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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg p m L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. I

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Speaker 1: want to introduce Al Hunt, Bloomberg opinion columnist and expert

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Speaker 1: in all Things Washington, to tell us a little bit

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Speaker 1: about what we should pay attention to on this election day.

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Speaker 1: Al Hunt, always a pleasure, Thanks for being with us.

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Speaker 1: I want you to just tell us a little bit

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Speaker 1: about Katie Hill. Now, this is not a name that

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Speaker 1: many people may be familiar with. She is running in

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Speaker 1: California's twenty five and you've written about Katie Hill and

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Speaker 1: why this is an election to watch. Tell us, Well,

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Speaker 1: it's a it's basically a Republican leaning district gets represented

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Speaker 1: by an incomment named Steve Knight, who was one of

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Speaker 1: the stronger incomments running for reelection. It's a district, it's

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Speaker 1: north of l A. It's Ventura Simi Valley, home of

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Speaker 1: the Reagan Library and suddenly this thirty one year old

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Speaker 1: woman who is the daughter of a cop and a nurse,

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Speaker 1: ran a large homeless organization, didn't have a lot of

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Speaker 1: connections or anything, has run this dazzling campaign and come

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Speaker 1: from clearly behind to the point where she is at

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Speaker 1: least an even bet. She raised in the last quarter

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Speaker 1: three point eight million dollars. Let me repeat that, three

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Speaker 1: point eight million dollars even in Bloomberg terms, that's pretty big.

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Speaker 1: And she's got two thousand volunteers every last weekend at

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Speaker 1: least fanning out. So it's really kind of exciting to

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Speaker 1: see that kind of grassroots enthusiasms. So when you look

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Speaker 1: at the race specific details right now and from what

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Speaker 1: you're hearing with respect turnout, what are you expecting for

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Speaker 1: today's results? A huge turnout to begin with, and huge

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Speaker 1: turnout under conventional standards would be an advantage for Democrats,

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Speaker 1: and think it still might be. But one doesn't know

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Speaker 1: whether Trump rallied people with his what I consider racist

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Speaker 1: demogo agree on the caravan and other issues the last

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Speaker 1: couple of days, so it's a little bit uncertain. I

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Speaker 1: think the big turnout in suburban areas is clearly going

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Speaker 1: to advantage Democrats. If there's a huge turnout in red

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Speaker 1: rural areas, that may help Republicans. On balance, I think

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Speaker 1: it's going to help democrats more. Al Hunt, are you

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Speaker 1: looking to the Indiana Senate race as well? Big first

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Speaker 1: six o'clock post closed in Kentucky and Indiana, And there

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Speaker 1: are two really really huge races, one in the House

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Speaker 1: and one of the Senate Senate that you just mentioned.

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Speaker 1: Joe Donnally is probably one of the three or four

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Speaker 1: most endangered Democratic income with This is a really bad

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Speaker 1: map for Democrats this year, and if Joe Donally survives,

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Speaker 1: that means that Democrats, you know, have a shot taking

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Speaker 1: control of the Senate. It's a long shot, but it's

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Speaker 1: one of Republicans think they have to win. It's a

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Speaker 1: very Republican stage. Joe donny is a one term senator.

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Speaker 1: Uh he voted against bred Cavanall and they have really

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Speaker 1: I think I think Obama's excuse me, I think that

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Speaker 1: Trump has been there four times. Kentucky. Amy McGrath, Marine

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Speaker 1: combat pilot Amy McGrath is running against Republican income in

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Speaker 1: Andy Barr in a district it's about plus ten GOP

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Speaker 1: and I think she's got a real chance to win.

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Speaker 1: It's a very exciting race, and that will be an

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Speaker 1: indication of a of a wave of interesting candidates winning

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Speaker 1: this year, a lot of them women and a disproportionate

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Speaker 1: number of them veterans young. Do you think that Ted

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Speaker 1: Cruz will no longer be part of the Senate? Come?

