WEBVTT - Larry Ellison’s Guarantee Ups Warner Bros. Stakes to a New Level 0:00:02.759 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.640 --> 0:00:14.600 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.640 --> 0:00:17.880 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.960 --> 0:00:21.080 Business App. Listen on demand wherever you get your podcasts, 0:00:21.400 --> 0:00:23.120 or watch us live on YouTube. 0:00:24.079 --> 0:00:25.880 All right, let's talk a little bit more about this. 0:00:26.280 --> 0:00:29.840 Larry Ellison personally backing the paramount bid for Warner Brothers. 0:00:29.880 --> 0:00:32.600 It's something Warner Brothers was looking for and they appear 0:00:32.640 --> 0:00:35.680 to have gotten it now. Stephen Flynn is Bloomberg Intelligence 0:00:35.800 --> 0:00:39.000 Senior credit analyst here and is in studio with us. 0:00:39.120 --> 0:00:41.279 Great to see you, Stephen, Thanks good to be here. 0:00:41.880 --> 0:00:42.680 Break it down for me. 0:00:42.760 --> 0:00:47.200 What does it mean when Paramounts Guidance says that Larry Ellison, 0:00:47.200 --> 0:00:50.360 the chairman of Oracle, is offering a personal financial guarantee 0:00:50.600 --> 0:00:53.080 of forty point four billion dollars in equity financing. 0:00:53.080 --> 0:00:54.880 If something falls apart, what are they going to call 0:00:54.960 --> 0:00:56.080 upon Larry Ellison. 0:00:55.800 --> 0:00:56.400 To do well? 0:00:56.440 --> 0:00:59.960 This is an important step because mid last week, Paramount 0:01:00.240 --> 0:01:03.720 excuse me, the Warner Brothers board recommended shareholders reject the 0:01:03.760 --> 0:01:06.120 tender offer by Paramount for thirty dollars or share. 0:01:05.920 --> 0:01:06.480 And they lift that. 0:01:06.560 --> 0:01:09.440 They listed a list of reasons why, and one of 0:01:09.440 --> 0:01:12.520 them was that there was no personal guarantee from Larry Ellison. 0:01:12.600 --> 0:01:16.360 And now the company Power Amount has addressed that this 0:01:16.480 --> 0:01:19.120 morning with a number of amendments to their tender offer. 0:01:19.240 --> 0:01:22.600 But that means he's putting his equities up up at stake, right. 0:01:23.120 --> 0:01:25.160 And they confirm that they hold one point one six 0:01:25.200 --> 0:01:27.080 billion Oracle shares And if you look at you know, 0:01:27.080 --> 0:01:28.840 an Oracle sharre is about one hundred and ninety four 0:01:28.840 --> 0:01:31.120 dollars or so that's about two hundred and twenty five 0:01:31.120 --> 0:01:34.680 billion dollars. So that is obviously a large amount of 0:01:34.760 --> 0:01:37.360 value there, and the fact that he's personally backing it 0:01:37.400 --> 0:01:39.119 is something that Warner Brothers was looking for. 0:01:40.200 --> 0:01:43.160 Still, a pro form of Paramount Warner Brothers, it's gonna 0:01:43.160 --> 0:01:44.160 be highly levered, isn't it. 0:01:44.200 --> 0:01:46.800 Talk about the debt profile there and how do you 0:01:46.920 --> 0:01:49.320 how do you view it? Yeah, so it gets very complicated. 0:01:49.400 --> 0:01:53.240 So a pro former, you know, Paramount Warner Brothers will 0:01:53.280 --> 0:01:56.240 be highly leverage. You're talking you know, mid four times 0:01:56.320 --> 0:02:00.000 leverage overall, and that's accounting for a significant number of 0:02:00.200 --> 0:02:02.120 synergies that we're giving them credit for. So if you 0:02:02.120 --> 0:02:06.200 look at expected EVATAH or paramount expected EVATAH for Warner Brothers, 0:02:06.240 --> 0:02:07.600 and then you add on top of that, what they're 0:02:07.600 --> 0:02:10.520 targeting is six billion dollars of the annual run rate 0:02:10.560 --> 0:02:12.400 cost savings. It'll take them a few years to get there. 0:02:12.440 --> 0:02:14.200 But if you say pro formal, we'll give them credit. 0:02:14.840 --> 0:02:17.239 The company is still highly leverage at about mid four 0:02:17.320 --> 0:02:18.160 times and x. 0:02:18.240 --> 0:02:19.560 That it's above five times. 