WEBVTT - Gleysteen: "Concerned About Pace of Recovery" 0:00:00.160 --> 0:00:03.760 This is Bloomberg Business Week with Carol Messer and Jason 0:00:03.840 --> 0:00:08.799 Kelly on Bloomberg Radio. You're listening to Bloomberg Business Week 0:00:08.960 --> 0:00:13.119 with Carol Messer and Jason Kelly on Bloomberg Radio. Well, 0:00:13.160 --> 0:00:14.960 as we said at the top of our broadcast, this 0:00:15.040 --> 0:00:17.880 is a trusted Wall Street voice. We're so glad to 0:00:17.880 --> 0:00:20.239 have back with us. Someone who really understands the world 0:00:20.239 --> 0:00:22.599 of bank debt and the credit world. He's worked in 0:00:22.640 --> 0:00:25.760 it for several decades. Peter Glystein is back with us. 0:00:25.800 --> 0:00:28.120 He's CEO and c I O at A g L 0:00:28.200 --> 0:00:32.000 Credit Management. They've got roughly three billion in assets under management. 0:00:32.080 --> 0:00:34.960 He joins us on the phone from New York City. Peter, 0:00:35.280 --> 0:00:37.519 so good to have you back with us. How are you. 0:00:37.600 --> 0:00:41.760 How's your world? Um? Well, I am excellent. Carol and Jason, 0:00:41.800 --> 0:00:43.680 I hope both of you and all your friends and 0:00:43.720 --> 0:00:47.200 family are also well. Yeah, we're doing okay. So tell 0:00:47.280 --> 0:00:49.880 us about the credit world, because we are certainly watching 0:00:50.000 --> 0:00:53.440 very closely. It looks like things are working fairly smoothly. 0:00:53.760 --> 0:00:57.880 What are you seeing from your perspective. That's a very 0:00:57.880 --> 0:01:02.840 good description of the new issue loan market. It's at 0:01:02.880 --> 0:01:08.520 relatively low levels historically, but eligible, strong borrowers can come 0:01:08.560 --> 0:01:11.520 to market and raise capital. That's a really positive thing. 0:01:12.319 --> 0:01:17.240 It's it's also very attractive for investors because these borrowers 0:01:17.400 --> 0:01:21.920 are are paying more, so the risk adjusted returns are 0:01:22.000 --> 0:01:26.640 much higher than previously. Another comments I'll make from an 0:01:26.680 --> 0:01:31.800 investor's vantage point is that most of the borrowers who 0:01:31.800 --> 0:01:35.240 have come to the brdly syndicated loan new issue market 0:01:35.319 --> 0:01:40.360 since COVID last six to eight weeks are much stronger 0:01:40.440 --> 0:01:45.080 borrowers than the typical average borrowers, so that it's logical 0:01:45.200 --> 0:01:49.240 that that strong, well managed companies, not that many many 0:01:49.240 --> 0:01:53.040 other and smaller companies aren't also well managed, are taking 0:01:53.040 --> 0:01:57.920 the opportunity of the conservative step to raise additional passion 0:01:58.000 --> 0:01:59.920 put it on the balance sheet because the market is 0:02:00.040 --> 0:02:02.880 open for them to do that, and they're doing it 0:02:02.920 --> 0:02:08.200 because you know the unprecedented uncertainties ahead. I'll add that 0:02:09.200 --> 0:02:12.280 the so called secondary market, which is the actively traded 0:02:13.400 --> 0:02:17.600 market for already existing loans which are approximately one point 0:02:17.600 --> 0:02:23.720 three trillion and broader syndicated loans um many all those 0:02:23.760 --> 0:02:28.120 loans have sold off. In that sense, the loan markets 0:02:28.120 --> 0:02:30.880 are highly disconnected from the equity markets that we hear 0:02:31.800 --> 0:02:34.840 you're about and read about every day, um and But 0:02:34.960 --> 0:02:37.120 the point I want to make is in this very 0:02:37.200 --> 0:02:41.320 large population of loans, in excess of the trillion there are, 0:02:41.880 --> 0:02:44.400 are there haves and have nots in the sense that 0:02:44.480 --> 0:02:49.800 many of these borrowers, the majority of them are performing well. 0:02:49.880 --> 0:02:52.640 You know, they're affected by the circumstances and really but 0:02:52.639 --> 0:02:56.040 they're performing well. They're resilients, have capital structures that are 0:02:56.040 --> 0:02:58.880 such that will enable them to not go through the storm, 0:02:58.880 --> 0:03:03.280 but through the scale like a kind of a perpetual gale. 0:03:04.000 --> 0:03:09.000 But notwithstanding that, their their prices um are severely discounted. 