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Speaker 1: I guess well, no, I'm I I'm not saying I'm

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Speaker 1: not weighing in a one way or another. Better artist

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Speaker 1: certainly know you're being there, I'm not, but but better

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Speaker 1: rockers certainly run a competitive campaign, and it seems like

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Speaker 1: there is some uncertainty there though the leaning towards Ted Cruz, right,

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Speaker 1: he's a rock star two thousand and eighteen. Uh, not

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Speaker 1: not Ted Cruise, but better ur it's a it's a

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Speaker 1: really tough state. It's a really really tough state to

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Speaker 1: Wednesday wide. If you're a Democrat, it's probably moving that way,

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Speaker 1: but slowly. I think the only the only reason Democrats

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Speaker 1: think they may be an upset is because there is

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Speaker 1: a massive surge of early voting there. And the question

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Speaker 1: is do the polls and them and the modeling are

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Speaker 1: they able to reflect that? Because they all show Cruise

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Speaker 1: winning by about three or four. I don't know the

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Speaker 1: answer that question, but it will be exciting to watch

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Speaker 1: poles closed in Texas at eight, So stay tuned for

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Speaker 1: then next door, you said that Better Rourke is the

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Speaker 1: rock star of this election cycle. So you know, one

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Speaker 1: sort of speculation is if he wins, he'll be considered

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Speaker 1: a candidate for the presidency at some point, perhaps even

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Speaker 1: as soon as Do you think that that's feasible? And

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Speaker 1: do you think it's feasible even if he doesn't win? Well,

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Speaker 1: I think all the standards change when Donald Trump one.

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Speaker 1: Uh So therefore, you know, experience and gravitas and all

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Speaker 1: that kind of stuff that used to count for something

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Speaker 1: doesn't count much anymore. But I think that would be early.

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Speaker 1: Uh Barack Obama they said was early, but Barack Obama

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Speaker 1: has spent you know what, eight years in the state legislature,

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Speaker 1: four years in the Senate. I think more of a

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Speaker 1: you know, more ready say than Better would be in

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Speaker 1: twenty But I'll tell you there's an awful lot of

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Speaker 1: of of really movement Democrats who would put their hand

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Speaker 1: to fire for better or work. Al Hunt tell us

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Speaker 1: about the races in Florida, And I don't just mean

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Speaker 1: the Senate race between Bill Nelson and it's it's it's

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Speaker 1: really you know, if you if you're looking for a

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Speaker 1: operations central tonight, it's Florida because it's the one state

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Speaker 1: that has everything. Huge Senate race, which you just mentioned,

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Speaker 1: Bill Nelson running against an incumbent Governor Rick Scott, I mean,

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Speaker 1: and and the amount of money spent is has been colossal.

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Speaker 1: Same time, you have a fantastic governor's race with a

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Speaker 1: Trump supporting right wing Republican Congresman Rohn de Stantus running

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Speaker 1: against uh. The African American mayor of Tallahassee, Andrew Gillham,

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Speaker 1: has really been a It's been a very tough race.

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Speaker 1: I was down there a couple of weeks ago, and

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Speaker 1: I think, to the surprise of some Democrats in Washington least,

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Speaker 1: Gillham is just one heck of a candidate, and I

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Speaker 1: think the odds now favor him, and that would be

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Speaker 1: huge because it would be the first time the Democrats

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Speaker 1: control the state House in eight years. It affects redistricting

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Speaker 1: after the two thousand and twenty cents and those two

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Speaker 1: races at the top of Democrats win those by three

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Speaker 1: or four or five points. And some think they will.

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Speaker 1: That's that's going to affect the number of House seats

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Speaker 1: two I think there right now Democrats think they're going

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Speaker 1: to pick up two House seats in Florida. They have

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Speaker 1: a chance to pick up as many as four or

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Speaker 1: five if they have any kind of a blue wave night.

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Speaker 1: So we're talking a lot about a potential blue waver

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Speaker 1: of Democrats picking up seats. But there is the alternative here,

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Speaker 1: which is that Republicans pick up both they win, they

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Speaker 1: keep control over both houses, both the House for Presentatives

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Speaker 1: as well as the Senate. And what's the likelihood of

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Speaker 1: that and what would that do for President Trump? Well,

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Speaker 1: the likelihood of that I think is probably you know,

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Speaker 1: in the fifteen, you know, seventeen percent range. I think,

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Speaker 1: you know, far greater than they'll keep controlling the Senate.