0:02:19.800 --> 0:02:23.160 Oh clearly, yes, come on, yeah, And well you're asport 0:02:23.200 --> 0:02:23.639 credit guy. 0:02:23.639 --> 0:02:25.639 You're not giving them credit for the synergies are well, 0:02:25.639 --> 0:02:26.000 you have. 0:02:26.000 --> 0:02:28.680 To give them some credit, but you know, you really 0:02:28.720 --> 0:02:29.720 want to see a dummy and. 0:02:30.200 --> 0:02:31.519 That could a guy. I'm like, I'm all in on this. 0:02:31.560 --> 0:02:35.600 Synergies we usually are less bit more negative. Well, what's 0:02:35.600 --> 0:02:37.280 important too is how they break it up. 0:02:37.400 --> 0:02:40.800 So part of the commitment they have on the credit side, right, 0:02:40.800 --> 0:02:43.240 so you talked about Larry Elison some other equity providers 0:02:43.520 --> 0:02:45.520 providing forty over forty billion dollars. 0:02:45.360 --> 0:02:46.200 Of equity capital. 0:02:46.480 --> 0:02:49.760 They also have a fifty four billion dollars secured bridge commitment. 0:02:50.320 --> 0:02:52.760 And now that's secured. So if we assume that that 0:02:52.919 --> 0:02:55.639 debt is ahead of all the existing debt that's at 0:02:55.680 --> 0:02:59.440 both Warner Brothers and Paramount Skuidance, and again you give 0:02:59.480 --> 0:03:02.000 them credit for sinders. You're talking about pro former leverage 0:03:02.000 --> 0:03:04.840 through the secure debt of about three times. Now, there's 0:03:04.880 --> 0:03:07.919 a possibility that you could get that investment grade rated 0:03:08.360 --> 0:03:10.920 using Charter as an comparable. So if we look at Charter, 0:03:11.000 --> 0:03:13.040 which is one of the biggest cable companies out there, 0:03:13.480 --> 0:03:16.400 they owe almost one hundred billion dollars. Of that, about 0:03:16.639 --> 0:03:19.160 seventy billion dollars or so of it is secured bonds 0:03:19.160 --> 0:03:22.119 and loans that are ig rated, and they're about three 0:03:22.160 --> 0:03:24.480 times levered. So if we use that at a compt 0:03:24.800 --> 0:03:27.360 maybe you could get to investment grade ratings from at 0:03:27.400 --> 0:03:29.800 least two of the three agencies to qualify for investment 0:03:29.880 --> 0:03:32.440 grade for that fifty four billion dollars, which would be 0:03:32.600 --> 0:03:33.760 very key to financing. 0:03:33.880 --> 0:03:36.000 All right, I know we're talking about paramounts Guidance and 0:03:36.040 --> 0:03:38.560 Warner Brothers as the principal players here and Netflix if 0:03:38.560 --> 0:03:40.360 you want to get into that side of the bid too. 0:03:40.680 --> 0:03:42.760 But I'm curious, and this might be a dumb question. 0:03:43.760 --> 0:03:48.600 Larry Ellison, now personally guaranteeing the equity financing, there's a 0:03:48.600 --> 0:03:52.400 lot of questions about Oracle and its debt. Overall, we've 0:03:52.400 --> 0:03:55.120 seen the credit default swaps on its debt rise. That's 0:03:55.160 --> 0:03:57.520 the cost to ensure against a possible default. Does the 0:03:57.520 --> 0:04:00.760 fact that Larry Ellison is committing to backing a large 0:04:00.800 --> 0:04:02.640 portion of the money needed for the deal, does that 0:04:02.720 --> 0:04:05.680 affect Oracle's credit rating at all? Would a credit investor 0:04:05.680 --> 0:04:08.880 and analysts look at that and think, hmm, Now. 0:04:08.680 --> 0:04:12.240 Well, I don't forget Oracle still has a massive equity 0:04:12.240 --> 0:04:14.440 market cap, right, and the stock is traded every day, 0:04:14.480 --> 0:04:16.160 so the market is telling you every day what they 0:04:16.160 --> 0:04:18.359 think the value of Oracle equity is worth. Right, And 0:04:18.400 --> 0:04:20.599 he has again the one point one six billion dollars 0:04:20.839 --> 0:04:23.360 one point one six billion of shares worth about two 0:04:23.400 --> 0:04:25.120 hundred and twenty five billion dollars, and that's what the 0:04:25.160 --> 0:04:27.640 market's saying it's worth. So that's what a credit investor 0:04:27.640 --> 0:04:30.920 would look for that comfort or I'm sorry, an equity 0:04:30.960 --> 0:04:33.679 investor at Warner Brothers Discovery saying that that is backing 0:04:33.760 --> 0:04:35.400 up his forty point four billion dollars. 