WEBVTT - Warner Bros. Investors Approve $110 Billion Paramount Deal 0:00:02.720 --> 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 --> 0:00:17.920 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 --> 0:00:23.640 or watch us live on YouTube. 0:00:23.680 --> 0:00:27.040 Warner Brothers investors approved one hundred and ten billion dollars 0:00:27.040 --> 0:00:30.720 sale to Paramount. I also note, since I know David 0:00:30.720 --> 0:00:33.879 saslof that investors reject CEO compensation package. 0:00:34.000 --> 0:00:34.760 That's interesting. 0:00:34.840 --> 0:00:35.960 I know, is that binding? 0:00:36.320 --> 0:00:36.800 I don't know. 0:00:36.920 --> 0:00:38.480 I don't know how lot works. But our next guest, 0:00:38.479 --> 0:00:40.640 I think probably has some good reporting there, Chris Pomary. 0:00:40.840 --> 0:00:43.440 He covers all the entertainment companies out there in Los 0:00:43.479 --> 0:00:45.920 Angeles for Bloomberg News. Chris, what are you making the 0:00:45.920 --> 0:00:48.080 news here today? I guess it's fairly well expected that 0:00:48.120 --> 0:00:53.040 the shareholders would approve this sale to Paramount Sky Sky Dance. Paramount. 0:00:53.360 --> 0:00:55.880 Yeah, they showed them the money and they said yes, 0:00:56.600 --> 0:00:58.920 thirty one dollars this year, one hundred and ten billion 0:00:59.000 --> 0:01:04.840 dollars total. The pay package vote is not binding, you know. 0:01:04.880 --> 0:01:07.520 It's one of those say on paced things that companies 0:01:07.520 --> 0:01:10.400 are required to do. If this company were continuing as 0:01:10.440 --> 0:01:12.920 a public company, then you know, the board would take 0:01:13.000 --> 0:01:16.440 the you know that into consideration and next year's pay. 0:01:16.520 --> 0:01:19.800 But this this go round doesn't matter. They'll be gone 0:01:19.800 --> 0:01:22.279 and David Satisov will have his money. 0:01:22.520 --> 0:01:26.200 Right, We're looking at accelerating equity awards valued at more 0:01:26.240 --> 0:01:29.520 than five hundred million and three hundred and thirty five 0:01:29.560 --> 0:01:32.200 million dollars in potential tax reimbursements. 0:01:32.280 --> 0:01:35.760 So he makes out pretty well, so he always does. 0:01:36.000 --> 0:01:41.800 Chris, what does this mean for the thousands of Hollywood actors, screenwriters, directors, 0:01:42.000 --> 0:01:45.280 and other workers in the industry who have come together 0:01:45.319 --> 0:01:50.680 to oppose this merger? They were appealing to regulators, to policymakers. 0:01:50.880 --> 0:01:53.680 I mean, do they still continue to try to press 0:01:53.680 --> 0:01:55.680 state attorneys general to do something about this? 0:01:56.440 --> 0:02:00.200 They can, and they will. It's you know, it's not 0:02:00.480 --> 0:02:04.000 a done deal overall. Certainly it is from the shareholders standpoint. 0:02:04.000 --> 0:02:07.920 It's a milestone in that regard, but there's still regulatory 0:02:07.920 --> 0:02:11.000 approvals that have to be done, and everyone's sort of 0:02:11.040 --> 0:02:15.000 anticipating lawsuits similar to what we've seen in a live 0:02:15.080 --> 0:02:18.320 nation and other cases sort of opposing this deal. So yeah, 0:02:18.400 --> 0:02:19.560 quite still. 0:02:19.120 --> 0:02:21.000 Now on the federal government level, right. 0:02:21.320 --> 0:02:23.760 It doesn't appear that that's the case. I mean, there's 0:02:23.760 --> 0:02:27.520 been no official sign off. You know, the Paramount will 0:02:27.560 --> 0:02:30.400 say that they've gotten clear into essentially from the DJ, 0:02:30.560 --> 0:02:33.080 but there's really been no official sign off in Washington. 0:02:33.840 --> 0:02:36.040 You know, the deal price is thirty one dollars a share. 