WEBVTT - Wall St. Quietly Telling Companies Not to Draw Loans 0:00:00.440 --> 0:00:02.960 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:03.040 --> 0:00:05.480 Jason Kelly. We're here every day bringing you the latest 0:00:05.519 --> 0:00:09.800 news from the world's of business and finance, plus technology, politics, economics, 0:00:09.840 --> 0:00:13.480 all harnessing the power of Bloomberg Business Week reporters and editors, 0:00:13.480 --> 0:00:16.639 not to mention our hundred journalists and analysts more than 0:00:16.680 --> 0:00:19.280 a hundred and twenty countries. You can download Bloomberg Business 0:00:19.320 --> 0:00:22.200 Week on iTunes, SoundCloud, or Bloomberg dot Com. You can 0:00:22.200 --> 0:00:24.520 also listen to our radio show weekdays at two pm 0:00:24.520 --> 0:00:28.480 Eastern only on Bloomberg Radio. Let's also set the Business 0:00:28.520 --> 0:00:30.320 Week agenda. Gotta talk a little bit about the market. 0:00:30.360 --> 0:00:33.400 Trade Here. Sarah Ponza is with Us Crosshouse at reporter 0:00:33.440 --> 0:00:36.400 at Bloomberg New She's on the phone in New York City. 0:00:36.479 --> 0:00:39.599 Dave Wilson our stocks that are at Bloomberg News on 0:00:39.640 --> 0:00:43.080 the phone from New Jersey. So, Sarah, let's start with you. 0:00:43.200 --> 0:00:44.920 What kind of interesting moves are you seeing in the 0:00:44.920 --> 0:00:49.240 trade today. So honestly, it's really shocking in a way 0:00:49.560 --> 0:00:52.240 that you have oil prices the wt I crude oil 0:00:52.280 --> 0:00:55.240 as we speak, below twenty dollars a barrel coming into 0:00:55.280 --> 0:00:57.400 the trading day. There were a lot of warnings, a 0:00:57.400 --> 0:01:00.600 lot of research notes emails going around say this could 0:01:00.680 --> 0:01:05.400 be another rough day in the markets, considering the extremely 0:01:05.680 --> 0:01:09.640 large games at rally that we saw last week and 0:01:09.720 --> 0:01:13.120 now oil plunging yet again. Yet you look at the 0:01:13.120 --> 0:01:16.399 market and we see equities higher for a fourth day 0:01:16.440 --> 0:01:19.600 in five. So it really is pretty striking the fact 0:01:19.600 --> 0:01:22.840 that we're seeing this resilience once again, and you have 0:01:23.040 --> 0:01:26.399 the likes of JP Morgan Cross Assets strategists saying that 0:01:26.480 --> 0:01:29.759 maybe the lows truly are in, and even Mike Wilson, 0:01:29.840 --> 0:01:32.720 who's been embarished, he was on Blueberg Television this morning 0:01:32.760 --> 0:01:34.800 and he said he doesn't even think that we will 0:01:34.840 --> 0:01:36.880 go back and retest those lows. Now. Of course, you 0:01:36.920 --> 0:01:39.319 have many people on the other end of the spectrum too, 0:01:39.400 --> 0:01:41.280 saying that this is just a bear market bounce. But 0:01:41.560 --> 0:01:45.399 the resiliency today does make you at least question, all right, 0:01:45.440 --> 0:01:48.320 Dad Wilson, come on in here. Set the scene for us. 0:01:48.360 --> 0:01:51.000 From your perspective, you're looking at sectors, you're looking at 0:01:51.040 --> 0:01:53.520 individual names. What do you see in this trade that 0:01:53.560 --> 0:01:55.760 feels different from what we've seen over the last couple 0:01:55.760 --> 0:01:59.000 of weeks. Frankly, not a whole lot. I mean, you 0:01:59.120 --> 0:02:02.480 talk about energy stocks being down, we've gotten used to 0:02:02.520 --> 0:02:06.000 the idea since last year that energy has been a 0:02:06.040 --> 0:02:09.240 week sister. When you look at the main industry groups 0:02:09.240 --> 0:02:11.720 in the S and P and when you see what's 0:02:11.760 --> 0:02:15.880 up today technology stocks, and we've certainly seen them at 0:02:15.919 --> 0:02:20.320 the forefront of the market's performance, even in this current 0:02:20.320 --> 0:02:23.000 bear market. I'll have more about that next hour with 0:02:23.120 --> 0:02:25.520 my chart of the day. And on top of that, 0:02:25.600 --> 0:02:31.320 the defensive areas healthcare utilities, the makers of consumer staples, food, beverage, 0:02:31.360 --> 0:02:34.440 tobacco doing relatively