Speaker 1: This is Bloomberg Business Week with Carol Messer and Jason
Speaker 1: Kelly on Bloomberg Radio. You're listening to Bloomberg Business Week
Speaker 1: with Carol Messer and Jason Kelly on Bloomberg Radio. Well,
Speaker 1: as we said at the top of our broadcast, this
Speaker 1: is a trusted Wall Street voice. We're so glad to
Speaker 1: have back with us. Someone who really understands the world
Speaker 1: of bank debt and the credit world. He's worked in
Speaker 1: it for several decades. Peter Glystein is back with us.
Speaker 1: He's CEO and c I O at A g L
Speaker 1: Credit Management. They've got roughly three billion in assets under management.
Speaker 1: He joins us on the phone from New York City. Peter,
Speaker 1: so good to have you back with us. How are you.
Speaker 1: How's your world? Um? Well, I am excellent. Carol and Jason,
Speaker 1: I hope both of you and all your friends and
Speaker 1: family are also well. Yeah, we're doing okay. So tell
Speaker 1: us about the credit world, because we are certainly watching
Speaker 1: very closely. It looks like things are working fairly smoothly.
Speaker 1: What are you seeing from your perspective. That's a very
Speaker 1: good description of the new issue loan market. It's at
Speaker 1: relatively low levels historically, but eligible, strong borrowers can come
Speaker 1: to market and raise capital. That's a really positive thing.
Speaker 1: It's it's also very attractive for investors because these borrowers
Speaker 1: are are paying more, so the risk adjusted returns are
Speaker 1: much higher than previously. Another comments I'll make from an
Speaker 1: investor's vantage point is that most of the borrowers who
Speaker 1: have come to the brdly syndicated loan new issue market
Speaker 1: since COVID last six to eight weeks are much stronger
Speaker 1: borrowers than the typical average borrowers, so that it's logical
Speaker 1: that that strong, well managed companies, not that many many
Speaker 1: other and smaller companies aren't also well managed, are taking
Speaker 1: the opportunity of the conservative step to raise additional passion
Speaker 1: put it on the balance sheet because the market is
Speaker 1: open for them to do that, and they're doing it
Speaker 1: because you know the unprecedented uncertainties ahead. I'll add that
Speaker 1: the so called secondary market, which is the actively traded
Speaker 1: market for already existing loans which are approximately one point
Speaker 1: three trillion and broader syndicated loans um many all those
Speaker 1: loans have sold off. In that sense, the loan markets
Speaker 1: are highly disconnected from the equity markets that we hear
Speaker 1: you're about and read about every day, um and But
Speaker 1: the point I want to make is in this very
Speaker 1: large population of loans, in excess of the trillion there are,
Speaker 1: are there haves and have nots in the sense that
Speaker 1: many of these borrowers, the majority of them are performing well.
Speaker 1: You know, they're affected by the circumstances and really but
Speaker 1: they're performing well. They're resilients, have capital structures that are
Speaker 1: such that will enable them to not go through the storm,
Speaker 1: but through the scale like a kind of a perpetual gale.
Speaker 1: But notwithstanding that, their their prices um are severely discounted.