0:02:36.440 --> 0:02:38.959 Stocks trading at twenty seven dollars and thirty cents here. 0:02:39.360 --> 0:02:41.800 That feels like a big discount to me from an 0:02:41.880 --> 0:02:44.880 arbitrage perspective, given this deal is going to presumably closed 0:02:44.880 --> 0:02:47.480 in a couple of months. So I guess what do 0:02:47.480 --> 0:02:49.000 you think that uncertainty might be out there. 0:02:48.960 --> 0:02:49.520 In the marketplace? 0:02:49.600 --> 0:02:52.080 Chris? Is it regulatory? We need to get a sign 0:02:52.080 --> 0:02:54.160 off from President Trump and that can always be a risk. 0:02:54.560 --> 0:02:57.760 Is it some legal maybe lawsuits or something. 0:02:57.760 --> 0:02:59.240 What do you think is there und? 0:02:59.480 --> 0:03:01.880 I think all of above. I mean, really when we've 0:03:01.919 --> 0:03:04.360 really just seen a steady drum beat. I mean, the 0:03:04.560 --> 0:03:06.800 Hollywood community has sort of been against it, but you know, 0:03:06.840 --> 0:03:09.080 they had to shift, they had to go. They were 0:03:09.160 --> 0:03:12.160 posted to Netflix and then they sort of regather and 0:03:11.840 --> 0:03:16.080 now now they're opposed to Paramount. And so but we've seen, 0:03:16.120 --> 0:03:19.320 you know, the list of celebrities signing a petition against this, 0:03:19.480 --> 0:03:22.800 growing the number of events, people like Corey Booker, the 0:03:22.840 --> 0:03:25.639 Senator from New Jersey, of hell to sort of examine 0:03:25.639 --> 0:03:28.640 this deal and criticize this deal. So whether all enough 0:03:29.240 --> 0:03:32.679 mounts to something that will stop the deal still big 0:03:32.760 --> 0:03:36.120 question mark there, but they're certainly sort of growing opposition. 0:03:36.960 --> 0:03:42.560 So when does the companies Paramount, Warner Brothers Discovery, When 0:03:42.560 --> 0:03:44.320 do they start doing some of the hard work of 0:03:44.320 --> 0:03:46.840 integrating or is that something they cannot do until the 0:03:46.920 --> 0:03:49.840 regulators have made clear that they're not opposing. 0:03:50.360 --> 0:03:54.720 Yeah, they really have to wait to close. We saw 0:03:54.760 --> 0:03:57.240 in that next Star Techner deal where they jumped as 0:03:57.240 --> 0:04:00.840 soon as they got a clearance in Washington, and then 0:04:00.840 --> 0:04:03.520 the lawsuit happens and now they're actually barred from integrating. 0:04:03.560 --> 0:04:06.960 So very awkward situation. I imagine the Warner by the Paramount 0:04:07.120 --> 0:04:09.040 folks are looking at that and saying, all right, well, 0:04:09.480 --> 0:04:12.440 we should probably make sure we're in the clear before 0:04:12.480 --> 0:04:13.640 we actually close this. 0:04:14.320 --> 0:04:16.279 Chris, you're based in LA I'm sure you know a 0:04:16.279 --> 0:04:19.200 lot of these folks that work at these entertainment companies. 0:04:19.760 --> 0:04:24.000 How concerned are they just about La as a creative community, 0:04:24.040 --> 0:04:27.400 as a Hollywood community? Because here in New Jersey, Netflix 0:04:27.440 --> 0:04:31.760 is building a huge production complex in down A Fort Mammoth, 0:04:31.760 --> 0:04:34.800 the old army base. Tore down everything at this huge 0:04:34.880 --> 0:04:37.039 army base and are building this is a gajillion dollar 0:04:37.080 --> 0:04:41.440 production facility. I mean, there's Vancouver, there's South Carolina. There's 0:04:41.440 --> 0:04:43.880 lots of places that are taking business away. What's the 0:04:43.920 --> 0:04:44.680 mood in LA. 0:04:44.720 --> 0:04:48.400 Creatively, particularly gloomy. 0:04:49.000 --> 0:04:51.600 Yeah, and you know it's been that way. We've written 0:04:51.640 --> 0:04:54.279 about this for a couple of years now. You've had, 0:04:54.440 --> 0:04:57.520 you know, the flight to other locations to shoot. There's 0:04:57.520 --> 0:04:59.960 a big part of it. There's overall cutbacks and spend 0:05:00.200 --> 0:05:03.520 among big companies, and the globalization of the business has 0:05:03.520 --> 0:05:06.920 really changed things. And then you know we've got AI 0:05:07.040 --> 0:05:12.800 as a threat. So jobs are definitely weak, particularly here 0:05:12.839 --> 0:05:16.320 in the capital of entertainment. And so the idea of 0:05:16.360 --> 0:05:20.440 this big merger. While David Ellison, the CEO of Paramount, 0:05:20.520 --> 0:05:25.000 promises they'll be growth, everyone anticipates that it's going to 0:05:25.000 --> 0:05:25.800 be very difficult in. 0:05:25.760 --> 0:05:26.440 The labor market. 