well. Real estate is a bit of 0:02:34.480 --> 0:02:37.600 an exception today because it's, you know, little changed and 0:02:37.639 --> 0:02:40.320 you're finding issues. I mean, let's face it, we're coming 0:02:40.400 --> 0:02:43.639 up on April one. We already know that Cheesecake Factory 0:02:43.720 --> 0:02:46.760 isn't gonna be paying rent on any of their restaurants, 0:02:46.840 --> 0:02:48.520 and you've got to presume they're gonna be a whole 0:02:48.520 --> 0:02:53.280 lot of other companies following their example. My husband and 0:02:53.280 --> 0:02:55.880 I've been talking about that. That's remarkable because anytime we've 0:02:55.880 --> 0:02:58.560 ever gone to a cheesecake factory, it is packed, The 0:02:58.600 --> 0:03:01.320 lines are out the door. So if a chain like 0:03:01.440 --> 0:03:06.000 that is having troubles. You know, it just is indicative 0:03:06.120 --> 0:03:09.400 of just so many of those independently owned restaurants. You 0:03:09.480 --> 0:03:12.760 just you know, it's very clear how troubling this time 0:03:12.840 --> 0:03:14.440 is going to be for them. I just I think 0:03:14.440 --> 0:03:17.240 it's interesting, and David speaks to a larger real estate story, 0:03:17.560 --> 0:03:20.480 commercial and even residential. If folks aren't able to pay 0:03:20.520 --> 0:03:23.720 their mortgage, or if businesses aren't able to pay their rent, 0:03:23.800 --> 0:03:27.520 that's has a ripple effect through um our economy. What 0:03:27.560 --> 0:03:30.519 absolutely does. And we've already seen that play out with 0:03:30.639 --> 0:03:33.960 what they call the mortgage reets real Estate Investment Trust 0:03:33.960 --> 0:03:37.280 and either lend money for properties or buy morriage backed securities. 0:03:37.440 --> 0:03:39.440 And they have really taken a hit this month, much 0:03:39.480 --> 0:03:41.680 more so than the broader market. And I just want 0:03:41.680 --> 0:03:43.960 to point out, you know what, Cheesecake Factory, the shares 0:03:44.000 --> 0:03:46.920 are actually hired today, and you had a firm, Googen 0:03:46.960 --> 0:03:50.160 Haun come in and raise their twelve bunts price estimate 0:03:50.200 --> 0:03:53.000 by fifteent to thirty dollars to share. They figured that 0:03:53.120 --> 0:03:56.160 Cheesecake Factory is gonna be okay in the long run 0:03:56.520 --> 0:03:58.400 once they get past the issues in front of them 0:03:58.400 --> 0:04:01.120 now that are keeping them um at least in their 0:04:01.160 --> 0:04:05.560 own plans from paying the rent, and so Sarah Ponzac 0:04:06.000 --> 0:04:09.400 still with us, help us understand whether that is consistent 0:04:09.520 --> 0:04:12.680 across the trade and investor's mindset. At this point, are 0:04:12.680 --> 0:04:15.160 people just saying, all right, well, let's see what's going 0:04:15.200 --> 0:04:17.160 to be good in the long term and just look 0:04:17.240 --> 0:04:21.520 past the next sixty days. Well, do you know what's 0:04:21.560 --> 0:04:24.200 really standing out to me today? And I think it's 0:04:24.400 --> 0:04:27.359 a little different, is the fact that we're back to 0:04:27.400 --> 0:04:30.479 that norm where you have tech outperforming once again, you 0:04:30.520 --> 0:04:34.800 have healthcare outperforming once again, particularly the likes of Abbott Labs, 0:04:35.000 --> 0:04:38.240 also Johnson and Johnson. But you're back to that scenario 0:04:38.480 --> 0:04:42.640 where the likes of Boeing, your airline, your transport companies 0:04:42.760 --> 0:04:45.760 are the ones falling. And that it is a bit 0:04:45.880 --> 0:04:48.039 telling because if you were to love there to basket 0:04:48.120 --> 0:04:51.080 that Goldman Sacks tracks of the most short of stocks, 0:04:51.440 --> 0:04:54.960 and today it's actually down but very very slightly. So 0:04:55.400 --> 0:04:59.160 you're not seeing this giant rally in the stocks that 0:04:59.240 --> 0:05:01.919 were beating up most. So you're not seeing this huge 0:05:02.080 --> 0:05:04.840 short squeeze in the market, which we did see in 0:05:04.960 --> 0:05:08.400 some of those major rallies last week. So we're back 0:05:08.480 --> 0:05:12.919 