1
00:00:12,000 --> 00:00:15,040
Speaker 1: Hello, and welcome to The Credit Edge, a weekly markets podcast.

2
00:00:15,280 --> 00:00:18,000
Speaker 1: My name is James Crumbie. I'm a senior editor at Bloomberg.

3
00:00:18,480 --> 00:00:21,560
Speaker 1: This week, we're very pleased to welcome it enly Garthia Pees,

4
00:00:21,640 --> 00:00:25,200
Speaker 1: who covers distressed debt and also football for Bloomberg News

5
00:00:25,200 --> 00:00:27,000
Speaker 1: in London. How are you, Renie?

6
00:00:27,600 --> 00:00:28,080
Speaker 2: All good?

7
00:00:28,200 --> 00:00:29,000
Speaker 3: Thank you? James.

8
00:00:29,360 --> 00:00:32,800
Speaker 1: Ru also delighted to have Tolu Alamutu, who covers real

9
00:00:32,920 --> 00:00:36,559
Speaker 1: estate and banks for Bloomberg Intelligence based in London. We'll

10
00:00:36,600 --> 00:00:38,360
Speaker 1: be coming back to Tollu later in the show to

11
00:00:38,400 --> 00:00:41,879
Speaker 1: talk about the crisis at SBB, the poster child for

12
00:00:41,920 --> 00:00:47,599
Speaker 1: Sweden's property meltdown. But first it Garcia Pees with Bloomberg

13
00:00:47,680 --> 00:00:51,600
Speaker 1: News traveled companies distress debt. Why are we seeing so

14
00:00:51,680 --> 00:00:52,800
Speaker 1: much drama right now?

15
00:00:53,159 --> 00:00:56,520
Speaker 3: Well, it's been a long time coming because a lot

16
00:00:56,520 --> 00:01:01,280
Speaker 3: of companies accumulated a lot of debt during COVID times.

17
00:01:02,320 --> 00:01:07,199
Speaker 3: Also some of them that had you know, big, big

18
00:01:07,520 --> 00:01:11,320
Speaker 3: leverage because they were leveraged buyouts when that was cheap.

19
00:01:12,840 --> 00:01:16,760
Speaker 3: Those kind of structures worked well while that was very cheap,

20
00:01:17,959 --> 00:01:23,280
Speaker 3: not so much anymore, in particular when they face refinancings.

21
00:01:24,120 --> 00:01:28,800
Speaker 3: So we are now starting to see the cracks showing

22
00:01:28,880 --> 00:01:35,040
Speaker 3: up more often and higher interest rates is already hurting

23
00:01:35,080 --> 00:01:40,600
Speaker 3: those that have floating dead, but also the ones that

24
00:01:40,680 --> 00:01:45,000
Speaker 3: are trying to refinance. They know that it's going to

25
00:01:45,040 --> 00:01:51,080
Speaker 3: be more expensive and in some cases just prohibitedly. So

26
00:01:51,120 --> 00:01:54,280
Speaker 3: that's one and then the other thing is inflation, which

27
00:01:54,280 --> 00:01:57,440
Speaker 3: of course it's also hurting. Not all the companies have

28
00:01:57,560 --> 00:02:02,000
Speaker 3: the same pricing powers, so some have been able to

29
00:02:02,040 --> 00:02:07,040
Speaker 3: pass through to consumers at least for most of last year,

30
00:02:08,760 --> 00:02:11,280
Speaker 3: and others haven't. So we are also starting to see

31
00:02:11,919 --> 00:02:15,480
Speaker 3: this disparity between borrowers of the ones that have this

32
00:02:16,000 --> 00:02:17,760
Speaker 3: power and the ones that don't.

33
00:02:18,560 --> 00:02:20,920
Speaker 1: So in basic terms, rates are going up. That means

34
00:02:20,960 --> 00:02:24,320
Speaker 1: that debt service, you know, the cost of your debt increases. Also,

35
00:02:24,440 --> 00:02:28,359
Speaker 1: the economy's slowing, so your earnings are going down. Consumption

36
00:02:28,480 --> 00:02:31,680
Speaker 1: is probably suffering because of inflation across the world. But

37
00:02:32,360 --> 00:02:34,760
Speaker 1: where are we in the cycle any Is it going

38
00:02:34,800 --> 00:02:35,639
Speaker 1: to get worse from here?

