WEBVTT - Brilliant Private Debt Returns; Paramount Bonds Lag

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<v Speaker 1>Hello, welcome to the Credit Edge of Weekly Markets podcast.

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<v Speaker 1>My name is James Crumbie. I'm a senior editor at Bloomberg.

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<v Speaker 1>This week, we're very pleased to have Paula Sambo, who

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<v Speaker 1>covers private debt for Bloomberg News in Toronto. How are you, Paula,

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<v Speaker 1>I'm doing great.

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<v Speaker 2>How about you, Jane.

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<v Speaker 1>All well, thank you very much. And we're also delighted

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<v Speaker 1>to see Steve Flynn, who covers telecoms and media for

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<v Speaker 1>Bloomberg Intelligence in New York. How's it going, Steve, Welcome

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<v Speaker 1>back to the show.

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<v Speaker 3>Oh good, thanks for having me.

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<v Speaker 1>We'll be coming back to Steve a bit later to

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<v Speaker 1>talk about Paramount Global, the media company that brought us

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<v Speaker 1>top Gun Maverick, among other things. So do stay with us.

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<v Speaker 1>But first, Paula Sambo with Bloomberg News. Why is everyone

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<v Speaker 1>so excited about private credit right now?

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<v Speaker 2>I know, right First, thanks for having me here and

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<v Speaker 2>I'm a great kind of your work. And going back

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<v Speaker 2>to private credit, it seems to be all everyone talks

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<v Speaker 2>about these days. Canada has these huge pension funds that

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<v Speaker 2>usually do much better than the US ones, and they

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<v Speaker 2>have been in private markets for a long time. So

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<v Speaker 2>I mean private credit is not It's a subject that

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<v Speaker 2>has been talked about in Canada for a long time.

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<v Speaker 2>But now we have a bunch of other smaller firms

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<v Speaker 2>that are trying to do as well as the big

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<v Speaker 2>pension funds, and it's a very booming operation up here.

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<v Speaker 1>So talking about the big pension plans in Canada, I

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<v Speaker 1>mean there are some huge, huge funds out there. You

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<v Speaker 1>talked to the Pension Fund of British Columbia recently, right,

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<v Speaker 1>they're the big one on the West coast. How much

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<v Speaker 1>money they managing.

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<v Speaker 2>So they manage two hundred and eleven Canadian dollars, so

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<v Speaker 2>that's just north of one hundred and sixty billion US.

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<v Speaker 2>They are pretty big, and they are out west in

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<v Speaker 2>in Victoria. They are a very interesting player because they

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<v Speaker 2>started doing private credit a bit later and their private

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<v Speaker 2>credit operations are still under their public equities on team

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<v Speaker 2>though they have been hiring specialists for that, and they

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<v Speaker 2>grill their private ed operation to thirteen point five billion Canadians,

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<v Speaker 2>which is a record for them.

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<v Speaker 1>Why are they jumping into private credit right now?

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<v Speaker 2>You know, they see it as the place with the

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<v Speaker 2>best of you know, the best returns in all of

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<v Speaker 2>the markets. So just yesterday I talked to THEIRS active

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<v Speaker 2>vice president and he said that you they are just

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<v Speaker 2>absolutely brilliant right now in the private credit space, so

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<v Speaker 2>it's impossible to stay out of there. He says, there

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<v Speaker 2>is nowhere else where you can get like double digit

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<v Speaker 2>returns with you know, basically quarly payments.

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<v Speaker 1>So yeah, it does sound brilliant. I mean, but by

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<v Speaker 1>double digit, what are we talking about? Is it like

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<v Speaker 1>ten percent or is it heading up towards twenty percent?

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<v Speaker 1>Did he give you any sense.

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<v Speaker 2>Of Oh, he did not. I mean, they are whole operation,

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<v Speaker 2>because they are. They don't do a bunch of hyo.

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<v Speaker 2>They do mostly what they would call very safe investments.

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<v Speaker 2>So there are their gains was basically five percent, but

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<v Speaker 2>he's seeing like deals that he says are in the

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<v Speaker 2>double digits. I would think closer to ten percent because

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<v Speaker 2>they they are not really going down the credit risk.

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<v Speaker 2>But he did not. He did not advance on that.