0:05:26.839 --> 0:05:29.720 Stay with us. More from Bloomberg Intelligence coming up after this. 0:05:33.360 --> 0:05:37.080 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:05:37.160 --> 0:05:40.239 weekdays at ten am Eastern on Apple Cocklay and Android 0:05:40.279 --> 0:05:43.560 Auto with the Bloomberg Business App. Listen on demand wherever 0:05:43.640 --> 0:05:49.000 you get your podcasts, or watch us live on Youtube'll. 0:05:47.640 --> 0:05:49.800 Talk about the railroad stocks, one of my favorite sectors. 0:05:49.839 --> 0:05:51.839 I used to cover this group back in the eighties. 0:05:52.160 --> 0:05:54.320 I have all my earnings and models for the railroad 0:05:54.360 --> 0:05:57.039 and trucking companies, but they're on floppy disc so I 0:05:57.040 --> 0:06:00.200 don't think I can really access them anymore. But I'm 0:06:00.200 --> 0:06:03.479 sure they're still killer. Lee Classical Senior Transport, Logistics and 0:06:03.520 --> 0:06:05.880 Shipping analys fro Bloomberg Intelligence. He's got some pretty good 0:06:05.880 --> 0:06:10.279 earnings models to here. So Union Pacific stocks up about 0:06:10.360 --> 0:06:12.720 seven percent here today, up fifteen percent year today. How 0:06:12.720 --> 0:06:13.480 are their earnings lead? 0:06:14.560 --> 0:06:17.320 Yeah, their earnings were pretty good. They beat this morning 0:06:17.360 --> 0:06:19.240 on the first quarter, and it really was driven on 0:06:19.480 --> 0:06:23.400 productivity gains and pricing. The company was able to show 0:06:23.440 --> 0:06:26.120 that it's able to operate a better network, a more 0:06:26.160 --> 0:06:30.120 efficient network, despite the fact that volumes were slightly softer 0:06:30.240 --> 0:06:31.480 than most expected. 0:06:31.480 --> 0:06:33.279 They were down about one percent. 0:06:34.000 --> 0:06:38.400 The company really does appear focused that it can continue 0:06:38.520 --> 0:06:41.840 to get that productivity. Productivity could be more difficult if 0:06:41.920 --> 0:06:45.760 volumes do increase. Their outlook on the volumes, I would 0:06:45.800 --> 0:06:48.719 say was cautiously optimistic. There are some pluses and minuses. 0:06:49.000 --> 0:06:51.599 They were positive on their bulk commodities like coal and 0:06:51.680 --> 0:06:56.880 grain and also some domestic intermodal, while a little negative 0:06:56.880 --> 0:06:59.839 on their outlook as it relates to housing for as 0:07:00.040 --> 0:07:04.880 products that go into housing, automotives or international intermodals. So 0:07:04.960 --> 0:07:07.200 I think the outlook was a mixed bag. But the 0:07:07.200 --> 0:07:10.679 company is definitely executing on its plan, and it used 0:07:10.720 --> 0:07:14.920 the earnings call it's an opportunity to kind of plug 0:07:15.600 --> 0:07:20.160 the merits of its proposed merger with Norfolk Southern and folks. 0:07:20.200 --> 0:07:23.160 Just for rail geeks like Lee and I, this is 0:07:23.240 --> 0:07:24.400 a seismic transaction. 0:07:24.440 --> 0:07:25.720 The railroad business would. 0:07:25.480 --> 0:07:28.640 Create the first truly coast to coast to east west 0:07:29.240 --> 0:07:31.160 rail system in the US. 0:07:31.760 --> 0:07:31.920 LEE. 0:07:32.560 --> 0:07:34.600 But of course, the big, big, big issue is will 0:07:34.640 --> 0:07:37.280 the regulators allow. What's the feeling here? 0:07:38.440 --> 0:07:42.520 You know, the feeling is really mixed amongst participants, obviously 0:07:42.880 --> 0:07:44.480 Union Pacific and Northern Southern. 