39
00:02:36,680 --> 00:02:39,320
Speaker 3: It does look like it's definitely going to get worse

40
00:02:39,360 --> 00:02:42,360
Speaker 3: before it gets better. Part of the reason is because

41
00:02:42,360 --> 00:02:46,919
Speaker 3: we're still seeing high levels of inflation, so central banks

42
00:02:46,960 --> 00:02:51,639
Speaker 3: are not likely to lower rates anytime soon. And the

43
00:02:51,680 --> 00:02:54,640
Speaker 3: other part of The reason is that we are coming

44
00:02:54,720 --> 00:02:59,600
Speaker 3: from from an era where lenders or creditors in general,

45
00:02:59,720 --> 00:03:06,400
Speaker 3: where keen on amending and extending the dead and wave covenance,

46
00:03:06,440 --> 00:03:10,480
Speaker 3: et cetera, because they understood with COVID, they understood that

47
00:03:10,960 --> 00:03:13,560
Speaker 3: most of the companies were in that situation for reasons

48
00:03:13,560 --> 00:03:18,120
Speaker 3: that were outside of their control or had reasons that

49
00:03:18,200 --> 00:03:22,359
Speaker 3: had little to do with their performance. Now that they

50
00:03:22,400 --> 00:03:25,400
Speaker 3: are a lot of them are running out of passions

51
00:03:26,360 --> 00:03:29,160
Speaker 3: in some cases, when you know, you've seen a lot

52
00:03:29,160 --> 00:03:31,760
Speaker 3: of of the restructurings that we're seeing now actually are

53
00:03:32,440 --> 00:03:36,240
Speaker 3: second time structurings. In some cases even third time companies

54
00:03:36,280 --> 00:03:40,120
Speaker 3: that restructure during COVID, and that hasn't been enough because

55
00:03:40,400 --> 00:03:45,880
Speaker 3: the business hasn't rebounded as strongly as expected. So they

56
00:03:46,040 --> 00:03:49,600
Speaker 3: are coming back for a second or third round.

57
00:03:49,840 --> 00:03:52,040
Speaker 1: So what kind of companies at most risks do you think?

58
00:03:52,040 --> 00:03:54,040
Speaker 1: I mean, in the US, we've seen a lot of

59
00:03:54,040 --> 00:03:58,840
Speaker 1: stress in retail and healthcare, and commercial real estate is

60
00:03:58,920 --> 00:04:00,880
Speaker 1: under a lot of pressure as well. But what about

61
00:04:00,920 --> 00:04:03,960
Speaker 1: in Europe? Is it the same kind of cast of characters,

62
00:04:04,000 --> 00:04:06,280
Speaker 1: the same same same sectors that are in trouble.

63
00:04:06,880 --> 00:04:09,440
Speaker 3: Yeah, it does look like it's it's very similar retail

64
00:04:09,480 --> 00:04:14,560
Speaker 3: has been distressed for ages because of the change in

65
00:04:14,560 --> 00:04:18,960
Speaker 3: in online shopping. It was a change of partying people

66
00:04:19,080 --> 00:04:24,240
Speaker 3: not going to to shopping malls as often that that

67
00:04:24,400 --> 00:04:28,080
Speaker 3: kind of of trend that was already the case before COVID,

68
00:04:28,120 --> 00:04:31,400
Speaker 3: and of course with COVID things accelerated even further. And

69
00:04:31,440 --> 00:04:34,960
Speaker 3: then for real estate it is now it's a sector

70
00:04:35,000 --> 00:04:38,920
Speaker 3: that accumulated a lot of debt again when when it

71
00:04:39,000 --> 00:04:41,240
Speaker 3: was cheap to do so. But now a lot of

72
00:04:41,240 --> 00:04:45,080
Speaker 3: these structures are suffering because of property value going down

73
00:04:45,200 --> 00:04:47,320
Speaker 3: also with the pandemic. In the case of the of

74
00:04:47,360 --> 00:04:52,480
Speaker 3: the businesses that have offices, a lot of those are

75
00:04:52,520 --> 00:04:55,920
Speaker 3: suffering because depending on the on the geographies, people are

76
00:04:55,960 --> 00:05:00,160
Speaker 3: not going back to the office as often as for

77
00:05:00,839 --> 00:05:04,240
Speaker 3: so not a lot of companies don't need the same

78
00:05:04,440 --> 00:05:06,880
Speaker 3: office space that they used to. They need less, So

79
00:05:07,680 --> 00:05:12,000
Speaker 3: landlords in that part of the market are are struggling.