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Speaker 1: But but our reach and the half. But if they do, uh,

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Speaker 1: it's uh, you know, it's a free license for Donald Trump.

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Speaker 1: Donald Trump can do anything he wants to. It will

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Speaker 1: be the end of the Affordable Healthcare Act. He can

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Speaker 1: really get done almost anything he wants. He dominates his party,

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Speaker 1: and his party will dominate Washington. Al Hunt, thank you

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Speaker 1: so much for being with us. All Hunt is a

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Speaker 1: columnist with Bloomberg Opinion talking about the midterm elections. There

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Speaker 1: certainly has been a lot of hype around financial technology

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Speaker 1: fintech firms. A number of startups have version to the surface,

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Speaker 1: so over the number of years, there is a question though,

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Speaker 1: how much more room is there for startups at a

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Speaker 1: time when the big banks are all trying to plow

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Speaker 1: into financial technology fintech Joining us now to talk about

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Speaker 1: that it should work such a volo. He is a

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Speaker 1: general partner at Trinity Ventures in San Francisco. Shu Work,

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Speaker 1: thank you so much for being with us. So let's

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Speaker 1: just start there. I mean, do you see a lot

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Speaker 1: of good potential opportunities out there with respect to fintech

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Speaker 1: firms that you are interested investing in? Absolutely. I think

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Speaker 1: fintech's uh is a pretty broad category. There's a lot

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Speaker 1: of different kinds of opportunities up and down the financial

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Speaker 1: services spectrum. Um. I do think the the levels of

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Speaker 1: innovation in fact are just getting started. You had mentioned

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Speaker 1: the big banks flowing in more. If anything, I think

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Speaker 1: that actually creates a whole bunch of new opportunity because

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Speaker 1: as these big banks effectively try to create new products

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Speaker 1: and services there's a whole bunch of new technology platforms

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Speaker 1: and so of us is that will be necessary in

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Speaker 1: order to deliver them. A lot of opportunity there, and

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Speaker 1: part of the reason why a lot of the large

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Speaker 1: national institutions are getting more aggressive is because there's a

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Speaker 1: whole bunch of new upstarts are effectively pushing the boundary

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Speaker 1: and kind of forcing a lot more innovation faster. So

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Speaker 1: all in all, I think there's still a lot of

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Speaker 1: opportunity across the spectrum for fintech innovation. Now, you yourself

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Speaker 1: are a serial entrepreneur in the world of fintech. You've

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Speaker 1: created companies that have then been acquired by master Card,

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Speaker 1: for example. How is it possible that on the consumer level,

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Speaker 1: you're able to take an uber or to transact business

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Speaker 1: completely on your phone instantly, without any friction, you can

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Speaker 1: pay for things. But when it comes to the world

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Speaker 1: of wholesale banking banks moving large amounts of money, why

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Speaker 1: is that still a challenge and why is it still expensive?

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Speaker 1: It's an excellent quite chin, and I think the simple

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Speaker 1: answer is that the stakes are higher and and the

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Speaker 1: infrastructure that is necessary to be built up in order

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Speaker 1: to plane those spaces is higher simply because the regulatory

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Speaker 1: um requirements that are required to play those spaces are

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Speaker 1: substantially more um stringent, So you have a larger number

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Speaker 1: of regulations that control, you know, things like k y

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Speaker 1: C and m L that all are multiple three letter

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Speaker 1: words that effectively are things that need to be done.

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Speaker 1: To make sure that the consumer and all the participating

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Speaker 1: parties in a transaction are protected and to make sure

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Speaker 1: that all of those things are done is a much

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Speaker 1: higher bar and a lot of cases actually quite boring stuff.

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Speaker 1: So when you think about financial innovation, UH innovation first

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Speaker 1: starts with the easier things, things that are easier to

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Speaker 1: get done. But we've recently invested in a company that's

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Speaker 1: actually making that a lot easier do um, a company

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Speaker 1: called Synapse i f I that's actually creating a p

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Speaker 1: I S to almost make access to wholesale banking almost

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Speaker 1: as easy as Stripe has made payment services to be

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Speaker 1: integrated into an over order left for example. And just

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Speaker 1: to do the acronym definition, k y C means know

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Speaker 1: your Customer and a m L for those in the

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Speaker 1: financial world, no, it means anti money laundering rules. Sorry, no, no,

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Speaker 1: no worries. It's good to point that out, because these

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Speaker 1: acronyms do have purposes for for the regulators and for

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Speaker 1: the banks. But Schwork, I'm wondering you mentioned payments and

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Speaker 1: that was an area that you have expertise in yourself.

