.840 --> 0:12:54.439 that CDO collateralized. That allegation is the sort of umbrella 0:12:54.520 --> 0:12:57.520 term for all debt that you put in a pool. 0:12:57.559 --> 0:12:59.880 But like, there's a big existing market right now of 0:13:00.200 --> 0:13:04.720 things called clos, which is floating right, loan securitizations, and 0:13:04.760 --> 0:13:07.240 there's not such a big existing market of things called 0:13:07.320 --> 0:13:10.200 c doos because those went out of favor in two 0:13:10.240 --> 0:13:10.719 thousand and eight. 0:13:10.840 --> 0:13:13.800 Yeah, they led to an even scarier acronym. Or we're 0:13:13.840 --> 0:13:15.920 a starring character in the GFC. 0:13:16.040 --> 0:13:19.880 The GFC, but these are clearly clos. These are clearly like, 0:13:21.280 --> 0:13:23.400 if you're a company and you want to borrow money, 0:13:23.440 --> 0:13:26.360 you can borrow in the broadly syndicated loan market, in 0:13:26.400 --> 0:13:28.960 which case ultimately your loans will end up in a CLO. 0:13:29.160 --> 0:13:31.200 Or you can borrow from Apollo in a direct credit 0:13:31.280 --> 0:13:33.480 in a direct loan, in which case your loan will 0:13:33.520 --> 0:13:33.959 end up in. 0:13:33.920 --> 0:13:37.400 A it's called a MAPS, a Maps Apollo. 0:13:37.280 --> 0:13:41.480 Multi Asset Prime Securities. I guess once it becomes genericizeder 0:13:41.559 --> 0:13:43.959 you just call it MAPS multi Asset Prime Securities, but 0:13:44.000 --> 0:13:46.800 probably just call it a private credit CLO, which is 0:13:46.800 --> 0:13:49.520 what it is, right And if you borrow from Apollo. 0:13:49.640 --> 0:13:52.200 Your loan will end up in an am apse, which 0:13:52.240 --> 0:13:54.839 is like a CLO, and in either case there will 0:13:54.880 --> 0:13:57.640 be like a highly rated investment grade tranch that is 0:13:57.720 --> 0:14:01.480 most of the pool and that is sold to insurance companies. 0:14:01.840 --> 0:14:04.400 And in Apollow's case, the insurance company will be a Thian, 0:14:04.440 --> 0:14:06.480 which is the insurance company you knows very well. So 0:14:06.480 --> 0:14:07.280 it's just the CLO. 0:14:07.520 --> 0:14:10.160 You're not fussed about this, would anyone be? People are 0:14:10.280 --> 0:14:13.160 certainly fussed about this. There's a little bit of fuss 0:14:13.200 --> 0:14:18.720 in going on. Okay, I'm going to name the name 0:14:18.800 --> 0:14:20.880 of Michael Hislop. I hope I'm saying you're right. He's 0:14:20.880 --> 0:14:24.400 an analyst over a Cure Acid Capital Management. These are 0:14:24.400 --> 0:14:26.280 words that I like to read, not say out loud, 0:14:26.320 --> 0:14:29.920 but basically, he's saying that it's inevitable. He thinks it's 0:14:29.920 --> 0:14:32.720 a CEO saying that it's inevitable that this would make 0:14:32.720 --> 0:14:36.440 a comeback. And structured finance innovations tend to arise when 0:14:36.440 --> 0:14:38.400 there is an issue or need for them rather than 0:14:38.520 --> 0:14:43.080 just investor appetite. So basically saying this is Apollo doing 0:14:43.080 --> 0:14:44.680 this for Apollo's needs. 0:14:44.720 --> 0:14:46.440 When I think about Apollo's needs here. I think there 0:14:46.440 --> 0:14:51.160 are two things going on. One is that I have 0:14:51.280 --> 0:14:53.920 written for years that private credit is ultimately going to 0:14:53.920 --> 0:14:56.280 be it'll be quaint to talk about private credit. It's 0:14:56.320 --> 0:15:01.120 going to be a broadly syndicated, liquidly traded asset class, 0:15:01.200 --> 0:15:04.960 just like bank loans are now. Not everyone agrees with that, right. 