0:04:35.240 --> 0:04:37.160 And a credit investor wouldn't worry about that part of it. 0:04:37.760 --> 0:04:40.480 I don't think indirectly you could have some concern about it, 0:04:40.520 --> 0:04:42.000 But I don't think directly you would. 0:04:42.480 --> 0:04:45.080 The average credit investors that you talk to about Warner Brothers, 0:04:45.120 --> 0:04:45.920 which daily they. 0:04:45.839 --> 0:04:51.000 Prefer, Well, it's complicated, you would argue that. You know, 0:04:51.440 --> 0:04:54.040 it's interesting is that Warner Brothers bonds or investment grade 0:04:54.120 --> 0:04:56.480 rated right throughout most of the through half of last 0:04:56.560 --> 0:04:58.680 year or half of this year excuse me, twenty twenty five, 0:04:59.080 --> 0:05:01.240 and then they were by far the worst performing, huge 0:05:01.240 --> 0:05:04.400 negative total return. They went into junk, they were fallen 0:05:04.480 --> 0:05:07.400 angel in July, and now they've bounced back and one 0:05:07.400 --> 0:05:09.160 of the better performing high eel names. Was all this 0:05:09.279 --> 0:05:12.560 speculation of some sort of takeout. In either case, the 0:05:12.640 --> 0:05:15.359 bonds are probably better off than they would be without it, 0:05:15.400 --> 0:05:17.920 but there's still some concerns. So if they go with 0:05:18.040 --> 0:05:21.039 the powamount skuiddance deal, there's a chance they could be 0:05:21.080 --> 0:05:23.039 behind all that secure debt that we talked about, that 0:05:23.080 --> 0:05:25.599 fifty four billion dollars of secure debt. But you have 0:05:25.640 --> 0:05:29.200 all that equity capital coming in that's supporting the overall company, 0:05:29.320 --> 0:05:32.680 which would give you support as a bondholder for Warner Brothers. Now, 0:05:32.720 --> 0:05:34.480 the problem with the Netflix deal is that if you're 0:05:34.480 --> 0:05:37.320 a bondholder, you're probably left with the Global networks, which 0:05:37.400 --> 0:05:40.479 is going to be spun out before Netflix comes in 0:05:40.520 --> 0:05:43.160 and buys the studios and streaming operations, and that company 0:05:43.160 --> 0:05:46.560 will be relatively highly levered with a declining business. So 0:05:46.600 --> 0:05:48.440 I'd say it's pretty close, but maybe you lean a 0:05:48.480 --> 0:05:50.120 little bit towards the powamount s guidance. 0:05:50.200 --> 0:05:52.599 Really, all right, I wouldn't have thought that you guys 0:05:52.600 --> 0:05:54.440 are getting soft in early age back in my day. 0:05:54.680 --> 0:05:56.280 All Right, Steven Flinn, thanks so much, appreciate it. 0:05:56.279 --> 0:06:00.359 Steven Flynn, seeing your credit analysts Bloomberg Intelligence with us. 0:06:00.440 --> 0:06:02.640 More from Bloomberg Intelligence coming up after this. 0:06:06.640 --> 0:06:10.359 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:06:10.440 --> 0:06:13.480 weekdays at ten am Eastern on Apple, Cocklay and Android 0:06:13.520 --> 0:06:16.839 Auto with the Bloomberg Business App. Listen on demand wherever 0:06:16.880 --> 0:06:20.400 you get your podcasts, or watch us live on YouTube. 0:06:21.120 --> 0:06:23.200 All right, we got some economic data last week that 0:06:23.240 --> 0:06:25.000 the markets were looking for in terms of the labor 0:06:25.000 --> 0:06:27.359 market and inflation. We've got some more coming up here. 0:06:27.640 --> 0:06:30.200 The question is how how are our good friends down 0:06:30.240 --> 0:06:32.800 at the Federal Reserve kind of digesting all this. For that, 0:06:32.839 --> 0:06:36.360 we go to mister Ira Jersey and we're going to 0:06:36.400 --> 0:06:38.279 get a sense of what his thoughts are there, Ira Jersey, 0:06:38.360 --> 0:06:39.200 Chief US Interest. 