to this more sustainable buying, sustainable buying of the names 0:05:12.960 --> 0:05:15.840 that people have loved over the past ten years, over 0:05:15.920 --> 0:05:18.680 the past bull market, and I think that's a bit 0:05:18.760 --> 0:05:21.800 telling about the structure of the rally today. All Right, 0:05:21.839 --> 0:05:23.640 Sarah pon Zack, We're gonna leave it there, Thank you 0:05:23.720 --> 0:05:26.479 so much. Pon Zack is cross asset reporter for Bloomberg 0:05:26.800 --> 0:05:30.240 joining us from New York City. Dave Wilson. We are 0:05:30.279 --> 0:05:32.400 going to talk to him next hour, as he alluded 0:05:32.440 --> 0:05:36.520 to for his chart of the day. This is Bloomberg 0:05:36.560 --> 0:05:41.400 Business Week with Carol Messer and Jason Kelly on Bloomberg Radio. Well, 0:05:41.440 --> 0:05:43.480 we got a lot of news over the weekend and 0:05:43.520 --> 0:05:47.159 certainly continuing this morning. Jason Spain reporting fewer deaths today. 0:05:47.760 --> 0:05:50.599 Uh yet President Trump abandoning his ambition to return America 0:05:50.680 --> 0:05:55.120 to kind of normal life by Easter. H cases now 0:05:55.400 --> 0:05:59.159 of the virus topping seven hundred thirty seven thousand, thirty 0:05:59.240 --> 0:06:02.000 five thousand have lost their lives. A hundred and fifty 0:06:02.080 --> 0:06:05.440 six thousand um have recovered. This according to JOHNS. Hopkins, 0:06:05.880 --> 0:06:08.840 let's talk about this. Dr Rhonda Meadows is President at 0:06:08.880 --> 0:06:12.360 Health Management at Providence St. Joseph's Health, the first US 0:06:12.440 --> 0:06:15.000 case of the virus was confirmed in Washington State at 0:06:15.040 --> 0:06:18.680 Providence Regional Medical Center in Everest, and this is all 0:06:18.760 --> 0:06:22.719 part of a big major health system. Dr Meadows, nice 0:06:22.760 --> 0:06:26.039 to have you here with Jason and myself. Um tell 0:06:26.160 --> 0:06:30.840 us where we are in terms of either finding a 0:06:31.000 --> 0:06:34.880 vaccine or a better test so that we can somehow 0:06:34.960 --> 0:06:38.160 get our head our hands around uh, the virus, maybe 0:06:38.240 --> 0:06:42.320 sooner rather than later. Good afternoon, and thank you for 0:06:42.400 --> 0:06:45.040 inviting me. As far as a vaccine is concerned, that 0:06:45.200 --> 0:06:47.880 is somewhat out on the horizon. We're looking at about 0:06:47.880 --> 0:06:50.680 a year from now. But we're most concerned with now 0:06:50.960 --> 0:06:54.400 is actually getting the personal protective equipment on the map 0:06:54.839 --> 0:06:57.840 to our frontline caregivers, our doctors, nurses, e MS and 0:06:57.920 --> 0:07:01.480 first responders. We're also to the work of actually updating 0:07:01.520 --> 0:07:04.880 our projections on potentially the worst case scenario and making 0:07:04.920 --> 0:07:09.040 sure that we have sufficient supplies including ventilators and so. 0:07:09.279 --> 0:07:12.520 Dr Meadows, what have you seen change either in the 0:07:13.280 --> 0:07:17.880 sort of the the progression of the outbreak or the preparedness, 0:07:18.520 --> 0:07:21.440 especially in the last week or two as you've learned 0:07:21.480 --> 0:07:23.520 a lot there on the ground, and you've also watched 0:07:23.600 --> 0:07:27.400 cities like New York UH and San Francisco and others 0:07:27.840 --> 0:07:32.160 grapple with this. So what we have seen over the 0:07:32.280 --> 0:07:36.080 last week or show is trickling in of the personal 0:07:36.120 --> 0:07:39.200 protective equipment and some mask We get a couple of 0:07:39.280 --> 0:07:41.720 days at a time when we do get some supplies 0:07:41.760 --> 0:07:46.000 from some domestic suppliers, are international suppliers are still delayed 0:07:46.120 --> 0:07:49.480 and getting the big bulk of the equipment and supplies 0:07:49.560 --> 0:07:53.040 that we need. Um. We are seeing, UM with the 0:07:53.120 --> 0:07:56.320 good effort of the American people, UM, the efforts to 0:07:56.640 --> 0:07:59.760 do the stay in place and the social distancing, and 0:07:59.840 --> 0:08:02.040 the more we do it, the further along we will 0:08:02.080 --> 0:08:04.680 be in terms of slowing flowing the rate of the 0:08:04.760 --> 0:08:07.760 spread of the virus itself. UM. That means that in 0:08:07.920 --> 0:08:11.360 some places like cel and the West Coast where we 0:08:11.480 --> 0:08:13.640 have been addressing this for a little over two months 0:08:13.720 --> 0:08:17.680 now since that first case January one, but we actually 0:08:17.720 --> 0:08:20.480 are seeing UM that we can actually manage UM the 0:08:20.680 --> 0:08:24.720 patient populations that are coming in. However, if we delay 0:08:24.840 --> 0:08:27.640 or becomes a liquent in doing those social distances to 0:08:27.680 --> 0:08:29.960 stay at home, we could see another surge that can 0:08:30.040 --> 0:08:33.760 overwhelm our health your systems. Still on the East Coast, Yeah, 0:08:33.840 --> 0:08:36.400 I'm sorry, please continue. No, I was going to say, 0:08:36.400 --> 0:08:39.160 on the East coast, are rather are overwhelmed, right, they 0:08:39.280 --> 0:08:43.800 have a large number of people in population densed areas UM, 0:08:43.880 --> 0:08:47.280 they more than than anyone else, needs additional help in 0:08:47.320 --> 0:08:50.439 getting the supplies for their front line. It's interesting what 0:08:50.559 --> 0:08:54.160 you said about, you know, accessing your domestic and international suppliers. 0:08:54.600 --> 0:08:59.319 How is UM the federal government helping and maybe you know, 0:08:59.440 --> 0:09:02.679 figuring out out the domestic and international suppliers, pulling in 0:09:03.080 --> 0:09:06.800 those resources and making sure it gets to the hospitals 0:09:06.840 --> 0:09:10.480 and the medical care professionals or the medical professionals who needed. 0:09:11.120 --> 0:09:14.400 Is the government playing a bigger and better role, if 0:09:14.400 --> 0:09:17.680 you will? And all that, I think the Settle government 0:09:17.760 --> 0:09:20.360 is beginning to play a role UM. Probably and not 0:09:20.440 --> 0:09:22.959 as aggressively if some of us would like. But we 0:09:23.080 --> 0:09:26.040 do see some of the effort. UM. We actually went 0:09:26.120 --> 0:09:29.079 out on our own to actually procure the maths, the 0:09:29.200 --> 0:09:32.800 personal projective equipment, the ventilators, anything and everything we've needed. 0:09:33.120 --> 0:09:35.560 We've actually gone on our own. We've worked with our 0:09:35.679 --> 0:09:39.040 state partners who have been great UM to work with 0:09:39.240 --> 0:09:43.400 us UM. But part of the original problem, Carol and Jason, 0:09:43.559 --> 0:09:46.800 is that we are starting off with the blindly. We 0:09:46.920 --> 0:09:48.920 don't have the surveillance data, we don't know what the 0:09:48.960 --> 0:09:52.480 original denominator baseline was. So we're having to assume the 0:09:52.559 --> 0:09:57.200 worst case UH scenario, and so our projections may seem 0:09:57.320 --> 0:10:00.240 large and alarming to folks, but it's because if we 0:10:00.360 --> 0:10:04.800 don't prepare and act toward addressing the worst case, we 0:10:04.920 --> 0:10:08.600 will be surely in trouble if we don't do that. UM. 0:10:08.720 --> 0:10:12.520 So we're seeing some UM, some questions in some request. 0:10:13.080 --> 0:10:16.480 We have not received any ventilators from the subtle government. UM. 0:10:16.520 --> 0:10:19.120 They would go UM when they are dispersed to state 0:10:19.240 --> 0:10:22.840 government and then be UM dispersed. We have not seen 0:10:23.000 --> 0:10:26.080 any come to Providence yet. We have not seen any 0:10:26.200 --> 0:10:30.080 ventilators come locally, I mean domestically or internationally. We are 0:10:30.160 --> 0:10:33.480 in queue with everyone else UM, and everybody is trying. 0:10:34.080 --> 0:10:37.079 It kind of makes the use of the Defense Production 0:10:37.120 --> 0:10:41.760 Act even more important UM to basically encourage UM non 0:10:41.840 --> 0:10:47.560 traditional providers of equipment can help us get the supplies right. UM. 0:10:47.679 --> 0:10:49.679 So last question for you, Dr Meadows before we let 0:10:49.720 --> 0:10:53.040 you get back to work. How important was it yesterday 0:10:53.080 --> 0:10:57.199 the President coming out and basically saying, look, Easter is 0:10:57.240 --> 0:10:58.959 not going to make sense we're going to go to 0:10:59.320 --> 0:11:03.440 at least April. Did that give you some some sense 0:11:03.480 --> 0:11:06.720 of optimism that maybe this is being taken more seriously. 