0:07:44.640 --> 0:07:46.200 You really think the deal is going to get done. 0:07:46.480 --> 0:07:49.320 If you're the other railroads or maybe some trucking companies, 0:07:49.360 --> 0:07:52.760 you might be hoping that it doesn't. It is a 0:07:52.840 --> 0:07:55.800 high regulatory hurdle that it has to meet. It has 0:07:55.840 --> 0:07:58.960 to meet that it enhances competition, it's in the public interest. 0:07:59.520 --> 0:08:01.320 Along time time ago, I think it was two thousand 0:08:01.320 --> 0:08:03.360 and one, they changed the rules for mergers at the 0:08:03.480 --> 0:08:06.880 STB and they wanted to kind of stop the consolidation 0:08:06.960 --> 0:08:09.560 that was happening in the marketplace, and it was kind 0:08:09.560 --> 0:08:11.200 of designed to stop a deal like this. 0:08:11.600 --> 0:08:12.920 The reality is that if. 0:08:12.760 --> 0:08:16.840 It does happen, it will create a truly transcontinental network. 0:08:17.440 --> 0:08:20.160 That will mean that railcars will be touched less. And 0:08:20.200 --> 0:08:22.800 if they're touched less, you would assume that hopefully they 0:08:22.840 --> 0:08:26.080 can get better service and that could benefit from the 0:08:26.120 --> 0:08:29.200 customers that are on it. They are, you know, full 0:08:29.240 --> 0:08:32.080 press lobbying to try to get the deal done. They 0:08:32.120 --> 0:08:37.240 recently announced a new locomotive, a new locomotive that commences 0:08:37.800 --> 0:08:41.360 that commemorates, excuse me, the two hundred and fifty year 0:08:41.920 --> 0:08:45.160 anniversary of the US And it also has Donald Trump's 0:08:45.200 --> 0:08:47.880 name on the side. So it looks like they're they're 0:08:48.360 --> 0:08:52.199 looking everywhere they can to get some help from the administration. 0:08:52.440 --> 0:08:53.080 That's a good move. 0:08:54.000 --> 0:08:56.920 How about if i'm CSX here, I noticed CSX stock 0:08:57.720 --> 0:08:58.040 is at. 0:08:57.960 --> 0:09:00.760 An all time high. I pump CSX. 0:09:00.800 --> 0:09:03.800 Do I feel the need to maybe reach out to 0:09:04.559 --> 0:09:08.680 Union Pacific or maybe the other Western railroad there and 0:09:08.760 --> 0:09:11.720 figure out that we need to do a deal as well. 0:09:11.920 --> 0:09:14.240 Yeah, so if the deal does happen, you would assume that, 0:09:14.360 --> 0:09:17.000 you know, more mergers will come, whether that's a Burlington 0:09:17.040 --> 0:09:21.320 Northern merger with CSX. Burlington Northern is owned by Berkshire 0:09:21.320 --> 0:09:24.920 Hathaway and so obviously Berkshire Hathway has some deep pockets 0:09:24.920 --> 0:09:27.880 to pay for CSX if it wanted to. Also could 0:09:27.880 --> 0:09:32.600 make sense of CSX one with one of the Canadian competitors, 0:09:32.640 --> 0:09:36.040 like a Canadian Pacific Kansas City, that could be an 0:09:36.080 --> 0:09:36.920 option as well. 0:09:37.000 --> 0:09:40.319 So if it does happen, and again it's a high. 0:09:40.280 --> 0:09:43.680 Regulatory hurdle and we probably won't find out until late 0:09:43.720 --> 0:09:47.040 next year, early twenty twenty eight whether the deal gets done. 0:09:47.400 --> 0:09:48.640 Yeah, it's going to take some time. 0:09:48.640 --> 0:09:51.640 They have to refile with the STB because their initial 0:09:51.679 --> 0:09:55.800 filing did not cut the mustard with the regulators, so 0:09:55.840 --> 0:09:59.600 they wanted them to refile and that should happen probably 0:10:00.200 --> 0:10:03.000 in the next thirty to sixty days. And so it 0:10:03.080 --> 0:10:05.440 just takes time because this is a huge transaction that 0:10:05.520 --> 0:10:08.160 the STB has Tom all over But yeah, I. 0:10:08.160 --> 0:10:10.160 Mean just answer your question. 0:10:10.320 --> 0:10:13.400 Yes, it could, you know, the announcement of the deal 0:10:13.400 --> 0:10:16.040 because the two companies, N Pacific Norfolk Southern really can't 0:10:16.080 --> 0:10:18.880 do anything together until they get approval. So it's been 0:10:18.920 --> 0:10:21.599 an opportunity for other rails to work together. 