0:06:39.040 --> 0:06:40.599 Rate Strategies in Bloomberg Intelligence. 0:06:40.760 --> 0:06:42.400 I remember, where do you think the FED is these 0:06:42.520 --> 0:06:44.400 days and they're thinking about this economy and where they 0:06:44.440 --> 0:06:44.800 need to go. 0:06:45.480 --> 0:06:46.600 Yeah, they were all over the place. 0:06:46.640 --> 0:06:48.480 So what you didn't mention, Paul, was that we had 0:06:48.480 --> 0:06:50.560 a ton of FED speak last week too, and we 0:06:50.600 --> 0:06:53.640 actually had even more this morning. So you definitely have 0:06:53.680 --> 0:06:55.839 two camps that have been built in here, and one 0:06:55.920 --> 0:06:59.279 is the more dubsh side of the of the isle 0:06:59.320 --> 0:07:01.760 who think that, hey, we should be cutting interest rates 0:07:01.760 --> 0:07:03.880 at least a little bit. You even had Williams, the 0:07:04.640 --> 0:07:07.160 president of the New York FED, who's the vice chair 0:07:07.240 --> 0:07:10.080 of the FOMC so presumably has a little bit more 0:07:10.080 --> 0:07:13.400 weight than the rank and file members. So he said 0:07:13.440 --> 0:07:15.600 that like, hey, we can go. We don't have to 0:07:15.640 --> 0:07:18.480 go quickly, but we're going to ease. So that suggests 0:07:18.480 --> 0:07:22.080 to me that maybe January skip is perhaps the base 0:07:22.120 --> 0:07:26.040 case for now, but then more easing later, so March April, 0:07:27.000 --> 0:07:28.840 you know, once we have a little bit more data 0:07:29.040 --> 0:07:31.520 and we can see have the rate cuts that we've 0:07:31.840 --> 0:07:34.520 already had actually work to stimulate the economy. 0:07:34.600 --> 0:07:34.800 Or not. 0:07:35.360 --> 0:07:37.960 So the division inside the FOMC is not new. This 0:07:38.000 --> 0:07:40.720 is something we've seen over the last couple of rate decisions. 0:07:40.760 --> 0:07:42.320 But we do know we're going to get a new 0:07:42.320 --> 0:07:46.040 FED chair starting in late May, because that is when 0:07:46.680 --> 0:07:51.200 Jerome Powell's term as FED chair ends. Put together the 0:07:51.600 --> 0:07:55.600 division within the FED and this timetable for new personnel 0:07:55.840 --> 0:07:58.920 at the FOMC, and whether we should be paying attention 0:07:59.000 --> 0:08:00.200 to all this FED speak. 0:08:01.120 --> 0:08:02.760 Well, I think you have to listen to all the 0:08:02.800 --> 0:08:04.680 FED speak, but you have to take it holistically, right. 0:08:04.760 --> 0:08:06.680 You can't just take one member and say, oh, that's 0:08:06.680 --> 0:08:08.760 exactly what they're going to do, because it is a 0:08:08.800 --> 0:08:11.920 committee and that's what we have to remember. You know. 0:08:12.000 --> 0:08:14.080 Then the new chair comes in. President Trump has said 0:08:14.080 --> 0:08:17.160 he's going to announce a new chair in January. Presumably 0:08:17.200 --> 0:08:20.000 that person is going to take Stephen Myron's seat, and 0:08:20.040 --> 0:08:23.800 if that's the case, then the FED Chair elect will 0:08:23.800 --> 0:08:26.840 be in it for both the March and the April meetings. 0:08:27.520 --> 0:08:30.040 And so therefore we'll have some time around the table, 0:08:30.120 --> 0:08:32.320 but we'll make a few speeches as the FED Chair 0:08:32.720 --> 0:08:35.280 and we'll be able to see or as a FED governor, 0:08:35.280 --> 0:08:37.120 I should say, And so we'll be able to see 0:08:37.240 --> 0:08:40.480 is this person really very duvish? Are they not very dubvish? 0:08:40.640 --> 0:08:43.320 Presumably they'll be more dubvish than j Powell has been. 0:08:43.400 --> 0:08:46.280 But at the same time, you know, again that person 0:08:46.400 --> 0:08:49.600 is only one one of the twelve members who actually 0:08:49.720 --> 0:08:51.439 votes on the policy decisions. 