0:11:07.920 --> 0:11:10.400 It actually does, and I will tell you that we 0:11:10.520 --> 0:11:15.079 cannot flack off, we cannot step away. The social distancing 0:11:15.200 --> 0:11:18.480 and the stay at home must be maintained at least 0:11:18.559 --> 0:11:21.040 until April. We'll have to see in other states what 0:11:21.160 --> 0:11:24.800 they need as well. We're basically facing waves of viral 0:11:24.880 --> 0:11:27.800 spread and health care is what was The viral spread 0:11:27.960 --> 0:11:30.599 is local. We have to address it where it is. 0:11:31.880 --> 0:11:34.000 All right, we really appreciate it. Thank you so much. 0:11:34.080 --> 0:11:37.640 We know it is extraordinarily busy, very grateful for you 0:11:37.840 --> 0:11:40.520 for taking the time. We've learned so much in talking 0:11:40.800 --> 0:11:43.599 to you and your colleagues there in the state of Washington, 0:11:44.360 --> 0:11:46.839 especially as we as you point out, we deal with 0:11:46.880 --> 0:11:49.480 a very overwhelmed system here on the East Coast. Dctor 0:11:49.559 --> 0:11:52.560 Rounde Meadows is the president of health management at Providence St. 0:11:52.640 --> 0:11:55.480 Joseph Health to joined us on the phone from Everett, Washington. 0:11:55.559 --> 0:11:58.679 As Carol said, that's where it all began in the 0:11:58.760 --> 0:12:02.560 United States, or that's at least where we first saw 0:12:03.080 --> 0:12:05.719 the US the first domestic patient. Yeah, I feel like 0:12:05.800 --> 0:12:08.839 that what we've our discussions with her and her team 0:12:09.280 --> 0:12:11.440 have really been helpful and kind of understanding the spread 0:12:11.480 --> 0:12:14.400 of the virus and the impact of it. This is 0:12:14.440 --> 0:12:18.240 Bloomberg Business Week with Carol Masser and Jason Kelly on 0:12:18.520 --> 0:12:21.600 Bloomberg Radio. Glas Carol mentioned it's the most read story 0:12:21.760 --> 0:12:24.360 on the Bloomberg and not surprisingly, this is at the 0:12:24.480 --> 0:12:28.560 heart of the financial side of this crisis. Michelle Davis 0:12:28.679 --> 0:12:32.600 wrote the story. She's a finance reporter for Bloomberg, one 0:12:32.640 --> 0:12:35.079 of our top shots. She joins us on the phone 0:12:35.480 --> 0:12:40.040 from Vermont. So, Michelle, you, I'm sure, like all of us, 0:12:40.080 --> 0:12:43.920 saw these headlines about corporations drawing down these revolvers. You 0:12:44.000 --> 0:12:47.840 went to the banking side and what do you find. Well, So, yeah, 0:12:47.960 --> 0:12:50.360 as you mentioned, I have been watching as lots of 0:12:50.480 --> 0:12:53.480 companies around the country have just since March nine to 0:12:53.600 --> 0:12:55.679 draw on more than a hundred and seventy seven billion 0:12:55.760 --> 0:12:59.760 from revolvers, and h that means that banks have been, 0:13:00.080 --> 0:13:01.880 you know, at the same time, banks have been talking 0:13:01.920 --> 0:13:04.400 to companies and they've been saying, look, you know, if 0:13:04.480 --> 0:13:06.319 you don't really need the money right now and you 0:13:06.400 --> 0:13:09.320 are just topping this revolver out, of an abundance of caution, 0:13:09.800 --> 0:13:12.760 we'd advise you to please not do that. Um. And 0:13:12.840 --> 0:13:15.160 the idea is, you know, it's not anything having to 0:13:15.280 --> 0:13:18.040 do with liquidity concerns. The banks say there is there 0:13:18.120 --> 0:13:21.120 and they will honor any requests they get for revolver 0:13:21.280 --> 0:13:23.640 draw downs, but it's really one person described it as 0:13:23.800 --> 0:13:26.720 you know, trying to take a hot shower. If everyone 0:13:26.800 --> 0:13:28.400 tries to take a hot shower at the same time, 0:13:28.600 --> 0:13:30.319 some people are gonna be left with cold water. And 0:13:30.440 --> 