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Speaker 1: I'm looking at squares shares, for example, and they're up

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Speaker 1: more than a hundred and twenty percent so far year

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Speaker 1: to date. Is the payment sector still ground zero when

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Speaker 1: it comes to innovation in financial technology? What is the

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Speaker 1: frontier for the next wave of innovation? Absolutely, I think

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Speaker 1: it's definitely the early days square and of course is

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Speaker 1: then innovating almost in and around the payment sectors, so

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Speaker 1: they're actually kind of getting into things like lending and

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Speaker 1: marketing and all the other kinds of services from payroll

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Speaker 1: and so and so forth. So they the number of

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Speaker 1: services they can offer their existing customer base um is

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Speaker 1: still you know, they're still sketching the surface. I think

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Speaker 1: there's a lot more upside there. And but if you

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Speaker 1: look at broadly more fintech, I do think the the

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Speaker 1: amount of innovation is almost poised to accelerate because one

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Speaker 1: of the things that almost limits innovation and financial services

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Speaker 1: is in fact regulatory um strength. If you may so,

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Speaker 1: if the the regulators are are being very very cautious,

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Speaker 1: then it almost limits innovation because people are scared to

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Speaker 1: kind of push the boundary a little bit to kind

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Speaker 1: of make sure figure out what it is that actually

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Speaker 1: can be done. Um. But when the regulators tend to

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Speaker 1: be a little bit more lax, then it tends to

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Speaker 1: become a little bit more um encouraging of innovation. So lending,

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Speaker 1: for example, has been innovated on many, many times over

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Speaker 1: the last ten years because regulators were a little bit

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Speaker 1: more friendly towards innovation in the lending space. So as

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Speaker 1: regulators look favorably upon innovation in different areas, those actually

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Speaker 1: tend to count alive with a lot more innovation. So

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Speaker 1: I think lately, I think that regulators have been a

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Speaker 1: little bit more encouraging our innovation. The occ is, for example,

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Speaker 1: creating things like the Fintech Charter, so they're they're starting

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Speaker 1: to think about innovation as part of the realm of

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Speaker 1: the things that they want to encourage and push. And

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Speaker 1: so as the regulators start to kind of look at

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Speaker 1: this a little bit more favorably, I think innovation is

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Speaker 1: only going to accelerate. Can you just tell us quickly

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Speaker 1: about branch because we talked about the developed world, and

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Speaker 1: Branch is a company that you've invested in that works

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Speaker 1: in emerging markets. That's exactly right. I think if you

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Speaker 1: really think about financial services, we tend it kind of

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Speaker 1: almost always on fin techs especially, we tend to think

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Speaker 1: about that as a very US phenomenon. But if you

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Speaker 1: really look at the fintech innovation, it's actually happening across

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Speaker 1: the world. In fact, because again regulation is a little

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Speaker 1: bit more friendly innovation. In Europe, you actually find and

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Speaker 1: DiNovo banks that have actually been created from scratch actually

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Speaker 1: thriving in Europe, which is not quite played out almost

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Speaker 1: the same way in the US yet. UM. But if

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Speaker 1: you really think about consumers and consumer demand, UM, financial

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Speaker 1: services in the US is almost one of the most

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Speaker 1: well developed sectors. But across the rest of the world,

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Speaker 1: financial services has very very low penetration, so very few

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Speaker 1: consumers actually even have access to financial services as a

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Speaker 1: fraction of the entire population. And what Brand is trying

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Speaker 1: to do is kind of taking the device that is

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Speaker 1: that actually does have very high penetration, which is a

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Speaker 1: smartphone UM, which is rapidly increasing in its penetration rates

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Speaker 1: across and developing world and using the the access and

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Speaker 1: information that a smartphone provides in order to be able

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Speaker 1: to create underwriting decisions, in order to give access to

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Speaker 1: both loans and going forward even savings products to consumers

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Speaker 1: um directly off of their phone. So a branchless banking,