0:03:09.080 --> 0:03:12.839 So it's an investment opportunity. Right. Clearly, there are many 0:03:12.919 --> 0:03:15.840 that there are many companies that you wouldn't want to 0:03:15.880 --> 0:03:20.280 invest in as a regular investor because they're they're quite 0:03:20.320 --> 0:03:24.240 challenge Well, that's exactly what what I wanted to talk about, Peter, 0:03:24.320 --> 0:03:27.639 because you know, for those of our listeners who aren't 0:03:27.680 --> 0:03:32.600 as fluent, you're beyond fluent. You're your teach a masterclass 0:03:32.639 --> 0:03:35.680 in the credit markets. But you know, part of what 0:03:35.720 --> 0:03:37.640 it sounds like you're saying, and it is important to 0:03:37.680 --> 0:03:40.720 remind folks about, is that this is actually a clear 0:03:40.840 --> 0:03:43.560 window into the health of companies than we get from 0:03:43.560 --> 0:03:47.600 watching the vicissitudes as it were, uh of the equity 0:03:47.640 --> 0:03:52.560 markets bouncing around. Right, that's an excellent point, Jason. So 0:03:52.600 --> 0:03:56.480 what the what the recession has done has created high 0:03:56.600 --> 0:04:02.320 high visibility into borrowers that can survive a really bad 0:04:02.400 --> 0:04:05.400 if any recession, never mind a bad recession, and the 0:04:05.440 --> 0:04:09.000 ones that cannot. In normal times, you really, you know, 0:04:09.200 --> 0:04:11.640 to quote mon Buffet, until the tide goes out, you 0:04:11.640 --> 0:04:15.000 can't you can't see what's going on. But in this case, 0:04:15.480 --> 0:04:18.359 it's it's very, very visible. So what's happened is there 0:04:18.400 --> 0:04:21.200 are many borrowers that are clearly challenged, but there's so 0:04:21.240 --> 0:04:26.479 many that that that are resilient and are our great 0:04:26.520 --> 0:04:29.960 investment opportunities. So there, in addition to the fact that 0:04:30.200 --> 0:04:34.719 the markets open for qualified borrowers to raise capital, both 0:04:34.800 --> 0:04:38.320 for new loans but also old ones, there's plenty of 0:04:38.360 --> 0:04:44.800 investment opportunities. You know, there's there's no press continue the 0:04:45.680 --> 0:04:48.279 market reaction can be to throw the baby out with 0:04:48.360 --> 0:04:52.960 the bath water. So well, that's a good point. And 0:04:53.520 --> 0:04:56.320 so where where do you see the opportunities right now 0:04:56.320 --> 0:04:59.520 where people might get confused and actually throw the baby 0:04:59.560 --> 0:05:01.280 out with the AWA are where are you seeing those 0:05:01.279 --> 0:05:05.560 opportunities that you've got to make the distinctions? UM, Well, 0:05:05.560 --> 0:05:09.599 that's a great question. I would say that most most 0:05:09.640 --> 0:05:14.960 investors and also most asset managers UM look at credit 0:05:15.040 --> 0:05:18.120 quality and also the subject of portfolio diversityations is a 0:05:18.160 --> 0:05:23.320 really key point UM through through the lens of the 0:05:23.360 --> 0:05:27.120 industries that the borrowers performing in. But more important than 0:05:27.160 --> 0:05:30.719 the industry that a borrowers is is is what the 0:05:30.800 --> 0:05:36.000 business that a borrower has UM. How correlated is to 0:05:37.440 --> 0:05:41.120 g d P to the economy. Because you can have 0:05:41.279 --> 0:05:44.479 you can have. There are many industries who UM where 0:05:44.480 --> 0:05:47.960 there's credit risk, but the credit risk is dispersed over 0:05:48.040 --> 0:05:52.599 time as opposed to occurring at single points in time 0:05:52.640 --> 0:05:56.960 like a recession. UM. So so that I'll pick some 0:05:57.000 --> 0:05:59.920 obvious examples, and there are also some surprises. And obviously 0:06:00.000 --> 0:06:05.200 example is food UM or food supply or food storage 0:06:05.279 --> 0:06:09.520 or the transportation of foods UM. There are many, There 0:06:09.560 --> 0:06:12.960 are many, many many. One of the fastest for years, 0:06:12.960 --> 0:06:17.159 one of the largest now and fastest growing UM parts 0:06:17.160 --> 0:06:23.320 of our economy has been business software UM. In many cases, 0:06:23.720 --> 0:06:27.800 the business models were strong occurring revenue, which has high 0:06:27.880 --> 0:06:32.120 switching costs and good competitive musicians. UM. There are many 0:06:32.240 --> 0:06:35.400 kinds of business services think of iron mountain or documents 0:06:35.440 --> 0:06:41.359 storage or UM or even building