0:13:32.800 so in order to be able to get money to 0:13:33.040 --> 0:13:35.280 the companies or the people that need it the most 0:13:35.440 --> 0:13:38.200 and the quickest, banks are asking, you know, the healthiest 0:13:38.200 --> 0:13:40.360 companies to kind of stand down so that they can 0:13:40.400 --> 0:13:44.600 prioritize getting access to these other companies. Well, what's great 0:13:44.600 --> 0:13:46.520 about it too? I love this line in your story 0:13:46.760 --> 0:13:49.160 and you're reporting, Michelle is for Wall Street. It's not 0:13:49.240 --> 0:13:52.480 an issue of liquidity so much as profitability. Explain that 0:13:53.720 --> 0:13:58.559 so every time, well, first of all, revolvers are technically 0:13:58.880 --> 0:14:02.600 just very low more argin uh instruments. Banks will extend 0:14:02.640 --> 0:14:04.719 them the companies of kind of a relationship thing, you know, 0:14:04.840 --> 0:14:06.959 like this is here for you just in case, But 0:14:07.120 --> 0:14:10.079 they don't accept everyone to draw them down. There a 0:14:10.200 --> 0:14:12.240 lot of them aren't even profitable, and they're seen as 0:14:12.280 --> 0:14:15.920 kind of an entryway into other more expensive capital markets 0:14:16.360 --> 0:14:19.240 fields or or you know, m and a advice um. 0:14:19.400 --> 0:14:22.320 And so every time someone does draw down on one 0:14:22.360 --> 0:14:24.560 of these, the banks have to put aside more capital 0:14:24.840 --> 0:14:28.640 because of you know, financial crisis rules, and so that 0:14:28.920 --> 0:14:31.520 does end up straining or hitting their profitability if if 0:14:31.560 --> 0:14:33.960 everyone is doing it at the same time. Well, and 0:14:34.000 --> 0:14:36.520 it's interesting too in your story of a really important 0:14:36.560 --> 0:14:39.880 nuance is that you found evidence that some companies are saying, 0:14:40.360 --> 0:14:42.320 all right, banker, I'm going to give you a break 0:14:42.320 --> 0:14:44.200 on this one. I'm actually gonna pay a little bit more. 0:14:44.240 --> 0:14:46.360 I believe McDonald's did this to go get a short 0:14:46.480 --> 0:14:50.480 term loan, So I don't do this at the risk of, 0:14:50.760 --> 0:14:54.320 you know, maybe making you Mr banker and they're all misters. 0:14:54.400 --> 0:14:57.840 It feels like upset down the line and maybe not 0:14:58.000 --> 0:15:00.640 giving me the attention that that I want and feel 0:15:00.680 --> 0:15:04.240 like I deserve. That's correct. You know, when I first 0:15:04.280 --> 0:15:06.880 started hearing about bankers were doing this that my first 0:15:06.920 --> 0:15:09.560 question was, why would any company agree to this, Like, 0:15:09.680 --> 0:15:11.440 why would they say, yeah, you know what, I'm just 0:15:11.640 --> 0:15:13.680 not going to draw down on this. And the idea 0:15:13.920 --> 0:15:16.320 is no one really knows what's going to happen over 0:15:16.400 --> 0:15:18.920 the next couple of weeks or months or years even 0:15:19.040 --> 0:15:23.240 and so this companies, you know, see banks as very 0:15:23.360 --> 0:15:26.240 stable resource for them, and the last thing they want 0:15:26.240 --> 0:15:29.600 to do is is you know, bother or put their banker, 0:15:29.760 --> 0:15:32.240 you know, on bad terms. And so some of them, 0:15:32.360 --> 0:15:34.800 like McDonald's have said, okay, um, we'll work with you 0:15:34.920 --> 0:15:38.840 on these short, shorter term revolvers UM. McDonald's actually went 0:15:38.920 --> 0:15:42.320 up for a sixty four day revolving credit facility, drew 0:15:42.360 --> 0:15:45.320 down the entire thing, even though it hadn't yet tapped 0:15:45.360 --> 0:15:49.240 an existing six billion dollar revolver that it had well. 0:15:49.320 --> 0:15:52.440 And what's interesting though, is this is also illustrating by 0:15:52.880 --> 0:15:56.240 companies maybe tapping different sources, showing that the system is 0:15:56.280 --> 0:15:59.800 working right, that companies can access money if they need 0:15:59.880 --> 0:16:04.360 it exactly. Yeah, And this shows like McDonald's for example, 0:16:04.400 --> 0:16:07.280 by doing that, they kind of