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<v Speaker 1>So you no, private credit generally, I mean, has just

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<v Speaker 1>been such a big mania over the last you know,

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<v Speaker 1>twelve eighteen months, And I absolutely get it from a

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<v Speaker 1>Borough perspective that you know, rates have moved so much,

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<v Speaker 1>markets are so volatiles for some companies, it's the only

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<v Speaker 1>option now to get financing. But from an investor standpoint,

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<v Speaker 1>which is which is what we're talking about here, you know,

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<v Speaker 1>it made a lot of sense a few years ago

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<v Speaker 1>when yields were zero, and you know some places they

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<v Speaker 1>were negative and returns were very hard to get. But now,

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<v Speaker 1>and we can talk to Steve Flynn about this in

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<v Speaker 1>a minute, yields are over five percent now on high

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<v Speaker 1>quality US corporate bonds, nine percent for junk bonds in

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<v Speaker 1>the US. So why do you have to sacrifice liquidity

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<v Speaker 1>and transparency for just a little bit more return?

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<v Speaker 2>Oh yeah, that's a very interesting question. And you know,

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<v Speaker 2>these smaller players in Canada are having a hard time fundraising.

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<v Speaker 2>Like I spoke to a firm just a couple of

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<v Speaker 2>weeks ago which I can't really name because it was

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<v Speaker 2>on background, but they're aiming to raise one billion in

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<v Speaker 2>a year and they actually raised just one hundred million.

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<v Speaker 2>So like, that's a very tough place to raise money

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<v Speaker 2>because of what you said. Really, I mean, it's just

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<v Speaker 2>like you're getting good ills elsewhere, so why go into

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<v Speaker 2>private credit where the risk is not as clear as

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<v Speaker 2>in the public markets? For example? The dimension funds. They

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<v Speaker 2>are all very well capitalized and their situation is different.

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<v Speaker 2>Like they've I've been in this market for a long time.

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<v Speaker 2>They do the larger deals. I mean, their money is there.

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<v Speaker 2>They're not really fundraising is the writer like the people

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<v Speaker 2>who are retiring money. So you know, they do have

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<v Speaker 2>the capital and they think it makes sense to be

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<v Speaker 2>there and they have to diversify where You're absolutely right.

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<v Speaker 2>That's something that has been impacting the smaller players, especially

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<v Speaker 2>the first time fundraisers. I mean they're having a tough

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<v Speaker 2>time out there.

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<v Speaker 1>And so to get these brilliant yields. As the Canadian

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<v Speaker 1>fund managers are saying, how long do you have to

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<v Speaker 1>lock your money up for?

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<v Speaker 2>Oh, that's a very interesting question. Yeah, they are in

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<v Speaker 2>it for the long haul, right, I mean they're patient

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<v Speaker 2>investors their pensions so they can be there for as

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<v Speaker 2>long as they need. They haven't mentioned, you know, what

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<v Speaker 2>kind of terms they were working on, but in the

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<v Speaker 2>past I've talked about this with other mentioned funds and

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<v Speaker 2>they would like leave their money there for a long time.

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<v Speaker 1>Is that five years, seven years, ten years, even more.

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<v Speaker 2>Than sometimes even more than they can Okay, Yeah, they

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<v Speaker 2>have a very long horizon.

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<v Speaker 1>Yes, so all this lending and in private just that word,

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<v Speaker 1>you know, is somewhat worrying in some senses, All this

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<v Speaker 1>lending in the shadows, no transparency, no visibility. We can't

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<v Speaker 1>see where and how this stuff is trading. Aren't we

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<v Speaker 1>just setting ourselves up for a big fall here? I

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<v Speaker 1>mean underlying it, isn't this a set of companies that

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<v Speaker 1>that's most exposed to rising rates and the economic slowdown

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<v Speaker 1>that we're seeing.

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<v Speaker 2>Well, that's a very interesting question. I mean, we haven't

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<v Speaker 2>seen very high default rates yet. I mean, these companies,

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<v Speaker 2>like the banks, have been retreating from the sector for

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<v Speaker 2>a bunch of reasons. Not just because these companies are

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<v Speaker 2>not really good, but you know, they have higher like

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<v Speaker 2>lending criteria, so sometimes the borer is a good one,

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<v Speaker 2>but because of a bunch of rules that they have

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<v Speaker 2>to obay to, they can really lend to these places.