80
00:05:12,160 --> 00:05:14,839
Speaker 3: Depending on the on the countries, you do see more

81
00:05:15,279 --> 00:05:18,360
Speaker 3: higher back vacancy rates in that part of the of

82
00:05:18,400 --> 00:05:22,560
Speaker 3: the real estate market than in others. But but yeah,

83
00:05:22,640 --> 00:05:27,360
Speaker 3: real estate companies are are suffering a lot with this

84
00:05:27,640 --> 00:05:35,320
Speaker 3: combo of lower lower value of the properties plus higher rates.

85
00:05:35,480 --> 00:05:37,160
Speaker 1: So the borrowers that are out there that are really

86
00:05:37,200 --> 00:05:39,359
Speaker 1: struggling right now, but we think that they've got a future.

87
00:05:39,360 --> 00:05:41,800
Speaker 1: They're not going to file for bankruptcy. What are they

88
00:05:41,800 --> 00:05:43,479
Speaker 1: doing to relieve the pressure here?

89
00:05:44,440 --> 00:05:49,640
Speaker 3: So we are seeing more and more companies that are

90
00:05:49,680 --> 00:05:53,719
Speaker 3: trying to sell assets as a way to pay down debt,

91
00:05:53,960 --> 00:05:57,640
Speaker 3: or they are that are announcing that they are doing

92
00:05:57,680 --> 00:06:01,640
Speaker 3: reviews to sell assets to pay down that and for

93
00:06:01,760 --> 00:06:06,240
Speaker 3: now it's non core assets. They're not selling the duels

94
00:06:06,320 --> 00:06:10,440
Speaker 3: of the crowns or to speak, but they are starting

95
00:06:10,480 --> 00:06:15,320
Speaker 3: to look into it, if not doing it already. One

96
00:06:15,640 --> 00:06:21,400
Speaker 3: reason why there haven't been even more asset sales so

97
00:06:21,560 --> 00:06:28,039
Speaker 3: far is because the mismatch in valuation in terms of

98
00:06:28,160 --> 00:06:30,840
Speaker 3: what the sellers were hoping they would get for their

99
00:06:30,880 --> 00:06:35,200
Speaker 3: assets and what the buyers want to pay for them.

100
00:06:35,720 --> 00:06:40,600
Speaker 3: So the sellers that can hold to the asset are

101
00:06:40,680 --> 00:06:45,240
Speaker 3: waiting for a better moment to sell it. But that's

102
00:06:45,320 --> 00:06:48,040
Speaker 3: not the case for everyone.

103
00:06:48,200 --> 00:06:50,159
Speaker 1: And you say they're not giving away the crown jewels,

104
00:06:50,279 --> 00:06:52,920
Speaker 1: but are there any sort of being forced to sell

105
00:06:53,320 --> 00:06:56,440
Speaker 1: assets or units that they really do need to keep

106
00:06:56,480 --> 00:06:58,640
Speaker 1: in order to generate the cash that they'll need to

107
00:06:58,680 --> 00:07:02,200
Speaker 1: stay alive over the long term.

108
00:07:01,440 --> 00:07:07,200
Speaker 3: I think more than I mean perhaps Friends supermarket Casino

109
00:07:07,360 --> 00:07:11,080
Speaker 3: is the best example. It's still holding to its its

110
00:07:11,560 --> 00:07:17,320
Speaker 3: main business, which is Friends, but it did have a

111
00:07:17,360 --> 00:07:20,920
Speaker 3: bigger stake in SAE, which is I think the third

112
00:07:21,000 --> 00:07:24,240
Speaker 3: largest retailer in Brazil. That was a pretty good asset,

113
00:07:24,320 --> 00:07:27,120
Speaker 3: but it had to sell part of those shares in

114
00:07:27,200 --> 00:07:32,680
Speaker 3: order to raise money to to pay down debt. Again,

115
00:07:32,840 --> 00:07:35,360
Speaker 3: it's holding to its core business, which is Friends, but

116
00:07:35,400 --> 00:07:37,760
Speaker 3: it's also it also had to sell some of the

117
00:07:37,800 --> 00:07:42,280
Speaker 3: businesses that were actually pretty good for its you know,

118
00:07:42,440 --> 00:07:47,160
Speaker 3: existence so to speak. I guess what we are seeing

119
00:07:47,200 --> 00:07:50,280
Speaker 3: more when it comes to that core part of the business.