0:08:51.600 --> 0:08:53.280 Well, if Steven Myron is going to be replaced, we 0:08:53.280 --> 0:08:55.080 need to pay attention to what he says. We already 0:08:55.160 --> 0:08:58.600 know what side of the dubbish or hawkish campion lands on. 0:08:59.760 --> 0:09:02.000 Well, yeah, I mean he just you know, the most 0:09:02.040 --> 0:09:05.080 stubbish person on the committee, and you usually get those extremes, right, 0:09:05.080 --> 0:09:08.680 you get one or two really dubbish or relatively hawkish members. 0:09:08.880 --> 0:09:11.199 But it's that middle ground that you have to look at. 0:09:11.240 --> 0:09:13.959 So that's why someone like a Williams, for example, is 0:09:14.280 --> 0:09:16.880 important to listen to because you know he's voted, he 0:09:16.960 --> 0:09:20.160 hasn't yet dissented one way or the other. But you know, 0:09:20.480 --> 0:09:23.200 if that if he's saying that, hey, we're not going 0:09:23.200 --> 0:09:26.160 to necessarily cut in January, you have to take that seriously. 0:09:27.080 --> 0:09:28.880 I do we know what Jerome Palell is going to 0:09:28.920 --> 0:09:30.800 do once he steps down from the chairnship. 0:09:31.840 --> 0:09:33.920 As far as I know, he hasn't said what he's 0:09:33.960 --> 0:09:35.680 going to do. You know a lot of former FED 0:09:35.800 --> 0:09:38.840 chairs either take a role at one of the think 0:09:38.840 --> 0:09:41.880 tanks in Washington or go into academia. That those are 0:09:42.160 --> 0:09:45.840 two of the typical paths. I wouldn't be surprised if 0:09:45.920 --> 0:09:48.640 Jerome Powell maybe even just retired and wound up being 0:09:48.679 --> 0:09:51.320 on a lecture circuit or something like that instead of 0:09:51.880 --> 0:09:54.080 instead of doing having a day to day type of job. 0:09:55.280 --> 0:09:57.480 Yeah, commanding six figure paying fees for. 0:09:57.600 --> 0:10:00.000 Yeah, exactly, a couple board seats, couple of speaking things. 0:10:00.120 --> 0:10:01.880 That's the way to go. I mean, who needs it? 0:10:02.320 --> 0:10:05.199 Ira, Thanks so much, journeyers appreciate it. Ira Jersey, chief 0:10:05.280 --> 0:10:08.320 US interest rate strategist for Bloomberg Intelligence. Joining us there, 0:10:08.960 --> 0:10:12.120 stay with us. More from Bloomberg Intelligence coming up after this. 0:10:16.040 --> 0:10:19.720 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:10:19.800 --> 0:10:22.880 weekdays at ten am Eastern on Apple Coarclay, and Android 0:10:22.920 --> 0:10:26.200 Auto with the Bloomberg Business app. Listen on demand wherever 0:10:26.280 --> 0:10:29.760 you get your podcasts, or watch us live on YouTube. 0:10:30.080 --> 0:10:32.800 I like the analysts who covered like the travel industry, 0:10:32.880 --> 0:10:35.320 like cruise ships, theme. 0:10:35.120 --> 0:10:37.479 Parks, and you're going on your first cruise strong. 0:10:37.240 --> 0:10:40.520 On my first cruise next fall in France, so that'll 0:10:40.559 --> 0:10:44.280 be interesting. Jody Lourie actually does this, Lori. She actually 0:10:44.320 --> 0:10:46.520 does this for a living. She's a credit analyst for 0:10:46.600 --> 0:10:50.000 Bloomberg Intelligence. She follows a lot of the leisure sectors 0:10:50.040 --> 0:10:52.760 of the economy, think theme parks and cruise lines, that 0:10:52.760 --> 0:10:55.960 type of stuff, hotels, casinos, that type of stuff from 0:10:55.960 --> 0:10:59.840 the credit perspective, because remember that saw, I mean, equity 0:10:59.880 --> 0:11:01.280 of soft debt is hard. 0:11:01.360 --> 0:11:04.040 Right there you go, Jody, let's to spend the cruise 0:11:04.080 --> 0:11:04.640 lines here. 0:11:05.440 --> 0:11:08.320 It seems like the cruise people are cruising back in 0:11:08.400 --> 0:11:11.400 I mean, Charlie Pellot's any you know, sign of that. 0:11:11.800 --> 0:11:12.720 How are they performing? 