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<v Speaker 2>I mean, and these people are the ones that you know,

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<v Speaker 2>they're there like you know, making your food, you know,

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<v Speaker 2>doing all these real economy work that needs doing. So

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<v Speaker 2>it's important to have players out there like willing to

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<v Speaker 2>launch them. A lot of them are good payers and

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<v Speaker 2>they just can't access the big banks so I don't

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<v Speaker 2>think that's a sector that it's going anywhere anytime too,

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<v Speaker 2>Like it's going to be there for the long term.

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<v Speaker 2>Default rate hasn't been too bad, and you're right, I mean,

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<v Speaker 2>there is less transparency for one time. But on the

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<v Speaker 2>other hand, I mean, I mean this business they need

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<v Speaker 2>money and they need people to be willing to launch

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<v Speaker 2>to them. So I see them in there for the

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<v Speaker 2>long haul.

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<v Speaker 1>The Canadian pension funds, I mean, I think them is

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<v Speaker 1>pretty conservative investors with very low tolerance for risk. Do

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<v Speaker 1>they really know what they're getting into here?

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<v Speaker 2>I mean, they've been in it for a very long time.

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<v Speaker 2>They are pioneers. They have very qualified people, and they

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<v Speaker 2>seem to know what they're doing. I mean, I can't

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<v Speaker 2>speak on their behalf, but they have they give strong

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<v Speaker 2>reasons why they are in this market and why it

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<v Speaker 2>makes sense. I mean obviously now I even heard from

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<v Speaker 2>the head of the biggest Canadian pension from the Canadian

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<v Speaker 2>CPPA B, who said, like, now there's this huge of

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<v Speaker 2>money chasing private credit, which makes which is making it

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<v Speaker 2>harder to invest on right because you know, any deal

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<v Speaker 2>we'll get so many people willing to go in that

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<v Speaker 2>sometimes you know, the terms will be sacrificed, and they

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<v Speaker 2>are not really willing to go in there. So I mean,

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<v Speaker 2>if you have other places to invest on it doesn't

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<v Speaker 2>always make sense to invest in private credit. But I mean,

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<v Speaker 2>if you're well capitalized, you understand the market, and if

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<v Speaker 2>you think it makes sense, like why not.

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<v Speaker 1>And as you've written recently, you know there are other

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<v Speaker 1>firms from outside Kinada pushing into Canada. So that's making

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<v Speaker 1>the competition even more intense.

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<v Speaker 2>Right, even more intense. And some people don't have a

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<v Speaker 2>big track record. I mean, private credit is not for everyone.

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<v Speaker 2>I mean you have to understand this, you have to

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<v Speaker 2>be in it for a long time, or you have

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<v Speaker 2>to you know, partner with someone who knows what they're doing.

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<v Speaker 2>So yes, we've been hearing like a lot of firms

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<v Speaker 2>that say, like, our clients are pushing us into private credit.

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<v Speaker 2>We don't know it really well, but we don't want

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<v Speaker 2>to lose clients. So I mean, some people are getting

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<v Speaker 2>in there and we are not sure about how much

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<v Speaker 2>they know about it. So it's getting a bit trick here.

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<v Speaker 2>But and and and also like there's this huge, like

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<v Speaker 2>I said, this huge role of money chasing private credit,

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<v Speaker 2>which makes you know, some deals a bit overcrowded. Some

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<v Speaker 2>people alls are also over allocated to the sector because

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<v Speaker 2>you know, everyone is going private. But you know it's

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<v Speaker 2>still an interesting market. And yes, other players are entering Canada,

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<v Speaker 2>but the Canadian mention funds are also operating everywhere, so

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<v Speaker 2>I don't think that makes a big difference for them.

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<v Speaker 1>So it's not a fair Do you think it's definitely

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<v Speaker 1>here to stay?

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<v Speaker 2>I think so, yes.

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<v Speaker 1>So before we talk to Steve Flynn at Bloomberg Intelligence,

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<v Speaker 1>what's the next big story to watch on your beat? Pella,

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<v Speaker 1>more big private investments, more Distress's what are.

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<v Speaker 3>You looking for?