120
00:07:50,280 --> 00:07:52,480
Speaker 3: What we are seeing more is debt for equity swaps,

121
00:07:52,520 --> 00:07:55,960
Speaker 3: so creditors to taking over the business because a private

122
00:07:56,000 --> 00:08:00,160
Speaker 3: equity owner doesn't doesn't see a way forward for that

123
00:08:00,760 --> 00:08:04,160
Speaker 3: for that company, so it's just giving up on it altogether.

124
00:08:04,480 --> 00:08:06,280
Speaker 1: And on Casino, I mean, you've been all over that one.

125
00:08:06,320 --> 00:08:09,120
Speaker 1: It's a really fascinating story. It's the biggest supermarket, one

126
00:08:09,120 --> 00:08:13,000
Speaker 1: of the biggest supmarket chains in France, and so why

127
00:08:13,040 --> 00:08:15,320
Speaker 1: is that one getting so much attention? What's the drama there?

128
00:08:16,120 --> 00:08:19,880
Speaker 3: So it's a very interesting situation. It has been cooking

129
00:08:19,960 --> 00:08:20,800
Speaker 3: for a long time.

130
00:08:21,560 --> 00:08:23,239
Speaker 1: It was already.

131
00:08:24,680 --> 00:08:30,800
Speaker 3: Short sellers had it on the radar many years ago.

132
00:08:30,920 --> 00:08:35,240
Speaker 3: It started in twenty fifteen, and then in twenty eighteen

133
00:08:35,600 --> 00:08:39,200
Speaker 3: the main accuisition of short sellers was that the company

134
00:08:39,200 --> 00:08:43,000
Speaker 3: actually had more debt that it was reporting because of

135
00:08:43,040 --> 00:08:48,160
Speaker 3: the way it was consolidating different assets in its portfolio

136
00:08:49,000 --> 00:08:52,560
Speaker 3: in the group. And then from twenty eighteen the company

137
00:08:53,559 --> 00:08:56,960
Speaker 3: compromised medias announcement that it was going to sell assets

138
00:08:57,000 --> 00:09:00,320
Speaker 3: to reduce the debt because it was overlabored and it

139
00:09:00,400 --> 00:09:06,400
Speaker 3: was doing so. But definitely COVID didn't help in terms

140
00:09:06,840 --> 00:09:10,400
Speaker 3: of valuations and in terms of the calendar to some extent.

141
00:09:10,600 --> 00:09:15,960
Speaker 3: And also now it's got to a point where even

142
00:09:16,000 --> 00:09:18,319
Speaker 3: after selling a lot of assets just in time to

143
00:09:18,720 --> 00:09:23,520
Speaker 3: pay the next the dead that was the next maturity,

144
00:09:24,840 --> 00:09:26,800
Speaker 3: it not has come to a point where it has

145
00:09:26,840 --> 00:09:31,440
Speaker 3: to restructure and it has started talks with creditors and

146
00:09:31,480 --> 00:09:36,800
Speaker 3: other stakeholders to decide how it's best to restructure the

147
00:09:36,840 --> 00:09:40,840
Speaker 3: company for the business. It's also very interesting. It's also

148
00:09:40,880 --> 00:09:44,559
Speaker 3: a very interesting case because it's for the French government.

149
00:09:44,640 --> 00:09:48,240
Speaker 3: It's a very important asset because it employs over fifty

150
00:09:48,320 --> 00:09:52,040
Speaker 3: thousand people in France, and it's also critical for feit

151
00:09:52,120 --> 00:09:56,319
Speaker 3: security in some of the French regions. It's very important

152
00:09:56,400 --> 00:09:59,920
Speaker 3: in Paris, for instance, in the Paris region, it's important

153
00:10:00,040 --> 00:10:02,800
Speaker 3: in the Lyon region as well, and in the south

154
00:10:02,840 --> 00:10:05,600
Speaker 3: of France. So of course for the French government it's

155
00:10:05,600 --> 00:10:08,040
Speaker 3: a very it's a very important asset and also it's

156
00:10:08,080 --> 00:10:12,240
Speaker 3: interesting and it has a massive capital structure. It's about

157
00:10:13,040 --> 00:10:18,480
Speaker 3: seven billion of debt, so a lot of creditors involved,

158
00:10:18,720 --> 00:10:22,480
Speaker 3: a lot of suppliers involved, and it also has very

159
00:10:22,480 --> 00:10:28,920
Speaker 3: interesting characters involved in terms of well the chairman of