0:10:21.800 --> 0:10:23.240 And create new services. 0:10:23.440 --> 0:10:25.920 And you've seen some share shift away from Norfolk Southern 0:10:25.960 --> 0:10:29.960 to CSX on the intermodal side, which has been pretty 0:10:29.960 --> 0:10:30.840 interesting to watch. 0:10:31.559 --> 0:10:31.719 Lee. 0:10:31.800 --> 0:10:34.800 What are your transport that you cover everything in the trucks, 0:10:34.920 --> 0:10:38.199 the rails, the air freight, all that kind of stuff. 0:10:38.240 --> 0:10:42.079 The big ocean shipping companies. What's been the collective I 0:10:42.080 --> 0:10:44.640 don't know response to this war in Iran. Is it 0:10:44.720 --> 0:10:46.559 localized just to that part of the world or is 0:10:46.600 --> 0:10:48.920 it having wider ripple effects. 0:10:49.400 --> 0:10:53.280 Yeah, obviously it's impacting, you know, the shipping industry. It's 0:10:53.360 --> 0:10:57.640 keeping container rates artificially high just because it's tying up 0:10:57.679 --> 0:11:01.319 capacity and also assuming if there's a lasting piece, a 0:11:01.400 --> 0:11:04.120 sus canal can open up and that would make shipping 0:11:04.160 --> 0:11:05.560 rates come down considerably. 0:11:06.000 --> 0:11:06.160 You know. 0:11:06.200 --> 0:11:09.240 The biggest thing is it's pushing energy prices higher, diesel 0:11:09.280 --> 0:11:12.520 prices higher. That's a huge input for trucking rails. You know, 0:11:12.559 --> 0:11:17.800 they do have mechanics to offset that through fuel search charges, 0:11:18.440 --> 0:11:19.959 you know, just to pivot a little bit on the 0:11:20.000 --> 0:11:24.040 truckload side. Night Swift reported earnings last night. Their reportings, 0:11:24.040 --> 0:11:25.719 they pre announced and we knew it was gonna be 0:11:25.760 --> 0:11:29.120 a great quarter, which it wasn't, but their outlook really improved. 0:11:29.120 --> 0:11:31.680 So they expect rates to increase by high single digits, 0:11:31.679 --> 0:11:34.920 to load double digits, and that's up from low to 0:11:35.320 --> 0:11:38.439 mid single digits. So they're really seeing their rate recovery happening, 0:11:38.600 --> 0:11:40.800 and that's really being driven on the supply side, supply 0:11:40.880 --> 0:11:41.840 coming out of the market. 0:11:41.960 --> 0:11:42.560 Stay with us. 0:11:42.720 --> 0:11:45.120 More from Bloomberg Intelligence coming up after this. 0:11:48.960 --> 0:11:52.640 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:11:52.720 --> 0:11:56.080 weekdays at ten am Eastern on Applecarplay and Android Auto 0:11:56.200 --> 0:11:59.280 with the Bloomberg Business app. Listen on demand wherever you 0:11:59.320 --> 0:12:02.320 get your podcast, or watch us live on YouTube. 0:12:03.000 --> 0:12:07.560 Well, Blackstone, the world's largest alternative asset manager, reported a 0:12:07.640 --> 0:12:10.840 larger than expect to jump in distributable earnings in the 0:12:10.920 --> 0:12:13.480 first quarter, boosted by a robust start to the year 0:12:13.559 --> 0:12:14.520 for deal making. 0:12:14.720 --> 0:12:15.679 Let's break down further. 0:12:15.920 --> 0:12:19.520 We're joined by Paul Goldberg, senior equity analysts for Bloomberg Intelligence. 0:12:19.760 --> 0:12:21.880 Paul talks us about Blackstone. What did you learn from 0:12:21.880 --> 0:12:24.640 their earnings and their call about their business? 0:12:25.000 --> 0:12:27.959 I think the biggest thing for Blackstone is their size 0:12:28.040 --> 0:12:31.640 and diversification. As they did see some outflows from the 0:12:31.679 --> 0:12:35.480 retail fund the B credit in particular, they did get 0:12:35.520 --> 0:12:38.560 a lot of inflows across the company, so almost seventy 0:12:38.600 --> 0:12:41.760 billion dollars worth of inflows. So a lot of the 0:12:41.920 --> 0:12:46.080 fundraising and a lot of the activity is still holding 0:12:46.200 --> 0:12:49.439 up despite some of the pressure and the software pocket 0:12:49.559 --> 0:12:52.040 and the retail and the credit side. 0:12:52.240 --> 0:12:56.520 John Gray talked about AI infrastructure is driving Blackstone's performance. 