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<v Speaker 2>So I'm definitely looking for more distress because you know,

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<v Speaker 2>as a bunch of people invest in it and I'm

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<v Speaker 2>now the covenants get loser and there is some stuff

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<v Speaker 2>going on. So yes, we're chasing you know, some companies

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<v Speaker 2>that are filing for bankruptcy and they are like a

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<v Speaker 2>large part of someone's portfolio. So we've been chasing these stories.

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<v Speaker 2>That's something to watch on. But also we are watching

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<v Speaker 2>this huge influx into private credit. Where it's going, I mean,

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<v Speaker 2>what it's doing to the market, what it's doing to

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<v Speaker 2>specific deals.

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<v Speaker 1>Great stuff Palosambo from Bloomberg News. Thank you so much

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<v Speaker 1>for joining us.

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<v Speaker 2>Thank you for having me read.

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<v Speaker 1>All of Palace scoops on the Bloomberg terminal and of

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<v Speaker 1>course at Bloomberg dot com. So, as I mentioned earlier,

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<v Speaker 1>we're very pleased to have with us Steve Flynn, who

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<v Speaker 1>looks at telecoms and media for Bloomberg Intelligence in the US.

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<v Speaker 1>How's it going, Steve?

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<v Speaker 3>I'm good, How are you great?

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<v Speaker 1>Thank you? So what's the tone right now in your sector?

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<v Speaker 1>I see that both media and telecoms are doing very well.

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<v Speaker 1>They're beating the high grade index this year. What's drive

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<v Speaker 1>that and to be expected to continue?

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<v Speaker 2>Sure?

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<v Speaker 3>A couple of things.

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<v Speaker 4>Number one, some of the largest players are trying to

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<v Speaker 4>improve their balance sheet. So if you think about like

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<v Speaker 4>an AT T, A Verizon T Mobile US, they're all

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<v Speaker 4>striving for better debt profiles and lower leverage, which is

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<v Speaker 4>positive to the overall market. And then you have a

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<v Speaker 4>few really wide trading names that are also focused on

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<v Speaker 4>improving their balance sheet, names like Warner Brothers, Discovery, Paramount,

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<v Speaker 4>and Charter Secured Bonds.

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<v Speaker 1>You mentioned Paramount, I mean, other than top Gun and

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<v Speaker 1>Tom Cruise. Why do we care about them at the moment.

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<v Speaker 4>Paramount is a very interesting credit because the bond's trade

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<v Speaker 4>very wide. Appears it's rated triple B by all the

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<v Speaker 4>three major credit rating agencies. They all have a stable outlook,

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<v Speaker 4>Yet their bonds trade almost or about one hundred and

0:11:50.559 --> 0:11:54.120
<v Speaker 4>twenty basis points wide of the regression curve of like

0:11:54.200 --> 0:11:58.360
<v Speaker 4>rated bonds in the communications sector. Interestingly, they are also

0:11:58.400 --> 0:12:01.440
<v Speaker 4>about one hundred and twenty basis points at max inside

0:12:01.480 --> 0:12:04.280
<v Speaker 4>of double B rated communications bonds, so they're kind of

0:12:04.360 --> 0:12:06.800
<v Speaker 4>right in the middle between the triple B and the

0:12:06.840 --> 0:12:10.040
<v Speaker 4>double B curves. Yet we think that there's a much

0:12:10.440 --> 0:12:14.080
<v Speaker 4>higher than fifty percent chance that it stays investment great,

0:12:14.160 --> 0:12:17.960
<v Speaker 4>and I think that the bonds could narrow towards the

0:12:18.000 --> 0:12:22.000
<v Speaker 4>regression curve of their IG rated peers and therefore outperform.

0:12:22.559 --> 0:12:26.760
<v Speaker 1>And they recently slashed the dividend, didn't they to preserve cash.

0:12:26.840 --> 0:12:27.080
<v Speaker 3>Yes.