Speaker 1: So it's an investment opportunity. Right. Clearly, there are many
Speaker 1: that there are many companies that you wouldn't want to
Speaker 1: invest in as a regular investor because they're they're quite
Speaker 1: challenge Well, that's exactly what what I wanted to talk about, Peter,
Speaker 1: because you know, for those of our listeners who aren't
Speaker 1: as fluent, you're beyond fluent. You're your teach a masterclass
Speaker 1: in the credit markets. But you know, part of what
Speaker 1: it sounds like you're saying, and it is important to
Speaker 1: remind folks about, is that this is actually a clear
Speaker 1: window into the health of companies than we get from
Speaker 1: watching the vicissitudes as it were, uh of the equity
Speaker 1: markets bouncing around. Right, that's an excellent point, Jason. So
Speaker 1: what the what the recession has done has created high
Speaker 1: high visibility into borrowers that can survive a really bad
Speaker 1: if any recession, never mind a bad recession, and the
Speaker 1: ones that cannot. In normal times, you really, you know,
Speaker 1: to quote mon Buffet, until the tide goes out, you
Speaker 1: can't you can't see what's going on. But in this case,
Speaker 1: it's it's very, very visible. So what's happened is there
Speaker 1: are many borrowers that are clearly challenged, but there's so
Speaker 1: many that that that are resilient and are our great
Speaker 1: investment opportunities. So there, in addition to the fact that
Speaker 1: the markets open for qualified borrowers to raise capital, both
Speaker 1: for new loans but also old ones, there's plenty of
Speaker 1: investment opportunities. You know, there's there's no press continue the
Speaker 1: market reaction can be to throw the baby out with
Speaker 1: the bath water. So well, that's a good point. And
Speaker 1: so where where do you see the opportunities right now
Speaker 1: where people might get confused and actually throw the baby
Speaker 1: out with the AWA are where are you seeing those
Speaker 1: opportunities that you've got to make the distinctions? UM, Well,
Speaker 1: that's a great question. I would say that most most
Speaker 1: investors and also most asset managers UM look at credit
Speaker 1: quality and also the subject of portfolio diversityations is a
Speaker 1: really key point UM through through the lens of the
Speaker 1: industries that the borrowers performing in. But more important than
Speaker 1: the industry that a borrowers is is is what the
Speaker 1: business that a borrower has UM. How correlated is to
Speaker 1: g d P to the economy. Because you can have
Speaker 1: you can have. There are many industries who UM where
Speaker 1: there's credit risk, but the credit risk is dispersed over
Speaker 1: time as opposed to occurring at single points in time
Speaker 1: like a recession. UM. So so that I'll pick some
Speaker 1: obvious examples, and there are also some surprises. And obviously
Speaker 1: example is food UM or food supply or food storage
Speaker 1: or the transportation of foods UM. There are many, There
Speaker 1: are many, many many. One of the fastest for years,
Speaker 1: one of the largest now and fastest growing UM parts
Speaker 1: of our economy has been business software UM. In many cases,
Speaker 1: the business models were strong occurring revenue, which has high
Speaker 1: switching costs and good competitive musicians. UM. There are many
Speaker 1: kinds of business services think of iron mountain or documents
Speaker 1: storage or UM or even building security or even or
Speaker 1: even insurance brokerage or broad or broadband people getting internet access,
Speaker 1: never mind defense. There are many UM either industries or
Speaker 1: subsectors within industries that the term that a g L
Speaker 1: uses is our a recessionary US. There's credit risk, but
Speaker 1: the credit risk isn't UM has load and no correlation
Speaker 1: with actual GDP. So, Peter, I want to shift the
Speaker 1: conversation a little bit if we can. You're a Wall
Speaker 1: Street veteran. This has been, to say the least, a
Speaker 1: tumultuous time on Wall Street, and not just for the
Speaker 1: usual reasons of we've got a crisis, We're trying to
Speaker 1: figure out how to invest through it. We are trying
Speaker 1: to essentially reinvent Wall Street. It feels like a Wall
Speaker 1: Street is trying to reinvent itself on a number of fronts.
Speaker 1: One is from a remote perspective, and one is a
Speaker 1: long overdo reckoning with a lot of racial injustice, a
Speaker 1: lot of a lack of diversity, and so many elements
Speaker 1: that we've all been talking so much more about let's
Speaker 1: start if we can on how Wall Street changes in
Speaker 1: its operation coming out on the other side of this
Speaker 1: as we try to figure out what the new Wall
Speaker 1: Street looks like. That's a great question, Jason. Let me
Speaker 1: kind of work backwards. So I think you mentioned, you know,
Speaker 1: the need of course for more diversity, special racial especially
Speaker 1: racial diversity, and also the challenge that the new the
Speaker 1: new modality of working remotely. So what this is all
Speaker 1: presenting is an opportunity, especially because we've seen that financial services, investment, banking,
Speaker 1: even trading, all aspects of finance UM can be very
Speaker 1: effectively done remotely. There's a lot of pieces that are
Speaker 1: missing UM from human contact. But it means there's an
Speaker 1: opportunity to effectively start with a clean sheet of paper.