0:11:13.280 --> 0:11:16.080 So the cruise lines always have a dedicated base. But 0:11:16.320 --> 0:11:18.520 cruising is sort of interesting because it's only two percent 0:11:19.040 --> 0:11:21.679 of the travel industry. It really is such a small 0:11:21.760 --> 0:11:25.120 portion of it. Where we've been watching is for those 0:11:25.160 --> 0:11:27.520 new Dowo cruisers, which I don't know if I'm necessarily 0:11:27.520 --> 0:11:31.800 convinced that they're going as often or they're attracting the 0:11:31.840 --> 0:11:34.959 new to cruisers, but the cruisers are still very much cruising, 0:11:35.160 --> 0:11:37.079 and they're spending more than the average consumer. 0:11:37.960 --> 0:11:40.840 They're also spending more than the people who go to 0:11:40.960 --> 0:11:44.839 theme parks, according to your research, And partly that might 0:11:44.880 --> 0:11:47.719 be because the cruise line industry attracts a different kind 0:11:47.720 --> 0:11:52.000 of customer than the theme park industry. Theme park skews younger, 0:11:52.160 --> 0:11:56.120 cruises skew older easy, Which would you prefer if you 0:11:56.160 --> 0:11:58.320 are an operator? Which would you prefer if you're an investor. 0:12:00.200 --> 0:12:03.000 So we don't make full recommendations, but I will tell 0:12:03.040 --> 0:12:05.320 you a couple of things based on our research findings. 0:12:05.559 --> 0:12:08.360 So first of all, you have to think about how 0:12:08.559 --> 0:12:11.960 people book cruising versus how they book theme parks. So 0:12:12.000 --> 0:12:14.560 when you're talking about cruises, they book far in advance, 0:12:14.600 --> 0:12:16.760 they book a year or two well in advance. And 0:12:16.800 --> 0:12:19.200 what the cruise lines have been doing, particularly post pandemic, 0:12:19.440 --> 0:12:22.520 is they've been locking people in on the drink packages, 0:12:22.640 --> 0:12:25.600 on the experiences. They've been giving these steal of deals 0:12:25.679 --> 0:12:28.960 excursion ideas, and when you get on the boat, it's 0:12:29.000 --> 0:12:31.840 more expensive. So people say, Okay, I'm going to book 0:12:31.840 --> 0:12:34.640 my cruise, but I'm also going to book the snorkeling, 0:12:34.640 --> 0:12:35.960 and I'm going to book this. I'm going to book 0:12:36.000 --> 0:12:37.800 that the ones that I definitely want to do, they 0:12:37.880 --> 0:12:40.160 also book the drink packages which you know, I think 0:12:40.160 --> 0:12:42.559 you can go either way on that personally, because I 0:12:42.600 --> 0:12:45.040 don't think I drink enough, but maybe other people do, 0:12:45.559 --> 0:12:49.559 and and it really sort of just helps their cash flows. Now, 0:12:49.679 --> 0:12:54.160 theme parks people book much later, they are younger, they 0:12:54.200 --> 0:12:58.680 are lower income than the US median household. And the 0:12:58.800 --> 0:12:59.920 key for them is they. 0:12:59.800 --> 0:13:01.080 Can get people in the door. 0:13:01.120 --> 0:13:03.240 They can get them with season passes, or they can 0:13:03.320 --> 0:13:05.080 just get them for the one day pass, but they're 0:13:05.080 --> 0:13:07.880 not necessarily convincing them to spend in park the same way. 0:13:07.880 --> 0:13:09.520 But there's higher volume in theme park. 0:13:09.640 --> 0:13:12.480 Right, there's pretty highvlume in theme parks, but if they're 0:13:12.520 --> 0:13:15.200 just paying for the admission, it might not necessarily cover 0:13:15.240 --> 0:13:18.080 the costs per se. Right, they'll get in the door, 0:13:18.440 --> 0:13:21.240 but they have high capex, they have high just high 0:13:21.240 --> 0:13:23.199 costs in general, and they have all the employees that 0:13:23.200 --> 0:13:23.920 they're paying for. 0:13:24.400 --> 0:13:27.120 Six Flags, that's a theme park that got some local 0:13:27.240 --> 0:13:30.560 Jersey flavor here, six Flags Great Adventure. 0:13:31.200 --> 0:13:33.559 How's the capital structure for these theme parks? 0:13:33.920 --> 0:13:36.920 They are high capex, so high capital intensive companies. 0:13:37.280 --> 0:13:39.319 They have high level rides. 