0:12:27.280 --> 0:12:30.600
<v Speaker 4>Now they've taken a number of steps to improve their

0:12:30.600 --> 0:12:34.560
<v Speaker 4>credit profile, which I think is positive. Number One, they've

0:12:34.600 --> 0:12:38.840
<v Speaker 4>slashed their dividend, which saves them over five hundred million

0:12:38.840 --> 0:12:41.280
<v Speaker 4>dollars a year, which is extra cash that they can

0:12:41.400 --> 0:12:46.400
<v Speaker 4>use for debt reduction. Number Two, they've said that twenty

0:12:46.480 --> 0:12:49.560
<v Speaker 4>twenty three will be the peak year of investment in

0:12:49.600 --> 0:12:52.920
<v Speaker 4>their streaming services. So we think about Powermount Plus, you

0:12:53.120 --> 0:12:55.440
<v Speaker 4>mentioned top Go, Maverick, you know, all these things that

0:12:55.440 --> 0:12:58.240
<v Speaker 4>they're doing for the streaming service. This will be the

0:12:58.280 --> 0:13:01.160
<v Speaker 4>peak year of investment and that's so we'll get past

0:13:01.240 --> 0:13:05.160
<v Speaker 4>that this year. Third, the company is pursuing a sale

0:13:05.160 --> 0:13:08.040
<v Speaker 4>of Simon and Schuster. It's been reported in the news

0:13:08.080 --> 0:13:11.199
<v Speaker 4>that second round bids are due mid July. They could

0:13:11.200 --> 0:13:14.360
<v Speaker 4>fetch potentially in the low two billion dollar area, and

0:13:14.400 --> 0:13:16.720
<v Speaker 4>that can reduce net leverage by almost a full turn

0:13:16.840 --> 0:13:20.360
<v Speaker 4>for this full year two thousand and twenty three. And

0:13:20.400 --> 0:13:23.280
<v Speaker 4>then fourth, there's been several media reports over the past

0:13:23.360 --> 0:13:26.680
<v Speaker 4>few months of the companies selling Beet Media Group with

0:13:26.760 --> 0:13:29.240
<v Speaker 4>a potential sale price in the three billion dollar range.

0:13:29.360 --> 0:13:32.560
<v Speaker 4>So when we think about you know, potentially better organic

0:13:32.640 --> 0:13:35.920
<v Speaker 4>results in twenty twenty four, as we have passed the

0:13:36.640 --> 0:13:39.560
<v Speaker 4>upfront screaming costs in twenty three, and we think about

0:13:39.600 --> 0:13:42.400
<v Speaker 4>proceeds from asset sales to reduce debt, I think the

0:13:42.400 --> 0:13:45.960
<v Speaker 4>company's credit profile could improve meaningfully next year.

0:13:46.320 --> 0:13:48.120
<v Speaker 1>So why are they trading so wide right now?

0:13:48.720 --> 0:13:50.200
<v Speaker 4>Well, there are a couple of reason debt, right, you know,

0:13:50.200 --> 0:13:52.360
<v Speaker 4>they do trade wide, and there are there are reasons why.

0:13:53.240 --> 0:13:56.440
<v Speaker 4>Number one, like I said, this is a peak gear

0:13:56.480 --> 0:14:01.000
<v Speaker 4>for investment into its streaming services, including Paramount Plus, there's

0:14:01.040 --> 0:14:05.760
<v Speaker 4>a shift in viewers and advertising dollars away from traditional

0:14:05.800 --> 0:14:09.640
<v Speaker 4>linear based TV to streaming services. You know, Paramount obviously

0:14:09.720 --> 0:14:11.960
<v Speaker 4>is moving in that direction themselves, but they'd have a

0:14:11.960 --> 0:14:16.560
<v Speaker 4>fair exposure to linear based TV advertising. You know, there's

0:14:16.600 --> 0:14:19.440
<v Speaker 4>a chance of an economic slowdown this year, and you know,

0:14:19.440 --> 0:14:23.040
<v Speaker 4>whenever you get economic slowdowns, that typically means lower spending

0:14:23.080 --> 0:14:27.400
<v Speaker 4>on advertising, which hurts media companies. So you know, those

0:14:27.440 --> 0:14:30.520
<v Speaker 4>are a few factors why paramounts. You know, ibit DAH

0:14:31.520 --> 0:14:34.320
<v Speaker 4>is expected to decline about twenty five percent this year,

0:14:34.360 --> 0:14:36.280
<v Speaker 4>and it's going to push leverage into the high five

0:14:36.320 --> 0:14:39.080
<v Speaker 4>times area, which is high. And those are some of

0:14:39.120 --> 0:14:41.880
<v Speaker 4>the reasons why the bonds have traded so wide. Now again,

0:14:41.920 --> 0:14:43.960
<v Speaker 4>the good things are is that the company wants investment