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Speaker 1: if you may, delivered by a smartphone into the very

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Speaker 1: um deepest parts of Africa, India and Mexico and a

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Speaker 1: bunch of other countries as as they go along. Thank

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Speaker 1: you very much for spending time with us and talking

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Speaker 1: about financial technology and the challenges and the opportunities. Schwark

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Speaker 1: Sayavolo is the general partner for Trinity Ventors. Joining us

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Speaker 1: from San Francisco. The energy and pharmaceutical industries stand to

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Speaker 1: potentially be disrupted depending on the outcome of today's midterm

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Speaker 1: elections in the United States. Joining us now, Brian Rice

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Speaker 1: in your healthcare policy analyst four Brick Intelligence coming to

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Speaker 1: us from our nig n WIN studios in Washington, d C. Brian,

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Speaker 1: thank you so much for joining us. Let's start with

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Speaker 1: the pharmaceutical industry. What is the sort of range of

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Speaker 1: outcomes from today's election that could potentially affect this industry? Sure,

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Speaker 1: and I think the one that pharmaceutical industry would be

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Speaker 1: most concerned with is if you have the true blue

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Speaker 1: wave where Democrats control not only the House but also

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Speaker 1: the Senate, and in that instance, they would have the

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Speaker 1: ability to not only hold a lot of hearings that

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Speaker 1: would create a lot of noise and headlines, but then

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Speaker 1: also potentially send some legislation to President Trump's desk. And

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Speaker 1: I think the concern for the industry is that if

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Speaker 1: you've listened to President Trump over the past couple of years,

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Speaker 1: you know his personal leanings from time to time appear

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Speaker 1: to be more aligned with the Democrats on things like

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Speaker 1: giving the federal government more direct influence over the prices

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Speaker 1: of prescription drugs in the part deep program for example. Now,

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Speaker 1: if it's just a split where our gridlock situation where

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Speaker 1: Democrats maybe win control of the House, but Republicans retain

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Speaker 1: control of the Senate, and I think those more draconian

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Speaker 1: things are are taken off the table. But again, the

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Speaker 1: Democrat controlled House would have the ability to dictate a

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Speaker 1: number more hearings and things that would put pharmaceutical companies

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Speaker 1: UM in more of a spotlight than they are are already.

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Speaker 1: Brian Ryan, I just want to let you know that

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Speaker 1: we have a group of future voters of America joining

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Speaker 1: us here in our Bloomberg Interactive Broker studios. We have

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Speaker 1: all the members of a Girl Scout a troop nineteen

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Speaker 1: fifty six from Edgemont in Scarsdale. So they're all listening

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Speaker 1: to you because they want to understand how the midterm

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Speaker 1: elections figure into not just this election cycle, but the cycle.

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Speaker 1: Are these the same issues you believe are going to

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Speaker 1: dominate the next election or is this something that is

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Speaker 1: specific to this mid term because typically you think, oh,

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Speaker 1: however the economy goes, that's how the vote goes. Well.

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Speaker 1: First of all, I'm honored to be speaking in front

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Speaker 1: of such a distinguished group. Welcome girls, and uh. Secondly,

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Speaker 1: I think the healthcare UH situation is one that will

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Speaker 1: continue to be of particular interest to voters, not only

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Speaker 1: drug pricing, but then also starting tomorrow probably will cycle

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Speaker 1: very quickly into the presidential campaign, in particular the intra

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Speaker 1: Democratic party fight about how far left do you want

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Speaker 1: to go? Are we going to nominate someone who believes

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Speaker 1: in the Bernie Sanders Medicare for All perspective? Or is

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Speaker 1: it maybe not quite that far down that stretch. So

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Speaker 1: you know, I think twenty nineteen is going to be

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Speaker 1: a very interesting year from a healthcare perspective, and that

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Speaker 1: obviously sets up the battle versus President Trump in twenty

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Speaker 1: depending on the outcome of these UH midterm elections tomorrow

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Speaker 1: and what policies emanate from there, that will obviously drive

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Speaker 1: a lot of the conversation UM UH in heading into

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Speaker 1: and certainly, you know, healthcare, so one that I think

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Speaker 1: both parties will be forced to talk about, even if