0:15:04.960 --> 0:15:06.680 Some people are like, no, no, it's very important that 0:15:06.680 --> 0:15:08.960 it'd be a relationship driven not trading is a big 0:15:08.960 --> 0:15:10.960 part of the appeal of the product. But you see 0:15:10.960 --> 0:15:13.000 from Apollo's actions that they're like, no, no, we want 0:15:13.040 --> 0:15:14.920 to trade it right. They've set up a trading desk. 0:15:15.160 --> 0:15:19.600 They are talking about really pricing, which only really makes 0:15:19.600 --> 0:15:21.920 sense if you think there's going to be a trading market. Yes, 0:15:22.200 --> 0:15:25.320 and so you know, how does the bank syndicated load 0:15:25.680 --> 0:15:28.560 market work, How does that trading work? Well, part of 0:15:28.600 --> 0:15:30.680 it is that clo is, you know, by the stuff. 0:15:31.000 --> 0:15:35.760 So setting up a COLO product for private credit makes 0:15:35.800 --> 0:15:38.240 total sense if you are someone like Apollo who really 0:15:38.240 --> 0:15:41.240 wants the trade private credit and have it be liquid 0:15:41.320 --> 0:15:43.240 and broadly distributed and all the things that the bank 0:15:43.280 --> 0:15:45.840 line market does. The other reason I think that Apollo 0:15:45.960 --> 0:15:48.440 is interested in the sort of thing is that Apollo 0:15:48.720 --> 0:15:51.600 owns a big insurer. A lot of Apollo's private credit 0:15:51.640 --> 0:15:57.000 origination is to put stuff into the insurer. Insurers are 0:15:57.040 --> 0:16:01.680 not huge consumers of junk rating direct loans to LBO 0:16:01.800 --> 0:16:06.640 companies because they have, you know, capital requirements and ratings requirements. 0:16:07.120 --> 0:16:09.280 And so if you can smush a bunch of loans 0:16:09.800 --> 0:16:13.840 into a pool and issue a rated security is on 0:16:13.880 --> 0:16:16.200 the top eighty five percent of that pool, you can 0:16:16.240 --> 0:16:20.160 sell those to your insurance company at a good spread 0:16:20.280 --> 0:16:22.360 and in a good rating and get good capital treatment 0:16:22.360 --> 0:16:25.680 for your insurance company. This is not like a CLO 0:16:26.040 --> 0:16:29.120 manager where they want the equity for the upside and 0:16:29.120 --> 0:16:32.120 they're selling all of the highly rated tranches to outside 0:16:32.160 --> 0:16:34.200 insurance companies. This is like Apollo is an insurance company. 0:16:34.200 --> 0:16:37.080 They want the highly rated tranches because that's how they 0:16:37.120 --> 0:16:40.840 get yield with good capital treatment. So that's a CLO 0:16:42.360 --> 0:16:45.080 wow whatever I mean. CDOs were driven by investor demand 0:16:45.160 --> 0:16:48.000 for ye for yield the triple A paper, and so 0:16:48.480 --> 0:16:51.040 there is a portion of what's going on here. So sure, look, 0:16:51.320 --> 0:16:54.400 any securitization is driven by investor demand for yield the 0:16:54.480 --> 0:16:56.720 triple A paper. You can't get around that. 0:16:57.000 --> 0:17:01.160 Yeah, Well, Paul has cast this as the future of securitization. 0:17:01.320 --> 0:17:03.920 So it is the idea that private credit would just 0:17:03.920 --> 0:17:06.680 be like sleepily sit on the balance sheets of funds 0:17:06.760 --> 0:17:10.840 forever is clearly falling apart, right, I mean, yeah, sitting 0:17:10.920 --> 0:17:13.840 in the balance sheets of PDCs that are getting redemption requests. 