0:14:44.000 --> 0:14:47.640
<v Speaker 4>grade rated profile. They're going to be moving towards improving

0:14:47.640 --> 0:14:50.680
<v Speaker 4>the credit profile, and the rating agencies, as I said earlier,

0:14:50.720 --> 0:14:53.320
<v Speaker 4>all have stable outlooks as they look. They're looking past

0:14:53.360 --> 0:14:56.120
<v Speaker 4>this peak investment year, and a lot like a lot

0:14:56.160 --> 0:14:58.040
<v Speaker 4>of things the company is doing, like asset sales and

0:14:58.080 --> 0:14:59.040
<v Speaker 4>slashing the dividend.

0:15:00.160 --> 0:15:02.680
<v Speaker 1>Other companies in this sector, you know, Warner Brothers, Discovery,

0:15:02.680 --> 0:15:05.360
<v Speaker 1>they're exposed to exactly the same trends as Paralyn, yet

0:15:05.560 --> 0:15:08.160
<v Speaker 1>you know they're trading at lower yields. Why is that.

0:15:08.560 --> 0:15:11.520
<v Speaker 4>Yeah, so Warner Brothers Bonds have actually done very well

0:15:11.560 --> 0:15:14.960
<v Speaker 4>this year, So you're right, they're focused. They're facing the

0:15:14.960 --> 0:15:18.200
<v Speaker 4>same challenges as Paramount that You've got a changing video landscape,

0:15:18.280 --> 0:15:21.040
<v Speaker 4>they have a lot of exposure to advertising amid potential

0:15:21.040 --> 0:15:24.600
<v Speaker 4>economic slowdown. They're investing a lot of money into their

0:15:24.840 --> 0:15:28.640
<v Speaker 4>streaming services. You know, they just launched Max about a

0:15:28.680 --> 0:15:32.720
<v Speaker 4>month ago, and they have high leverage. Yet there's one

0:15:32.760 --> 0:15:36.840
<v Speaker 4>important lever that Warner Brothers has to pull which Paramount doesn't,

0:15:36.880 --> 0:15:41.040
<v Speaker 4>and that is mergers synergies. So you know, Discovery merged

0:15:41.080 --> 0:15:43.280
<v Speaker 4>with AT and t's Warner Brothers a little more than

0:15:43.280 --> 0:15:45.960
<v Speaker 4>a year ago and at the time they outlined steps

0:15:45.960 --> 0:15:49.160
<v Speaker 4>to achieve about three billion dollars in annual cost savings.

0:15:49.520 --> 0:15:51.680
<v Speaker 4>And this is huge because the cost savings will boost

0:15:51.680 --> 0:15:55.720
<v Speaker 4>EBITDAH and help improve their credit profile. So, you know,

0:15:55.800 --> 0:15:59.120
<v Speaker 4>Warner Brothers reiterated recent as recently as May that they

0:15:59.160 --> 0:16:02.080
<v Speaker 4>expect net leverage to be comfortably below four times this

0:16:02.200 --> 0:16:04.760
<v Speaker 4>year and then achieve their long term target of two

0:16:04.760 --> 0:16:06.360
<v Speaker 4>and a half to three times by the end of

0:16:06.440 --> 0:16:07.120
<v Speaker 4>twenty four.

0:16:07.640 --> 0:16:09.320
<v Speaker 3>So they're moving in the right direction.

0:16:10.120 --> 0:16:12.640
<v Speaker 1>Maybe look at the landscape. I mean, I look at

0:16:12.680 --> 0:16:15.840
<v Speaker 1>all the streaming services I now subscribe to, which customer

0:16:15.880 --> 0:16:19.040
<v Speaker 1>more than the package used to. Isn't this an area

0:16:19.120 --> 0:16:22.400
<v Speaker 1>that's right for consolidation in this paramount a target in that.

0:16:22.680 --> 0:16:23.720
<v Speaker 3>Yeah, I know, I agree.

0:16:24.080 --> 0:16:26.680
<v Speaker 4>There are a lot of streaming providers out there, and

0:16:27.320 --> 0:16:29.160
<v Speaker 4>we've seen a shift over the past couple of years.

0:16:29.240 --> 0:16:29.360
<v Speaker 3>Right.