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Speaker 1: they don't want to. Brian, one thing that I'm struck

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Speaker 1: by is that no matter who wins, we're going to

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Speaker 1: probably deepen US deficit right with spending, possibly either with

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Speaker 1: infrastructure spending or a more permanent tax cut. Would you

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Speaker 1: say that that's an accurate statement? And what are the

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Speaker 1: most likely spending scenarios should we see a blue wave

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Speaker 1: or a red wave? Yeah, I think in certainly history

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Speaker 1: suggests that's a pretty safe bet no matter what the

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Speaker 1: what the outcome of an election is, UM, certainly you

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Speaker 1: have either a blue wave or a split Congress. UM.

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Speaker 1: I think infrastructure is an area where the President has

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Speaker 1: expressed a lot of interest and Democrats UM also would

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Speaker 1: want to to maybe uh, provide more stimulus In that standpoint,

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Speaker 1: I think the political question that the Democrats would then

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Speaker 1: have to ask though, is do they want to hand

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Speaker 1: the president a win? Do they want to be seen

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Speaker 1: on stage at a bill stigning ceremony for example, where

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Speaker 1: the president is getting something that he wants. And then

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Speaker 1: for the president, would he be willing to to cave

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Speaker 1: in on some Democratic demands? How much would he ask

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Speaker 1: for in return, whether it's the wall or other infrastructure

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Speaker 1: priorities that perhaps the Democrats, um, you know, aren't aligned with,

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Speaker 1: but that I think is an area that investors are

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Speaker 1: going to want to focus on. But that's certainly that's

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Speaker 1: certainly not a deficit cutting program that we're going to see, Brian,

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Speaker 1: there are a lot of ballot initiatives that voters are

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Speaker 1: going to have to decide on. Tell us the ones

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Speaker 1: that you believe are the most relevant. Well, a couple

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Speaker 1: uh that that I think are in our various analysts

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Speaker 1: are focused on here at Bloomberg Intelligence out in California.

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Speaker 1: Prop eight I think has a lot of a lot

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Speaker 1: of interest within the healthcare community, in particular dialysis providers,

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Speaker 1: you know, Uh, Divita in particular has been very keen

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Speaker 1: on on that one. UH, several ballot initiatives could could

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Speaker 1: I guess further the trend towards cannabis legalization. I think

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Speaker 1: Michigan is a state in particular that that our analysts

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Speaker 1: are focused on, given the UH the potential market in

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Speaker 1: that state. So those are a couple that across the

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Speaker 1: country a number of ballot initiatives. This is much more

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Speaker 1: than just the battle for control of Congress. Thank you

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Speaker 1: so much for being with us, Brian, Ryan. I'm sure

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Speaker 1: you've got a long night ahead of you, and we

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Speaker 1: may not even know the results right come tomorrow morning,

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Speaker 1: and there might be some pretty hairy races there. That's right,

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Speaker 1: you know, ballot I guess the post closed around eleven

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Speaker 1: o'clock tonight Eastern time in California. A number of those

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Speaker 1: races could ultimately decide which way the no the Congress

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Speaker 1: goes next year. Well, Brian, right, I have a wonderful

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Speaker 1: time drinking coffee from now until tomorrow this time, Brian

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Speaker 1: Ryce and your healthcare policy analyst for Bloomberg Intelligence coming

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Speaker 1: to us from the Capital of the United States, Washington,

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Speaker 1: d C. The creditors of Seers are asking the court

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Speaker 1: to probe transactions that involve the bankrupt retailer's biggest shareholder,

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Speaker 1: Eddie Lampert. And here to tell us about it is

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Speaker 1: Noel Hebert, director of credit research for Bloomberg Intelligence. No

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Speaker 1: just set out for us exactly what kinds of transactions

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Speaker 1: do they want to investigate? It? Well, pretty much all

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Speaker 1: of them. Uh. So mean, over the last several years

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Speaker 1: is in order to keep Sears afloat at these done

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Speaker 1: a number of things to basically inject capital into the business.