160
00:10:28,960 --> 00:10:33,959
Speaker 3: the company is a very interesting character, but also Jean,

161
00:10:34,800 --> 00:10:39,200
Speaker 3: but also different parties that have made offers for the

162
00:10:39,240 --> 00:10:44,840
Speaker 3: company to inject equity. If you know, the company managed

163
00:10:44,880 --> 00:10:49,200
Speaker 3: to cut debt to sustainable levels. We have a check

164
00:10:49,280 --> 00:10:53,840
Speaker 3: billionaire called Daniel Kratinsky that has made such an offer,

165
00:10:54,240 --> 00:10:57,240
Speaker 3: teaming up with an existing shareholder of the company. And

166
00:10:57,240 --> 00:11:00,440
Speaker 3: we also have a tree of French businessmen that have

167
00:11:00,600 --> 00:11:04,120
Speaker 3: done a separate bit for it. And Lastie is interesting

168
00:11:04,160 --> 00:11:08,120
Speaker 3: because of the implications he may have in the French

169
00:11:09,520 --> 00:11:13,840
Speaker 3: food retail industry in general. Because O'shan, for instance, has

170
00:11:13,880 --> 00:11:18,200
Speaker 3: already approached Kratinski to team up if he's bid wins

171
00:11:18,320 --> 00:11:25,760
Speaker 3: after the restructuring, and Carfu has expressed interest in the

172
00:11:25,800 --> 00:11:30,560
Speaker 3: past for some of the assets. The company has already

173
00:11:30,600 --> 00:11:34,760
Speaker 3: agreed to sell some some of the some of its

174
00:11:34,760 --> 00:11:40,440
Speaker 3: sites to Antarache. It's another French retailer, so there is

175
00:11:41,640 --> 00:11:45,040
Speaker 3: a lot of interest for the assets in France, so

176
00:11:45,080 --> 00:11:47,120
Speaker 3: it will be it will be interesting to see how

177
00:11:47,160 --> 00:11:49,240
Speaker 3: it plays out after the restructuring.

178
00:11:49,920 --> 00:11:52,400
Speaker 1: Sounds like a fascinating story with It's like a Shakespeare

179
00:11:52,440 --> 00:11:56,160
Speaker 1: in drama. What what scene? What actor we in the drama?

180
00:11:57,000 --> 00:11:58,960
Speaker 1: Is it act three? Scene one? Or are we getting

181
00:11:58,960 --> 00:12:00,400
Speaker 1: towards the end of the two? No more?

182
00:12:00,880 --> 00:12:03,400
Speaker 3: Oh no, we're nowhere near the end. Because they just

183
00:12:03,640 --> 00:12:09,800
Speaker 3: entered conciliation laid may May twenty fifth, so they have

184
00:12:09,960 --> 00:12:15,240
Speaker 3: until October twenty fifth to negotiate the restructuring. Ideally they

185
00:12:15,240 --> 00:12:19,079
Speaker 3: would like to have it earlier, of course, because it's

186
00:12:19,120 --> 00:12:24,400
Speaker 3: also listed companies, so the earlier the better. And also

187
00:12:24,440 --> 00:12:30,800
Speaker 3: summer is typically a very bad quarter for supermarkets in

188
00:12:30,880 --> 00:12:33,320
Speaker 3: terms of liquidity because they need to do all the

189
00:12:33,360 --> 00:12:38,959
Speaker 3: purchases for them for the Christmas season, so they need

190
00:12:38,960 --> 00:12:45,600
Speaker 3: to stock basically, so Yeah, we were starting the talks

191
00:12:45,720 --> 00:12:48,200
Speaker 3: of the restructuring and after that they will have to

192
00:12:48,240 --> 00:12:53,320
Speaker 3: go to accord to validate the agreement, vote on etc.

193
00:12:55,640 --> 00:12:58,360
Speaker 3: But yeah, we're starting.

194
00:12:59,520 --> 00:13:02,360
Speaker 1: Okay. Interesting. So just going back to the asset sales generally,

195
00:13:02,400 --> 00:13:05,440
Speaker 1: I mean, you're talking about European asset sales to support

196
00:13:05,480 --> 00:13:08,520
Speaker 1: companies through difficult times. Is it confined to Europe orre

197
00:13:08,520 --> 00:13:09,880
Speaker 1: you seeing it in other parts of the world.