0:13:39.559 --> 0:13:42.720 Right exactly, and similar to cruise lines. So where we 0:13:42.800 --> 0:13:45.079 sort of see it interesting is theme parks and cruise 0:13:45.080 --> 0:13:49.199 lines are constantly they have to get the new experience in, right, 0:13:49.240 --> 0:13:52.360 So they have to spend not just on maintaining their products, 0:13:52.400 --> 0:13:55.240 so not just maintaining the ship or maintaining the ride, 0:13:55.480 --> 0:13:58.080 they also have to get new ones in. So people say, 0:13:58.120 --> 0:13:59.280 I want to go to a Great Adventure because I 0:13:59.280 --> 0:14:02.280 want to ride Superman, right, So they do this to 0:14:02.320 --> 0:14:05.480 get people excited, draw them in so that they're going. 0:14:05.520 --> 0:14:07.880 I mean, you know, the biggest example that we don't cover. 0:14:07.960 --> 0:14:11.360 I don't cover Universal or Comcast, but you know, Universal's 0:14:11.400 --> 0:14:14.160 new theme park this year was a big driver to Florida. 0:14:14.200 --> 0:14:16.959 It wasn't as big as expected necessarily, but it's still 0:14:16.960 --> 0:14:19.000 pretty big. Now, if you're talking about the regional theme 0:14:19.040 --> 0:14:23.000 parks is a little bit more difficult because people aren't 0:14:23.000 --> 0:14:26.720 necessarily planning these long term vacations around Great Adventure. 0:14:27.920 --> 0:14:32.800 Do the theme parks attract more domestic consumers than the cruises? 0:14:32.800 --> 0:14:36.160 I mean, I'm just curious in terms of the sustainability 0:14:36.160 --> 0:14:37.920 and the stability of your customer base. 0:14:38.360 --> 0:14:40.040 So it depends on the brand. 0:14:40.200 --> 0:14:43.840 Because if you look pre pandemic and now going into 0:14:43.840 --> 0:14:46.960 a few years post pandemic, the cruise lines they segment, 0:14:47.120 --> 0:14:50.880 So Norwegian most of their customer bases US their US customers. 0:14:51.400 --> 0:14:53.720 When you get to Royal Caribbean, it's a little bit less. 0:14:53.720 --> 0:14:55.880 It's about so I think it's about eighty percent for Norwegian. 0:14:55.920 --> 0:14:57.680 I'm doing this off the top of my head memory, 0:14:57.960 --> 0:15:00.520 but eighty percent Norwegian. You get to back, it's like 0:15:00.640 --> 0:15:03.080 seventy or sixty five for Royal, And then you get 0:15:03.120 --> 0:15:05.360 to Carnival and it's even less than that. It's closer 0:15:05.360 --> 0:15:09.680 to half, it's not quite half that are US versus international, 0:15:09.840 --> 0:15:12.800 they have a much larger international presence. Brian Egger and I, 0:15:12.880 --> 0:15:16.160 my equity counterpart, we were on the Aida, which is 0:15:16.280 --> 0:15:19.040 one of the one of their brands that they market 0:15:19.280 --> 0:15:23.360 to international customers, specifically in Germany, and it was a 0:15:23.560 --> 0:15:26.280 one hundred and thirty three round. 0:15:26.040 --> 0:15:27.840 The world cruise. 0:15:28.200 --> 0:15:30.800 Nice They were stopping in New York for the day, 0:15:31.080 --> 0:15:33.040 and they brought a bunch of us on, a bunch 0:15:33.080 --> 0:15:36.040 of US equity and credit nerds, and took us around 0:15:36.080 --> 0:15:39.360 the ship and everything was in German, as expected because 0:15:39.360 --> 0:15:42.240 most of their customers were German. So that's Carnival has 0:15:42.280 --> 0:15:45.000 a much more diversified customer base. If you talk about 0:15:45.040 --> 0:15:48.800 theme parks, SeaWorld or United Parks as they go. Right now, 0:15:49.160 --> 0:15:52.080 their Florida parks, which make up about half their revenue, 0:15:52.560 --> 0:15:56.880 is international about ten twenty percent, But when you get 0:15:56.880 --> 0:15:58.520 to six flags, it's much more domestic. 0:15:58.960 --> 0:16:02.560 We were off the a Mafia Coast last fall, oh fancy, 0:16:03.040 --> 0:16:05.880 and I saw this big yacht thats like either navy 0:16:05.920 --> 0:16:08.160 blue or black, And I said, what who owns that? 0:16:08.280 --> 0:16:10.880 It's the rich Carlton Ritz Carlton. Yes, I actually have 0:16:10.960 --> 0:16:13.880 the run on it, just parked in. Those are small, though, 0:16:13.920 --> 0:16:16.720 I mean in terms of the relative five hundred people. 