0:16:29.360 --> 0:16:32.160
<v Speaker 4>It used to be like subscribers, subscriber subscribers, just get

0:16:32.200 --> 0:16:34.880
<v Speaker 4>more subscribers, spend as much as you can, and yet

0:16:34.880 --> 0:16:37.160
<v Speaker 4>companies like Netflix that would borrow in the high field

0:16:37.280 --> 0:16:40.600
<v Speaker 4>market and realize big free cash flow losses. But they

0:16:41.080 --> 0:16:44.200
<v Speaker 4>kept getting subscribers and driving higher revenue, and that's where

0:16:44.200 --> 0:16:47.280
<v Speaker 4>everybody was going for it. Now, you know, in the

0:16:47.280 --> 0:16:49.960
<v Speaker 4>past year, things have shifted. People want to see positive

0:16:49.960 --> 0:16:52.920
<v Speaker 4>free cash flow. Netflix has turned to positive free cash flow,

0:16:52.960 --> 0:16:55.760
<v Speaker 4>and a lot of the other providers are behind Netflix

0:16:56.200 --> 0:16:58.240
<v Speaker 4>and they're focused now on cost cutting, and you know

0:16:58.320 --> 0:16:59.720
<v Speaker 4>a lot of them are talking about this year being

0:16:59.760 --> 0:17:02.280
<v Speaker 4>the year of streaming losses and next year it's going

0:17:02.320 --> 0:17:05.159
<v Speaker 4>to get better. But as you think about ways to

0:17:05.359 --> 0:17:09.600
<v Speaker 4>lower cost and gain more scale, it's through consolidation. So

0:17:09.640 --> 0:17:12.080
<v Speaker 4>when you think about all the streaming platforms out there, yes,

0:17:12.160 --> 0:17:13.760
<v Speaker 4>I agree there should be consolidation.

0:17:14.520 --> 0:17:18.919
<v Speaker 1>So paramount trading wide yields a high versus peers. But

0:17:19.040 --> 0:17:22.000
<v Speaker 1>there is some potential good news around the corner on

0:17:22.040 --> 0:17:24.560
<v Speaker 1>the fundamentals. I mean, it's a potential an opportunity there

0:17:24.600 --> 0:17:30.600
<v Speaker 1>for credit investors. Definitely, we'll be watching that closely. But

0:17:31.560 --> 0:17:33.399
<v Speaker 1>just to wrap up, Steve, I mean you've also been

0:17:33.400 --> 0:17:35.600
<v Speaker 1>looking at the maturity wall, which I find really interesting,

0:17:35.760 --> 0:17:38.040
<v Speaker 1>sort of you know, a big picture level in credit market.

0:17:39.040 --> 0:17:40.919
<v Speaker 1>Who has the big payments coming up? And what does

0:17:40.960 --> 0:17:41.880
<v Speaker 1>that mean for issuance.

0:17:42.520 --> 0:17:46.000
<v Speaker 4>Yeah, so like Hiyala has picked up this year, it's

0:17:46.080 --> 0:17:49.159
<v Speaker 4>up maybe let's call it roughly twenty percent from last year.

0:17:49.160 --> 0:17:51.520
<v Speaker 4>But last year was a very slow year, right, and

0:17:51.560 --> 0:17:54.679
<v Speaker 4>it's there's still well below you know, the pace that

0:17:54.720 --> 0:17:58.359
<v Speaker 4>we're at twenty nineteen, twenty twenty, twenty twenty one, and

0:17:58.400 --> 0:18:00.520
<v Speaker 4>there's still a lot of companies that that are going

0:18:00.560 --> 0:18:02.800
<v Speaker 4>to be facing big maturities of the next couple of years,

0:18:03.320 --> 0:18:05.480
<v Speaker 4>and so it's going to be interesting to watch. There's

0:18:05.480 --> 0:18:07.320
<v Speaker 4>a lot of refinancing that has to be done. If

0:18:07.320 --> 0:18:10.399
<v Speaker 4>I look at, you know, my sector communications, we have

0:18:10.480 --> 0:18:13.240
<v Speaker 4>a lot of distressed bonds out there. So whether you're

0:18:13.240 --> 0:18:18.840
<v Speaker 4>looking at a dish, allumin consolidated Communications, all TCUSA, there's

0:18:18.840 --> 0:18:21.920
<v Speaker 4>a lot of companies that have trade with very low

0:18:21.960 --> 0:18:25.480
<v Speaker 4>bond prices, very high yields, and their new term liquidity

0:18:25.560 --> 0:18:27.679
<v Speaker 4>is okay. But the next couple of years, those are

0:18:27.680 --> 0:18:29.280
<v Speaker 4>companies that are going to have to you know, improve

0:18:29.320 --> 0:18:32.000
<v Speaker 4>their credit profiles and try and refinance.