signaled to stay actually 0:16:07.360 --> 0:16:11.200 have additional funding sources UM. I think for companies that 0:16:11.280 --> 0:16:14.680 are not as directly impacted by you know, the economic 0:16:14.800 --> 0:16:17.200 fall out that's come from the majority of a country 0:16:17.240 --> 0:16:19.760 being on lockdown, if you can show if you can 0:16:19.800 --> 0:16:21.440 go to the bond market or go and get another 0:16:21.960 --> 0:16:24.360 bank line right now, and show that you actually don't 0:16:24.400 --> 0:16:26.440 need the money, but you actually, you know, want to 0:16:26.480 --> 0:16:29.960 have it, just in case that that communicates to investors 0:16:30.000 --> 0:16:32.600 that you're in a in a strong position. Well, I 0:16:32.680 --> 0:16:35.000 feel like I was gonna say, I feel like banks 0:16:35.040 --> 0:16:37.560 are also signaling like, all right, you draw it down, 0:16:37.800 --> 0:16:41.160 but listen, I'm going to make it up somewhere else road. 0:16:41.400 --> 0:16:43.040 And I think that's a really important point. And I'm 0:16:43.040 --> 0:16:44.800 glad that you both made it earlier in the conversation. 0:16:44.920 --> 0:16:47.520 This idea of what we're really talking about is bank 0:16:47.600 --> 0:16:50.280 profitability here. And so as people read this story, there 0:16:50.280 --> 0:16:51.840 are probably a lot of people outside of well sheet 0:16:51.880 --> 0:16:53.680 saying like, oh, I'm sorry, you're not gonna make as 0:16:53.760 --> 0:16:58.880 much money JP Morgan. Anyway, it's a very technical term. 0:16:59.000 --> 0:17:01.600 But in any case, Michelle Davis, thank you so much. 0:17:01.640 --> 0:17:04.959 Great reporting. Most read story on the Bloomberg for a reason, 0:17:05.280 --> 0:17:09.000 A really smart look at how this is playing out, Carol. 0:17:09.280 --> 0:17:11.760 I think it's a really smart story exactly. And and 0:17:12.080 --> 0:17:14.560 you know it's just um the understanding too of how 0:17:14.640 --> 0:17:17.760 it all works. Right. Uh So I think it's really 0:17:17.760 --> 0:17:20.360 important that that she wrote about it, and that it's 0:17:20.400 --> 0:17:23.720 certainly something we discussed. This is Bloomberg Business Week with 0:17:23.880 --> 0:17:27.960 Carol Masser and Jason Kelly on Bloomberg Radio. This was 0:17:28.080 --> 0:17:30.359 the story. Let's be honest. We had to do this 0:17:30.560 --> 0:17:35.280 when Carol Masser so into uh this because we're obsessed 0:17:35.320 --> 0:17:38.440 with the world of fitness and it's all that much 0:17:38.480 --> 0:17:41.680 more important right now. Uh, let's get into it with 0:17:41.920 --> 0:17:45.119 Mary Pollan. She is the writer of the story in 0:17:45.200 --> 0:17:47.840 Bloomberg Business Week this week. It's on the terminal and 0:17:48.000 --> 0:17:51.240 on Bloomberg dot Com today, along with the editor of 0:17:51.359 --> 0:17:54.320 the story and editor at the magazine, Sylvia Killingsworth, both 0:17:54.359 --> 0:17:58.200 of us, both of them joining us on the phone. Mary, 0:17:58.240 --> 0:17:59.880 I want to start with you, first of all, Great 0:18:00.080 --> 0:18:03.359 Peace help us what understand what's going on in the 0:18:03.480 --> 0:18:07.440 world of boutique fitness. Sure, thanks for having me. So. 0:18:08.040 --> 0:18:09.920 This is one of the many industries that I think 0:18:10.040 --> 0:18:13.560 was completely transformed overnight. This was considered to be a 0:18:13.680 --> 0:18:16.040 really booming part of the economy. You know, whether we're 0:18:16.080 --> 0:18:19.400 talking about the big players, your crunches, your equinoxes, etcetera, 0:18:19.720 --> 0:18:21.920 but also a lot of small businesses. There's a whole 0:18:22.000 --> 0:18:25.240 cottage industry of these boutique you know classes, whether it's 0:18:25.280 --> 0:18:29.000 bar or pilates or advanced to views. And then with coronavirus, 0:18:29.119 --> 0:18:31.800 a lot of them had to close their doors overnight. Uh, 0:18:31.880 --> 0:18:34.400 they operate with very little runway usually so they don't 0:18:34.480 --> 0:18:36.760 know how to pay rent for the next couple of months. 