security or even or 0:06:41.400 --> 0:06:46.359 even insurance brokerage or broad or broadband people getting internet access, 0:06:46.400 --> 0:06:51.920 never mind defense. There are many UM either industries or 0:06:52.080 --> 0:06:56.480 subsectors within industries that the term that a g L 0:06:56.640 --> 0:07:01.640 uses is our a recessionary US. There's credit risk, but 0:07:01.720 --> 0:07:05.360 the credit risk isn't UM has load and no correlation 0:07:05.440 --> 0:07:07.760 with actual GDP. So, Peter, I want to shift the 0:07:07.760 --> 0:07:09.880 conversation a little bit if we can. You're a Wall 0:07:09.920 --> 0:07:12.640 Street veteran. This has been, to say the least, a 0:07:12.720 --> 0:07:16.240 tumultuous time on Wall Street, and not just for the 0:07:16.360 --> 0:07:20.040 usual reasons of we've got a crisis, We're trying to 0:07:20.080 --> 0:07:23.200 figure out how to invest through it. We are trying 0:07:23.320 --> 0:07:26.640 to essentially reinvent Wall Street. It feels like a Wall 0:07:26.640 --> 0:07:29.920 Street is trying to reinvent itself on a number of fronts. 0:07:29.960 --> 0:07:33.120 One is from a remote perspective, and one is a 0:07:33.200 --> 0:07:38.520 long overdo reckoning with a lot of racial injustice, a 0:07:38.520 --> 0:07:42.040 lot of a lack of diversity, and so many elements 0:07:42.080 --> 0:07:46.400 that we've all been talking so much more about let's 0:07:46.440 --> 0:07:49.080 start if we can on how Wall Street changes in 0:07:49.120 --> 0:07:52.600 its operation coming out on the other side of this 0:07:52.640 --> 0:07:55.240 as we try to figure out what the new Wall 0:07:55.240 --> 0:08:00.360 Street looks like. That's a great question, Jason. Let me 0:08:00.400 --> 0:08:03.520 kind of work backwards. So I think you mentioned, you know, 0:08:03.560 --> 0:08:07.200 the need of course for more diversity, special racial especially 0:08:07.240 --> 0:08:11.280 racial diversity, and also the challenge that the new the 0:08:11.760 --> 0:08:15.720 new modality of working remotely. So what this is all 0:08:15.760 --> 0:08:22.960 presenting is an opportunity, especially because we've seen that financial services, investment, banking, 0:08:23.080 --> 0:08:27.360 even trading, all aspects of finance UM can be very 0:08:27.400 --> 0:08:30.840 effectively done remotely. There's a lot of pieces that are 0:08:30.880 --> 0:08:34.600 missing UM from human contact. But it means there's an 0:08:34.640 --> 0:08:37.880 opportunity to effectively start with a clean sheet of paper. 0:08:38.600 --> 0:08:45.840 So what we're dealing with, our our legacy cultures, business frameworks, systems, 0:08:46.400 --> 0:08:48.880 there's an opportunity now to say, okay, well, if we 0:08:48.880 --> 0:08:51.720 can take it to the next level, and if in 0:08:52.120 --> 0:08:55.520 many maybe not all cases, but in many cases, assume 0:08:55.559 --> 0:08:57.280 that we can build it from scratch or have a 0:08:57.320 --> 0:09:01.160 better policy from scratch, let's do so. One of the 0:09:01.520 --> 0:09:05.320 you know, coming back to diversity, one of the things 0:09:05.360 --> 0:09:09.199 that working remotely does is it forces you to rethink 0:09:09.200 --> 0:09:11.320 anything that you just in the habit of doing so 0:09:11.720 --> 0:09:13.679 in the real world. A lot of what we did, 0:09:13.720 --> 0:09:15.760 we did it that way because we always did it, 0:09:15.840 --> 0:09:18.120 or that's what our friend there is, which kind of 0:09:18.240 --> 0:09:23.920 with a default for incumbency, legacy mode um. Working virtually 0:09:24.000 --> 0:09:28.240 is illuminated that a lot of things, including that you 0:09:28.280 --> 0:09:29.760 don't have to get a lot of things done. You 0:09:29.760 --> 0:09:31.760 can even do it faster in some ways better and 0:09:31.880 --> 0:09:36.040 some ways not. But without the traditional way of doing it. 0:09:36.040 --> 0:09:40.560 It also makes it clearer and cleaner to to be 0:09:40.640 --> 0:09:44.640 objected um it um. We all we all have, I 0:09:44.679 --> 0:09:51.720 guess for life without our term embedded bias, subconscious biases. 