0:18:31.560 --> 0:18:33.920
<v Speaker 3>And hopefully their overall market backdrop will be better.

0:18:34.200 --> 0:18:36.119
<v Speaker 1>But at the same time, interest rates to just shut up,

0:18:36.160 --> 0:18:39.080
<v Speaker 1>so the costs of funds is massively higher than it was,

0:18:39.160 --> 0:18:40.719
<v Speaker 1>you know, a couple of years ago. What do they

0:18:40.720 --> 0:18:41.600
<v Speaker 1>have to do now? I mean, do they have to

0:18:41.640 --> 0:18:44.320
<v Speaker 1>sell assets to get the ship right to or what.

0:18:44.240 --> 0:18:44.600
<v Speaker 3>Do they do?

0:18:44.720 --> 0:18:47.960
<v Speaker 4>Yeah, a lot of them need to sell assets, look

0:18:48.000 --> 0:18:51.000
<v Speaker 4>for alternative sources of liquidity, whether it's equity or equity

0:18:51.040 --> 0:18:54.000
<v Speaker 4>linked or you know, try and sell assets.

0:18:54.240 --> 0:18:56.320
<v Speaker 3>Yeah, you know, all the above.

0:18:56.640 --> 0:18:58.440
<v Speaker 1>We'll refinance it much higher rates.

0:18:58.720 --> 0:19:00.760
<v Speaker 3>Yeah, No, rates are muchhih. It was interesting.

0:19:00.840 --> 0:19:00.920
<v Speaker 2>You know.

0:19:01.000 --> 0:19:03.400
<v Speaker 4>We always used to look at companies that had callable

0:19:03.440 --> 0:19:06.080
<v Speaker 4>bonds and that they can you know, call them earlier,

0:19:06.320 --> 0:19:08.880
<v Speaker 4>like high you almost bonds are callable and you can

0:19:08.920 --> 0:19:09.600
<v Speaker 4>call it early and.

0:19:09.560 --> 0:19:10.320
<v Speaker 3>Be finance it.

0:19:11.359 --> 0:19:13.640
<v Speaker 4>But now rates have gone up so much and their

0:19:13.680 --> 0:19:16.360
<v Speaker 4>coupons are low that you're not seeing that happen anymore.

0:19:16.440 --> 0:19:18.720
<v Speaker 4>But you're still going to run into the maturities which

0:19:18.720 --> 0:19:19.480
<v Speaker 4>you have to deal with.

0:19:19.600 --> 0:19:22.640
<v Speaker 1>Thanks very much, Steve playing a Bloomberg intelligence Thank you.

0:19:22.640 --> 0:19:24.359
<v Speaker 1>You can read all of his great analysis on the

0:19:24.400 --> 0:19:26.919
<v Speaker 1>Bloomberg Terminal. Do check it out. Hope see you back

0:19:26.920 --> 0:19:27.520
<v Speaker 1>on the show soon.

0:19:27.560 --> 0:19:27.840
<v Speaker 2>Steve.

0:19:28.160 --> 0:19:30.280
<v Speaker 3>Look forward to join you again, and.

0:19:30.240 --> 0:19:32.920
<v Speaker 1>Thanks again to Paula Sambo from Bloomberg News. Read all

0:19:32.920 --> 0:19:35.919
<v Speaker 1>of her great private debt scoops on the Terminal and

0:19:35.960 --> 0:19:39.200
<v Speaker 1>at Bloomberg dot Com. I'm James Crumbie. It's been a

0:19:39.240 --> 0:19:41.879
<v Speaker 1>pleasure having you join us again next week on the

0:19:41.920 --> 0:19:57.080
<v Speaker 1>Credit Edge.

0:20:00.040 --> 0:20:00.080
<v Speaker 2>Just