0:12:56.559 --> 0:12:57.400 What does that mean? 0:12:57.600 --> 0:13:00.959 So they're invested in data centers, they invested in infrastructure 0:13:01.000 --> 0:13:05.319 that supports the AI expansion. They talked about one hundred 0:13:05.360 --> 0:13:10.000 and fifty billion dollars of assets across that kind of 0:13:10.720 --> 0:13:16.600 size that of businesses. That's over ten percent of their 0:13:16.679 --> 0:13:20.440 overall assets under management. And they also talked about even 0:13:20.520 --> 0:13:23.880 slightly larger amount of the similar kind of deals in 0:13:23.920 --> 0:13:27.200 the pipeline to expand in that space. So they're really 0:13:27.240 --> 0:13:28.439 supporting that growth. 0:13:28.960 --> 0:13:32.400 Paul, what's the story for black Zone and raising capital. 0:13:32.440 --> 0:13:34.520 Do they have all the capital they need or is 0:13:34.559 --> 0:13:36.120 this one of those Are they always in the market 0:13:36.280 --> 0:13:36.920 raising capital. 0:13:37.320 --> 0:13:39.559 I think they're always in the market. It really depends 0:13:39.559 --> 0:13:42.280 on what kind of vehicles. Sometimes there's a flegship fond, 0:13:42.400 --> 0:13:45.440 sometimes there's a new products, but given their size, they're 0:13:45.440 --> 0:13:48.880 really usually in the market with both types of products. So, 0:13:48.960 --> 0:13:51.520 for example, if you look at the b CRAD, it 0:13:51.600 --> 0:13:54.280 did get some inflows, but obviously because of the redemption, 0:13:54.400 --> 0:13:57.960 they got some outflows, but credit was credited. Insurance was 0:13:57.960 --> 0:14:00.680 still the biggest segment of their growth in terms of 0:14:00.720 --> 0:14:04.400 the inflows. They raised a ten billion dollar opportunistic credit 0:14:04.440 --> 0:14:07.120 fond during the quarter they closed it, So there's a 0:14:07.120 --> 0:14:10.880 lot of activity going on outside of the risk back 0:14:10.960 --> 0:14:12.400 pockets that we hear about. 0:14:12.640 --> 0:14:14.760 Is there a weakling here in these results? I know 0:14:14.800 --> 0:14:17.280 you mentioned the credit and insurance arm and how that 0:14:17.679 --> 0:14:21.680 still drew inflows, but earnings in that business dropped twenty 0:14:21.680 --> 0:14:22.280 six percent. 0:14:23.680 --> 0:14:27.200 They did, but I don't think necessarily it's a weakling. 0:14:27.360 --> 0:14:29.920 So there's still some of that is driven by performance 0:14:30.000 --> 0:14:33.400 piece they did have to and they didn't. We're very 0:14:33.440 --> 0:14:36.640 explicit about it because people are always concerned about valuations. 0:14:36.680 --> 0:14:40.160 They did mention that they were lowered the valuations in 0:14:40.200 --> 0:14:43.360 some liquid credit that had a negative return during the quarter. 0:14:44.000 --> 0:14:46.640 So that's more normal in terms of what we see 0:14:46.640 --> 0:14:49.320 in the public markets, and they're responding to it. Probably 0:14:49.360 --> 0:14:52.600 not at that scale that we've see in the public markets, 0:14:53.040 --> 0:14:57.840 but it's there. So there is some pressure, but overall 0:14:57.920 --> 0:14:59.960 there's still a reasonable growth. 0:15:00.600 --> 0:15:04.000 Stockdown four percent today, down about twenty percent year to date. 0:15:04.480 --> 0:15:07.240 Is Blackstone getting caught up in just the overall market 0:15:07.280 --> 0:15:08.920 concern as it relates to private credit? 