0:16:16.880 --> 0:16:18.880 Yeah, I mean that looked pretty cool. 0:16:18.920 --> 0:16:22.440 Yeah, that's for the people who want to be on 0:16:22.480 --> 0:16:25.600 a luxury yacht but don't want to actually own a 0:16:25.680 --> 0:16:26.280 luxury yacht. 0:16:26.320 --> 0:16:26.480 Right. 0:16:26.720 --> 0:16:28.320 The joke about boats is. 0:16:28.240 --> 0:16:30.560 Bring on another thousand, right, My mother in law likes 0:16:30.600 --> 0:16:33.520 st always say that, and that's why it's called boat. 0:16:33.720 --> 0:16:38.200 So but the uh, you know, the thing about cruising 0:16:38.400 --> 0:16:42.000 is that there's a perception about who the typical cruiser is. Right, 0:16:42.320 --> 0:16:46.160 it's the you know, older people who are retired who 0:16:46.200 --> 0:16:49.400 likes who like to bring basically the catskills on the water. 0:16:49.880 --> 0:16:52.880 But really, I mean it's changed over time. And what's 0:16:52.920 --> 0:16:55.880 interesting about our credit research and our travel survey that 0:16:55.920 --> 0:16:58.760 we do every half a year is we're seeing that 0:16:58.800 --> 0:17:01.000 it's actually really really spread out. If you look into 0:17:01.040 --> 0:17:04.360 the buckets that we've segmented, it's really you know, it's 0:17:04.400 --> 0:17:06.240 one third of each, so it's one third, eighteen to 0:17:06.280 --> 0:17:09.400 thirty four year old one third that like middle age group, 0:17:09.440 --> 0:17:11.760 and fifty five and older one third, so it's really 0:17:11.880 --> 0:17:13.720 not specifically the older. 0:17:13.920 --> 0:17:15.680 All right, Very good, Jodi, thank you so much. We 0:17:15.720 --> 0:17:17.520 appreciate that. Jodi Lourie. 0:17:17.840 --> 0:17:21.199 She is senior credit analyst for Bloomberg Intelligence. Following the 0:17:21.840 --> 0:17:24.280 leisure part of the economy, stay with us. 0:17:24.440 --> 0:17:26.760 More from Bloomberg Intelligence coming up after this. 0:17:30.680 --> 0:17:34.399 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:17:34.480 --> 0:17:37.159 weekdays at ten am. He's done on Apple, Cocklay and 0:17:37.160 --> 0:17:40.439 Android Auto with the Bloomberg Business App. Listen on demand 0:17:40.480 --> 0:17:44.040 wherever you get your podcasts, or watch us live on YouTube. 0:17:44.560 --> 0:17:47.520 Well, it is a crazy time to be a CEO. 0:17:48.119 --> 0:17:50.919 New research from the Conference Board provides insights onto two 0:17:50.960 --> 0:17:53.920 big trends. Number one CEO turnover I think it's going 0:17:54.000 --> 0:17:55.879 up CEO and number two CEO. 0:17:55.680 --> 0:17:57.840 Targeted shareholder activism and again. 0:17:57.840 --> 0:18:01.440 We just had that try and acquisition of Janis Henderson 0:18:01.440 --> 0:18:03.360 and they were shareholders. 0:18:02.920 --> 0:18:04.119 So they said, we're going to buy this whole thing 0:18:04.160 --> 0:18:05.399 out right, So it's happening out there. 0:18:05.440 --> 0:18:08.639 Brian Campbell joins US US Center Leader for Governance and 0:18:08.680 --> 0:18:11.560 Sustainability at the Commerce Board. Brian talked to us about 0:18:11.800 --> 0:18:16.720 CEO turnover, Is it rising and soy sure? 0:18:16.760 --> 0:18:19.560 I think, Paul, thank you for having me. I think 0:18:19.600 --> 0:18:22.239 the trend is that it is up and we are 0:18:22.280 --> 0:18:26.760 seeing definitely more CEO transition, partially driven by what may 0:18:26.760 --> 0:18:31.080 have been longer delayed CEO transitions when you think back 0:18:31.119 --> 0:18:35.280 to the pandemic and the volatility since then, companies kept 0:18:35.320 --> 0:18:38.600 people in positions for longer, and I think that coupled 0:18:38.600 --> 0:18:41.520 with regular transition, is showing a spike. 0:18:42.480 --> 0:18:44.879 So making up for some lost time, which makes sense. 0:18:45.119 --> 0:18:47.520 Where do we see this happening the most? Are they 0:18:47.600 --> 0:18:51.280