0:09:51.720 --> 0:09:55.760 But when you're when you're working remotely and you're not 0:09:57.240 --> 0:10:02.080 you're looking at actual information and actual formants, it's easier 0:10:02.240 --> 0:10:06.559 to to compare it, appreciate it, understand it, respect it 0:10:07.320 --> 0:10:10.920 um without without kind of the lenses of kind of 0:10:10.920 --> 0:10:14.840 our our culture or or proclivities, whatever they may be. 0:10:14.880 --> 0:10:16.840 So I think there's a real opportunity to take things 0:10:16.840 --> 0:10:19.679 to level. I think it's gonna be hard. I will 0:10:19.720 --> 0:10:21.760 just make one more common about working virtual. I think 0:10:21.800 --> 0:10:28.720 it's hard dist on our our youngest colleagues across the 0:10:28.760 --> 0:10:32.880 industry because you know they're learning, they need feedback, and 0:10:32.960 --> 0:10:37.080 some feedback of course needs to be is for lack 0:10:37.120 --> 0:10:40.080 of better term, is it is not in a written 0:10:40.160 --> 0:10:43.400 or virtual form. You actually need to have have have 0:10:43.760 --> 0:10:48.000 a human presence or social proximity, especially to learn and 0:10:48.240 --> 0:10:52.360 and to see how you're making progress. But I do 0:10:52.480 --> 0:10:55.080 think it is a huge opportunity. I can't believe how 0:10:56.280 --> 0:11:01.120 how effective and productive, um much more could ever expected 0:11:01.160 --> 0:11:04.360 a g L has been. In fact, you mentioned our size. 0:11:05.280 --> 0:11:10.640 UM just since COVID, we have done two securitizations working 0:11:10.720 --> 0:11:14.120 virtually entire firms work in virtually totaling a billion dollars section, 0:11:14.200 --> 0:11:17.040 the most of any any manager has done since COVID. 0:11:17.120 --> 0:11:21.959 So um that just this testimony to how effective, how 0:11:21.960 --> 0:11:25.480 effective of not being in a physical environment is. I 0:11:25.480 --> 0:11:26.840 do think it's going to be a blend of the 0:11:26.880 --> 0:11:30.080 two in the future from what that b But I 0:11:30.160 --> 0:11:33.240 do to the more important question, I think it's incumbent 0:11:33.720 --> 0:11:36.760 on all firms of all sizes and types to take 0:11:36.800 --> 0:11:40.520 the responsibility to make it a better work environment, a 0:11:40.640 --> 0:11:45.200 fairer environment, and more opportunity for all. God I could 0:11:45.240 --> 0:11:47.559 just keep going talking about this. I have one last question. 0:11:47.600 --> 0:11:49.199 I want to go back. Forgive me, it's a bit 0:11:49.200 --> 0:11:51.360 of a turn. But you know, you sent over and 0:11:51.360 --> 0:11:53.320 you showed some notes with us, and you said we 0:11:53.360 --> 0:11:55.800 are in a recession and there is higher risk everywhere. 0:11:56.200 --> 0:12:00.120 How concerned are you, Peter about the economic outlook what 0:12:00.200 --> 0:12:02.959 it looks like. Well, we get on the other side 0:12:03.000 --> 0:12:04.839 of this and we've just got about a minute minute 0:12:04.840 --> 0:12:09.160 twenty left. Very concerned. I'm more concerned about the pace 0:12:09.840 --> 0:12:13.680 of the recovery, how fast it is, how wide it is, 0:12:15.160 --> 0:12:18.240 and and also the possibility that we can have kind 0:12:18.240 --> 0:12:22.480 of setbacks, hopefully not from from a second wave, especially 0:12:22.520 --> 0:12:25.079 a bad second wave. But I do want to point 0:12:25.080 --> 0:12:30.640 out that, um, it's not one size fits all. UM. 0:12:30.679 --> 0:12:35.680 Many businesses are normally surviving UM and for investors depend 0:12:35.760 --> 0:12:38.600 only focusing on on the right opportunities. There's a step 0:12:38.679 --> 0:12:42.400 shift increases in terms of risk invested returns. But I 0:12:42.440 --> 0:12:46.080 am but this reason that they're higher is for the 0:12:46.120 --> 0:12:51.040 reason you just said, there's just so much uncertainty, unprecedented 0:12:51.120 --> 0:12:55.280 level of it. Absolutely well, we really enjoy catching up 0:12:55.280 --> 0:12:57.400 with you whenever we get a chance to. Peter Gleistein 0:12:57.920 --> 0:13:01.360 CEO chief investment officer of a g L Credit Management. 0:13:01.400 --> 0:13:04.040 Just one of those thoughtful voices on Wall Street Carol 0:13:04.120 --> 0:13:06.800 that we love checking in with. He has sort of 0:13:06.840 --> 0:13:09.760 just a calming way about him that basically says, here's 0:13:09.800 --> 0:13:11.800 where we are, here's how we're going to figure it out. 0:13:12.080 --> 0:13:16.080 I love his point about the objectivity that comes with distance.