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Speaker 1: The biggest one being the transaction where they spun out

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Speaker 1: a bunch of real estate into what's called Siritage, which

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Speaker 1: is a real estate investment trust that took on a

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Speaker 1: bunch of the stores owned by Sears. But then more

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Speaker 1: recently there's been a number of deals which were more

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Speaker 1: direct lending, whereas Eddie Lampert through his E s L

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Speaker 1: investment font would basically lend dollars secured by new real

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Speaker 1: estate or intellectual property or some of the other assets

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Speaker 1: of the company. So what's its stake here? I mean,

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Speaker 1: could Eddie Lampert have to pay the credit or something

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Speaker 1: or would you just stand or recover less? Uh it's

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Speaker 1: a great question. Hi, I wish I knew the answer. Uh,

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Speaker 1: you know, I think realistically it's a tactic by creditors

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Speaker 1: to try and extract more from Eddie Lamper to kind

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Speaker 1: of move the process along, because if it doesn't happen quickly,

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Speaker 1: the problem is, as we saw with Toys r Us,

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Speaker 1: that you end up in a situation where you risk

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Speaker 1: moving from a chapter eleven into a Chapter seven. Um

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Speaker 1: that he doesn't want that because of his Sriitage ownership

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Speaker 1: Steak and because Seritage still collects a lot of rent

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Speaker 1: from scares. So to be clear, chapter seven means that

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Speaker 1: the whole place to stands liquidates and is done, whereas

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Speaker 1: Chapter eleven is more restructuring. Who are the creditors? I

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Speaker 1: mean these are these mostly hedge funds. It's going to

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Speaker 1: be predominantly hedge funds because you gotta remember, you know,

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Speaker 1: esl controlled, you know, of the equity. He also controlled

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Speaker 1: of you know, the lending part of the portfolio. So

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Speaker 1: between him and fair Home before they had equity exited

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Speaker 1: much of their equity stak. I mean those two collectively

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Speaker 1: owned you know, three quarters of the capital structure. Almost

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Speaker 1: no al How far back will this are they looking

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Speaker 1: for this investigation to go? So they're they're trying to

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Speaker 1: roll up everything going back until which is when you

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Speaker 1: saw Siries Home Town spun out, as well as some

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Speaker 1: of the deals with Sears Canada. Uh those I mean

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Speaker 1: because a lot of those deals, including Land's End as well,

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Speaker 1: which was a lot of those deals were just done

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Speaker 1: as distributions spun out pro rata or everybody, all the

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Speaker 1: shareholders had equal right to participate. So those look like

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Speaker 1: a tough lift, I would think from the creditor standpoint.

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Speaker 1: Same with Siritage because I got a fairness opinion and

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Speaker 1: Eddie Lamport in the ESL paid an extra forty million

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Speaker 1: a couple of years after that deal was done to

434
00:24:25,840 --> 00:24:30,760
Speaker 1: settle shareholder litigation at that point, so you know, it's

435
00:24:30,760 --> 00:24:33,040
Speaker 1: a good reach for them. I think the more recent

436
00:24:33,119 --> 00:24:36,560
Speaker 1: deals where you know they lent directly against specific assets

437
00:24:36,560 --> 00:24:39,680
Speaker 1: of the last call it two years, are probably more

438
00:24:39,800 --> 00:24:42,960
Speaker 1: doable for for the hedge funds and the people on

439
00:24:42,960 --> 00:24:45,560
Speaker 1: the other side of the ledger here um. But but

440
00:24:45,600 --> 00:24:49,000
Speaker 1: they're going after everything. I'm just wondering there have been

441
00:24:49,040 --> 00:24:52,000
Speaker 1: some kinks some people who are looking to lend a

442
00:24:52,119 --> 00:24:56,359
Speaker 1: Sears while they're in bankruptcy adator and possessions loan have

443
00:24:56,760 --> 00:24:59,360
Speaker 1: sort of balked at the idea of Eddie Lambert being

444
00:24:59,480 --> 00:25:02,000
Speaker 1: orally in alved where is that and sort of how

445
00:25:02,080 --> 00:25:03,639
Speaker 1: much are they going to be able to actually borrow

446
00:25:03,640 --> 00:25:06,879
Speaker 1: to keep themselves afloat during this whole process. Well, it

447
00:25:06,920 --> 00:25:10,399
Speaker 1: sounds like at least the latest iteration is that the

448
00:25:10,480 --> 00:25:12,920
Speaker 1: other creditors are willing to put up another three hundred million,