0:15:09.920 --> 0:15:10.400 I think so. 0:15:10.560 --> 0:15:14.440 I think it's a matter of convincing the investors about 0:15:14.520 --> 0:15:17.200 the breadth and all the other businesses that are working, 0:15:17.440 --> 0:15:20.920 and the fact that the credit quality generally is holding 0:15:21.000 --> 0:15:24.040 up reasonably well. The companies that they're invested in and 0:15:24.400 --> 0:15:28.840 including the software partner businesses, they do it okay, So 0:15:29.240 --> 0:15:31.800 it will take a few quarters to convince the market 0:15:31.840 --> 0:15:34.120 to come around. So if we'll look at the be Read, 0:15:34.280 --> 0:15:37.200 there are the retail funds that they manage, a large 0:15:37.560 --> 0:15:41.480 fund going back several years. It took them a few 0:15:41.560 --> 0:15:44.720 quarters to work through those concerns. So we might see 0:15:44.720 --> 0:15:48.080 some more pressure coming into view even later on possibly, 0:15:48.760 --> 0:15:52.040 but the investors will come to realize the bigger picture. 0:15:52.560 --> 0:15:55.320 Stay with us. More from Bloomberg Intelligence coming up after this. 0:15:58.760 --> 0:16:02.440 You're listening to the bloom Intelligence podcast. Catch us live 0:16:02.520 --> 0:16:05.640 weekdays at ten am Eastern on Apple, Cocklay and Android 0:16:05.640 --> 0:16:08.920 Auto with the Blueberg Business App. Listen on demand wherever 0:16:09.000 --> 0:16:12.520 you get your podcasts, or watch us live on YouTube. 0:16:13.080 --> 0:16:15.120 Jet fuel prices have been rising and it's been really 0:16:15.120 --> 0:16:18.120 bad for these airlines, which as far as I know, 0:16:18.320 --> 0:16:19.120 don't hedge. 0:16:19.160 --> 0:16:20.840 There are oil costs at all. 0:16:20.880 --> 0:16:23.320 They used to, right, but they don't anymore unless you 0:16:23.360 --> 0:16:24.680 have a refinery, right. 0:16:24.760 --> 0:16:25.640 Delta has that, right. 0:16:25.640 --> 0:16:26.320 That's pretty cool. 0:16:26.360 --> 0:16:27.800 All right, Let's bring in George Ferguson. 0:16:27.840 --> 0:16:30.440 He is our senior aerospace defense and an airlines analyst, 0:16:31.880 --> 0:16:34.880 and George American Airlines just reported. But I mean, for 0:16:34.960 --> 0:16:37.760 all these airlines, the story is the fuel bill. The 0:16:37.800 --> 0:16:39.440 fuel bill is surging. 0:16:39.080 --> 0:16:41.280 For them and it is having an impact on their 0:16:41.280 --> 0:16:42.040 bottom line. 0:16:42.680 --> 0:16:43.840 Yeah, definitely. Right. 0:16:43.880 --> 0:16:46.720 The name of the game right now in airline land 0:16:47.080 --> 0:16:51.640 is I need to increase fares. I think it's you know, 0:16:51.680 --> 0:16:53.280 they're roughly going to have to get up into the 0:16:54.200 --> 0:16:57.640 high teens to twenty percent rise in order to cover 0:16:58.440 --> 0:17:01.960 my increased fuel prices. Is one of the big challenges too, 0:17:02.080 --> 0:17:04.920 is as they you know, they need fares to rise, 0:17:05.000 --> 0:17:07.879 so they have to start to cut some capacity so 0:17:07.920 --> 0:17:10.800 they can they can get supply and demand back in balance. 0:17:11.320 --> 0:17:15.240 As they cut capacity, their costs go up, right, because 0:17:15.240 --> 0:17:18.680 there's a there's economies to scale, and so they start 0:17:18.680 --> 0:17:22.120 to get mid single digit and higher increases in cost 0:17:22.160 --> 0:17:25.480 per available seat mile as they trim their capacity growth. 0:17:25.600 --> 0:17:28.960 So it's a it's a real push pull kind of 0:17:29.040 --> 0:17:31.480 challenge here, and American came out and they hit it 0:17:31.520 --> 0:17:34.400 squarely with hey, we're not really going to adjust capacity 0:17:34.520 --> 0:17:37.400 very much in two Q, and we think we can 0:17:37.440 --> 0:17:40.480 get fair increases to compensate for a lot of it, 0:17:40.560 --> 0:17:41.280 but not all of it. 0:17:42.600 --> 0:17:45.199 What are the airlines saying about demand here? I mean, 0:17:45.320 --> 0:17:48.120 because I think airlines have some pretty good visibility people 0:17:48.200 --> 0:17:50.800 booking trips into the summer, maybe even longer, more longer 0:17:50.880 --> 0:17:52.760 term than that. How are they seen demand? 