Speaker 1: So what we're dealing with, our our legacy cultures, business frameworks, systems,
Speaker 1: there's an opportunity now to say, okay, well, if we
Speaker 1: can take it to the next level, and if in
Speaker 1: many maybe not all cases, but in many cases, assume
Speaker 1: that we can build it from scratch or have a
Speaker 1: better policy from scratch, let's do so. One of the
Speaker 1: you know, coming back to diversity, one of the things
Speaker 1: that working remotely does is it forces you to rethink
Speaker 1: anything that you just in the habit of doing so
Speaker 1: in the real world. A lot of what we did,
Speaker 1: we did it that way because we always did it,
Speaker 1: or that's what our friend there is, which kind of
Speaker 1: with a default for incumbency, legacy mode um. Working virtually
Speaker 1: is illuminated that a lot of things, including that you
Speaker 1: don't have to get a lot of things done. You
Speaker 1: can even do it faster in some ways better and
Speaker 1: some ways not. But without the traditional way of doing it.
Speaker 1: It also makes it clearer and cleaner to to be
Speaker 1: objected um it um. We all we all have, I
Speaker 1: guess for life without our term embedded bias, subconscious biases.
Speaker 1: But when you're when you're working remotely and you're not
Speaker 1: you're looking at actual information and actual formants, it's easier
Speaker 1: to to compare it, appreciate it, understand it, respect it
Speaker 1: um without without kind of the lenses of kind of
Speaker 1: our our culture or or proclivities, whatever they may be.
Speaker 1: So I think there's a real opportunity to take things
Speaker 1: to level. I think it's gonna be hard. I will
Speaker 1: just make one more common about working virtual. I think
Speaker 1: it's hard dist on our our youngest colleagues across the
Speaker 1: industry because you know they're learning, they need feedback, and
Speaker 1: some feedback of course needs to be is for lack
Speaker 1: of better term, is it is not in a written
Speaker 1: or virtual form. You actually need to have have have
Speaker 1: a human presence or social proximity, especially to learn and
Speaker 1: and to see how you're making progress. But I do
Speaker 1: think it is a huge opportunity. I can't believe how
Speaker 1: how effective and productive, um much more could ever expected
Speaker 1: a g L has been. In fact, you mentioned our size.
Speaker 1: UM just since COVID, we have done two securitizations working
Speaker 1: virtually entire firms work in virtually totaling a billion dollars section,
Speaker 1: the most of any any manager has done since COVID.
Speaker 1: So um that just this testimony to how effective, how
Speaker 1: effective of not being in a physical environment is. I
Speaker 1: do think it's going to be a blend of the
Speaker 1: two in the future from what that b But I
Speaker 1: do to the more important question, I think it's incumbent
Speaker 1: on all firms of all sizes and types to take
Speaker 1: the responsibility to make it a better work environment, a
Speaker 1: fairer environment, and more opportunity for all. God I could
Speaker 1: just keep going talking about this. I have one last question.
Speaker 1: I want to go back. Forgive me, it's a bit
Speaker 1: of a turn. But you know, you sent over and
Speaker 1: you showed some notes with us, and you said we
Speaker 1: are in a recession and there is higher risk everywhere.
Speaker 1: How concerned are you, Peter about the economic outlook what
Speaker 1: it looks like. Well, we get on the other side
Speaker 1: of this and we've just got about a minute minute
Speaker 1: twenty left. Very concerned. I'm more concerned about the pace
Speaker 1: of the recovery, how fast it is, how wide it is,
Speaker 1: and and also the possibility that we can have kind
Speaker 1: of setbacks, hopefully not from from a second wave, especially
Speaker 1: a bad second wave. But I do want to point
Speaker 1: out that, um, it's not one size fits all. UM.
Speaker 1: Many businesses are normally surviving UM and for investors depend
Speaker 1: only focusing on on the right opportunities. There's a step
Speaker 1: shift increases in terms of risk invested returns. But I
Speaker 1: am but this reason that they're higher is for the
Speaker 1: reason you just said, there's just so much uncertainty, unprecedented
Speaker 1: level of it. Absolutely well, we really enjoy catching up
Speaker 1: with you whenever we get a chance to. Peter Gleistein
Speaker 1: CEO chief investment officer of a g L Credit Management.
Speaker 1: Just one of those thoughtful voices on Wall Street Carol
Speaker 1: that we love checking in with. He has sort of
Speaker 1: just a calming way about him that basically says, here's
Speaker 1: where we are, here's how we're going to figure it out.
Speaker 1: I love his point about the objectivity that comes with distance.