449
00:25:12,920 --> 00:25:15,080
Speaker 1: which is what Eddie and E. S l Are trying

450
00:25:15,119 --> 00:25:17,960
Speaker 1: to do as a second leaned that are in possession

451
00:25:17,960 --> 00:25:20,600
Speaker 1: financing loan um. So it looks like they're willing to

452
00:25:20,600 --> 00:25:24,520
Speaker 1: take on that liability, which is okay from the standpoint

453
00:25:24,520 --> 00:25:28,199
Speaker 1: of you still have plenty of coverage from your working capital,

454
00:25:28,240 --> 00:25:31,720
Speaker 1: so your inventory, etcetera. Um. And basically they're trying to

455
00:25:31,800 --> 00:25:34,160
Speaker 1: keep Eddie from getting more engaged because if he had

456
00:25:34,160 --> 00:25:36,560
Speaker 1: gotten into the debtor possession role that he would leap

457
00:25:36,640 --> 00:25:39,520
Speaker 1: frog right the other term loan lenders and some of

458
00:25:39,520 --> 00:25:43,000
Speaker 1: the other first leans which are still out there as creditors.

459
00:25:43,000 --> 00:25:44,800
Speaker 1: So I think the banks and a lot of people

460
00:25:44,800 --> 00:25:49,760
Speaker 1: who've sort of bought into this process over time and

461
00:25:49,840 --> 00:25:52,800
Speaker 1: kept you know, kind of maybe seeing the silver lining

462
00:25:52,840 --> 00:25:55,920
Speaker 1: on the gray cloud that kept building, or maybe now

463
00:25:55,960 --> 00:25:58,560
Speaker 1: feeling a little more disenchanted with the whole thing and

464
00:25:58,640 --> 00:26:01,280
Speaker 1: less inclined to the sort of let Eddie have a

465
00:26:01,280 --> 00:26:05,240
Speaker 1: bigger say and just quickly no time. You mentioned time.

466
00:26:05,760 --> 00:26:07,840
Speaker 1: Do they have time to let this happen while the

467
00:26:07,880 --> 00:26:16,080
Speaker 1: company still operates? No, would be my my gut answer here, right.

468
00:26:16,119 --> 00:26:18,600
Speaker 1: I mean, the reality is, if you don't have something

469
00:26:18,640 --> 00:26:20,880
Speaker 1: in place, in a real firm plan by the very

470
00:26:20,920 --> 00:26:24,280
Speaker 1: early part of next year, call it mid February early March,

471
00:26:24,640 --> 00:26:27,280
Speaker 1: it'll be very hard to keep this thing from spiraling

472
00:26:27,280 --> 00:26:31,480
Speaker 1: into liquidation because the company consumes so much cash um,

473
00:26:31,640 --> 00:26:33,840
Speaker 1: so you need to be able to wipe away all

474
00:26:33,880 --> 00:26:36,159
Speaker 1: the incremental costs, whether you're talking just the cost of

475
00:26:36,240 --> 00:26:38,800
Speaker 1: learning the bankruptcy, the cost of the incremental stores, etcetera.

476
00:26:39,960 --> 00:26:42,280
Speaker 1: So it's going to be an interesting an interesting road,

477
00:26:42,320 --> 00:26:44,000
Speaker 1: as it has for the number of years that this

478
00:26:44,040 --> 00:26:46,080
Speaker 1: has been ongoing. Noal Hebert, thank you so much for

479
00:26:46,119 --> 00:26:48,760
Speaker 1: being with us. Noal Hebert, Director of Credit Research for

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00:26:48,880 --> 00:26:52,879
Speaker 1: Bloomberg Intelligence. Thanks for listening to the Bloomberg P and

481
00:26:53,000 --> 00:26:56,040
Speaker 1: L podcast. You can subscribe and listen to interviews at

482
00:26:56,080 --> 00:27:00,520
Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm

483
00:27:00,520 --> 00:27:04,000
Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on

484
00:27:04,000 --> 00:27:07,439
Speaker 1: Twitter at Lisa Abramowitz. One before the podcast, you can

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00:27:07,480 --> 00:27:09,840
Speaker 1: always catch us worldwide on Bloomberg Radio