0:17:13.840 --> 0:17:17.320 And now it's sitting on the balance sheets of securitizations 0:17:17.359 --> 0:17:19.919 that gets sold to insurance companies, and yeah, it's the 0:17:19.960 --> 0:17:23.480 future of everything. Yeah, okay, sliced uff and securitized. 0:17:23.920 --> 0:17:28.200 So not a cdo a different type of CLO. Well. 0:17:28.240 --> 0:17:31.359 Mark Rohan said that basically the idea that they have 0:17:31.480 --> 0:17:33.639 behind a MAPS is that it takes the benefits of 0:17:33.680 --> 0:17:37.080 clos and adds greater numbers of issuers, less leverage, a 0:17:37.160 --> 0:17:41.800 better structure for investors. So they prefer the CLO comparison. 0:17:43.560 --> 0:17:45.480 Yeah, I mean, I say, is it the future of 0:17:45.480 --> 0:17:50.840 private credit? Yes? I feel like people in the credit 0:17:50.880 --> 0:17:54.840 world would have some complaints about the effect of clos 0:17:54.880 --> 0:17:58.040 on the credit You know, like in the olden days, 0:17:58.200 --> 0:18:01.679 banks made loans and they the loans to maturity. Then 0:18:01.720 --> 0:18:03.800 you had a relationship with your bank and if you 0:18:03.880 --> 0:18:05.640 needed to restructure the loan, you went to the bank 0:18:05.680 --> 0:18:09.760 and talked about it and it was all very sort 0:18:09.760 --> 0:18:12.119 of sleepy. And now the thing that it's called a 0:18:12.160 --> 0:18:14.840 bank loan or broadly syndicated loan is mostly owned by 0:18:14.840 --> 0:18:17.840 clos and it trades more liquidly and you have less 0:18:17.840 --> 0:18:21.040 of a relationship, and you know, the clos are not 0:18:21.600 --> 0:18:23.480 the same sort of credit analysts as the banks and 0:18:23.520 --> 0:18:28.440 all this stuff. And private credit two years ago would 0:18:28.440 --> 0:18:30.960 be like, we're long term relationship holders, and like the 0:18:31.040 --> 0:18:32.760 people making the loan are going to hold the loan 0:18:32.800 --> 0:18:35.120 and if you need to restructure, you'll come to talk 0:18:35.160 --> 0:18:36.800 to one person, you know. And now we're going to 0:18:38.280 --> 0:18:40.600 Colo is a private credit and that market will evolve 0:18:40.600 --> 0:18:41.680 the way the bank line market does. 0:18:41.840 --> 0:18:44.480 Yeah. I mean it feels like Apollo in particular is 0:18:44.560 --> 0:18:46.920 driving a lot of this shifting conversation. 0:18:47.000 --> 0:18:47.719 I want to trade it. 0:18:47.880 --> 0:18:52.520 Yeah, daily pricing it's coming by September anti September. Yeah, 0:18:52.640 --> 0:18:53.520 according to Apollo. 0:18:53.720 --> 0:18:56.160 Yeah, you send me an article that Pimco I did. 0:18:57.520 --> 0:19:01.600 Yeah, Pimco took some umbrage with that. Basically, an analyst 0:19:01.640 --> 0:19:04.720 over there said that more frequent pricing is not more 0:19:04.760 --> 0:19:09.680 accurate pricing, so some skepticism there over. Okay, there's daily prices, 0:19:09.680 --> 0:19:10.680 but are they accurate? 0:19:11.000 --> 0:19:14.040 Okay, I don't know, but like two points. One point 0:19:14.119 --> 0:19:17.399 is if you are in the business of providing daily pricing, 0:19:17.440 --> 0:19:19.879 then you have a model. I think you have to 0:19:20.000 --> 0:19:23.600 have a model that updates daily based on something. So 0:19:23.720 --> 0:19:26.439 one possibility is that your model updates daily based on 0:19:26.560 --> 0:19:33.479 public market data, right, Like, if you know public market 0:19:33.720 --> 0:19:36.840