0:18:37.240 --> 0:18:40.480 And you know, there's three d fifty thousand fitness trainers 0:18:40.520 --> 0:18:43.800 and instructors, most of whom work as contractors. So unfortunately 0:18:43.880 --> 0:18:46.760 this has also met a lot of people are out 0:18:46.800 --> 0:18:49.159 of a job and it's unclear, you know, kind of 0:18:49.240 --> 0:18:51.280 what with the future holds for them. I have to say, 0:18:51.320 --> 0:18:53.719 I do feel like there's these tensions within the fitness 0:18:53.760 --> 0:18:57.480 industry because every we go to these fitness classes. I 0:18:57.600 --> 0:18:59.360 love it because I do have a sense of community 0:18:59.400 --> 0:19:01.080 with all my friends and sitting in the class and 0:19:01.160 --> 0:19:04.480 doing something. But I have to say this weekend I 0:19:04.560 --> 0:19:07.800 did a yoga class by a beloved teacher through Zoom 0:19:08.040 --> 0:19:10.800 and it was twenty of us, twenty five of us. 0:19:10.840 --> 0:19:13.159 It was pretty amazing. We could see each other um 0:19:13.240 --> 0:19:15.119 and there was a sense of community. Sylvia, I do 0:19:15.240 --> 0:19:17.359 feel like this is going to be an interesting time 0:19:17.840 --> 0:19:21.720 and maybe there are some longer lasting results on the 0:19:21.760 --> 0:19:25.280 fitness industry as a result of the virus. That's absolutely 0:19:25.320 --> 0:19:27.720 the post I think you're seeing. Um. You know you 0:19:27.800 --> 0:19:30.480 mentioned like yoga classes of verg we also know about 0:19:30.560 --> 0:19:35.080 peloton um is one of or the mirror for example, 0:19:35.160 --> 0:19:37.040 are those services whereas you can do a lot of 0:19:37.160 --> 0:19:39.320 in home workouts. And I think you're going to see 0:19:39.840 --> 0:19:42.760 probably a lot of people shipping over to those businesses 0:19:42.840 --> 0:19:45.680 and maybe you know when things reopen, who's going to 0:19:45.760 --> 0:19:47.560 stick with that? He's going to go back to the studio. 0:19:47.760 --> 0:19:50.359 This is a really kind of like a pole uh 0:19:50.440 --> 0:19:52.879 tug of war between those two things. I think right 0:19:52.880 --> 0:19:54.719 now they're trying to plant ye to each other. Um. 0:19:55.160 --> 0:19:58.680 The focus here was definitely those smaller business owners who 0:19:59.359 --> 0:20:02.320 um how you know, it's like usually an individual sounder 0:20:02.520 --> 0:20:04.400 who goes off on their own rather than being part 0:20:04.440 --> 0:20:06.640 of the big gym. They take on a lot of risks, 0:20:06.680 --> 0:20:09.040 they take on a lot of debt, and you know 0:20:09.240 --> 0:20:11.760 now they're sort of reduced to essentially a staff of one. 0:20:11.960 --> 0:20:14.800 So we're looking at very much what is you know, 0:20:15.160 --> 0:20:17.919 sort of put the put the business on ice option? 0:20:18.040 --> 0:20:20.040 How do you how does one person keep a small 0:20:20.600 --> 0:20:23.760 studio afloat and for that time, and it's it's going 0:20:23.800 --> 0:20:26.600 to be really tough. Yeah, it's funny, Mary, I mean 0:20:26.720 --> 0:20:30.119 my inbox is just full of these you know offers, 0:20:30.400 --> 0:20:33.280 you know, as including from folks who are in your 0:20:33.400 --> 0:20:36.920 story like boxing, flow box plus flow uh and many 0:20:37.040 --> 0:20:40.399 others sort of shopping their wares. How does it change 0:20:40.520 --> 0:20:44.959 the business model though, especially for these small guys. Sure, well, 0:20:45.000 --> 0:20:47.399 you've got a lot of people racing to make these videos. 0:20:47.480 --> 0:20:49.280 And you know, keep in mind obviously, like at home 0:20:49.359 --> 0:20:52.680 fitness is far from new. I mean it's almost like 0:20:52.800 --> 0:20:55.400 this return to it's a return Yeah, It's like it's 0:20:55.480 --> 0:20:58.200 like a throwback and back then you have to watch 0:20:58.240 --> 0:21:00.240 the same video over and over and over again. Now 0:21:00.320 --> 0:21:02.359 we have all this variety. And so there's been you know, 0:21:02.560 --> 0:21:04.920 players like Beach Body, Um, we've been doing this for 0:21:04.920 --> 0:21:06.600