0:17:53.640 --> 0:17:56.880 Yeah, so, I mean I would say that across the board, 0:17:58.280 --> 0:18:00.280 you know, they've all sort of said demand was was 0:18:00.880 --> 0:18:02.680 very strong going into. 0:18:04.040 --> 0:18:06.280 You know, sort of the end of one Q into 0:18:06.320 --> 0:18:08.960 the summer travel season this year. So it sounds like 0:18:08.960 --> 0:18:10.520 the setup had been pretty good. 0:18:11.040 --> 0:18:14.600 And again now it's a function of the demand looks 0:18:14.640 --> 0:18:18.679 like it's still largely there, although they clearly wouldn't be 0:18:18.680 --> 0:18:21.800 cutting capacity if it was there and just would take 0:18:21.840 --> 0:18:26.040 a big price increase in fares. So a lot of 0:18:26.080 --> 0:18:29.200 them are and I shouldn't say cutting capacity, they're trimming 0:18:29.320 --> 0:18:34.080 growth plans, especially the big full service carriers, because I mean, 0:18:34.119 --> 0:18:37.439 to me, that tells me that they can't get they 0:18:37.480 --> 0:18:41.159 can't push through the full price increase they need. And 0:18:41.240 --> 0:18:44.000 a lot of them are talking about the cadence of 0:18:44.040 --> 0:18:48.639 getting that full recovery in fares to compensate for higher 0:18:48.640 --> 0:18:52.040 fuel prices, and they're kind of telling us that. You know, 0:18:52.080 --> 0:18:54.160 we heard from United that by the end of the year, 0:18:54.200 --> 0:18:57.400 by four Q they thought they'd be fully compensated. American 0:18:57.480 --> 0:19:00.000 told us they thought they would almost be fully competent 0:19:00.119 --> 0:19:01.840 stated by the end of four Q. 0:19:02.480 --> 0:19:03.760 So you can see a cadence here. 0:19:03.760 --> 0:19:05.280 Where's going to take them a bunch of the year 0:19:05.800 --> 0:19:09.320 to really drive through that those higher ticket prices and 0:19:09.440 --> 0:19:12.400 get back the increased fuel prices if they stay here. 0:19:13.040 --> 0:19:14.440 If fuel prices stay here. 0:19:14.359 --> 0:19:16.959 Well, we know demand also looks very good because consumers 0:19:17.000 --> 0:19:19.240 are booking their flights for this summer and maybe for 0:19:19.320 --> 0:19:21.960 the holidays that they know they're going to be going away, 0:19:22.160 --> 0:19:24.320 knowing full well that fares are going up, up, up. 0:19:24.400 --> 0:19:26.320 I mean, that's been kind of a steady drumbeat of 0:19:26.359 --> 0:19:31.639 the newsflow for companies sending employees to go do business 0:19:31.680 --> 0:19:34.200 in other parts of the world and country that kind 0:19:34.200 --> 0:19:37.600 of ends up being something you book maybe a month out. 0:19:37.760 --> 0:19:40.200 What does corporate travel look like? What do we learn 0:19:40.240 --> 0:19:41.280 from the airlines about that? 0:19:42.000 --> 0:19:44.880 Again, the commentary we're hearing right now is that corporate 0:19:44.920 --> 0:19:49.280 travel is continuing to recover, it was doing well, is 0:19:49.359 --> 0:19:54.480 doing well, you know, and so from a demand perspective, 0:19:54.480 --> 0:19:57.120 we're hearing good things. But agree with you on that, 0:19:57.480 --> 0:19:59.720 Scarlett that I think that you know you're going to 0:19:59.800 --> 0:20:02.000 have to some degree that people that absolutely want to 0:20:02.040 --> 0:20:06.400 go or have to go, rushing to book here. Right, 0:20:06.440 --> 0:20:09.440 we know the airlines haven't booked out their entire schedule 0:20:09.480 --> 0:20:13.200 for the summer and into the fall. Against summer, we're 0:20:13.200 --> 0:20:17.560 coming into vacation season. It's traditionally a very leisure focused 0:20:17.600 --> 0:20:22.120 season and again one of their strongest. So this fuel 0:20:22.160 --> 0:20:25.240 spike comes at a good time for them to pass 0:20:25.320 --> 0:20:28.080