198
00:13:10,520 --> 00:13:13,320
Speaker 3: We are seeing it in other parts of the world

199
00:13:13,360 --> 00:13:17,000
Speaker 3: as well. In the in the US, we've seen different

200
00:13:17,000 --> 00:13:19,800
Speaker 3: cases and there was also a poll by EY that

201
00:13:20,240 --> 00:13:24,199
Speaker 3: mentioned that in the US there were about forty four

202
00:13:24,240 --> 00:13:28,319
Speaker 3: percent of chief executive officers that are planning to the

203
00:13:28,360 --> 00:13:34,080
Speaker 3: investments this year. And we have already seen in Chapter eleven,

204
00:13:34,120 --> 00:13:37,280
Speaker 3: although of course you can say Chapter eleven is the

205
00:13:37,320 --> 00:13:40,600
Speaker 3: place you want to avoid if you can. But we

206
00:13:40,640 --> 00:13:43,920
Speaker 3: are seeing examples of companies that Genesis Care, for instance,

207
00:13:44,160 --> 00:13:47,120
Speaker 3: is an example. It's in the healthcare space. It has

208
00:13:47,160 --> 00:13:50,840
Speaker 3: businesses in Australia, in Europe and in the US, but

209
00:13:50,880 --> 00:13:54,120
Speaker 3: the US one is the one that wasn't working and

210
00:13:54,160 --> 00:14:00,480
Speaker 3: that was dragging performance in general. So eventually they put

211
00:14:00,480 --> 00:14:03,120
Speaker 3: the police a company in they file for Chapter eleven

212
00:14:03,320 --> 00:14:05,960
Speaker 3: and they are announced that they are planning to sell

213
00:14:06,120 --> 00:14:11,520
Speaker 3: the US business. But again that one's as part of

214
00:14:11,559 --> 00:14:14,040
Speaker 3: the chapter eleven situation.

215
00:14:14,440 --> 00:14:16,680
Speaker 1: Right, got it. So basically, these companies that are trying

216
00:14:16,720 --> 00:14:19,720
Speaker 1: to sell assets they think are worth more than the

217
00:14:19,760 --> 00:14:22,520
Speaker 1: market is willing to pay. At the same time rates

218
00:14:22,520 --> 00:14:24,680
Speaker 1: are going up and the economy is slowing. It all

219
00:14:24,720 --> 00:14:28,080
Speaker 1: sounds like a recipe for disaster. It seems going to

220
00:14:28,080 --> 00:14:28,600
Speaker 1: get worse.

221
00:14:28,880 --> 00:14:33,720
Speaker 3: Yeah, it is complicated because, for instance, or Pea, which

222
00:14:33,800 --> 00:14:39,640
Speaker 3: is a French care home operator, it had to restructure

223
00:14:39,840 --> 00:14:42,840
Speaker 3: twice last year. And part of the reason for that

224
00:14:43,240 --> 00:14:47,080
Speaker 3: was that in the first restructuring it made a deal

225
00:14:47,120 --> 00:14:49,880
Speaker 3: with the French banks, but it also was planning to

226
00:14:49,960 --> 00:14:53,280
Speaker 3: sell a lot of assets to cut down that. But

227
00:14:53,320 --> 00:14:58,040
Speaker 3: then because of the valuations, it realized, well, if we

228
00:14:58,120 --> 00:15:02,600
Speaker 3: do this now, it's we're going to get paid less

229
00:15:02,720 --> 00:15:05,800
Speaker 3: than we think they're worth. So it's better if we

230
00:15:05,840 --> 00:15:09,040
Speaker 3: do a broader structuring and then we sell the assets

231
00:15:09,120 --> 00:15:11,280
Speaker 3: as we see fit. The other thing is that when

232
00:15:11,920 --> 00:15:17,760
Speaker 3: everyone in the market knows or thinks you have problems,

233
00:15:18,320 --> 00:15:20,800
Speaker 3: of course the price that they're willing to pay for

234
00:15:20,840 --> 00:15:25,480
Speaker 3: those assets are not necessarily the best or fair value

235
00:15:25,680 --> 00:15:29,400
Speaker 3: or what you could get if they thought your situation

236
00:15:29,640 --> 00:15:33,840
Speaker 3: was more stable. And that's something that SBB, for instance,

237
00:15:33,920 --> 00:15:35,960
Speaker 3: is facing. That they announced they were planning to do

238
00:15:36,520 --> 00:15:41,640
Speaker 3: asset sales, but then the new management was very clear.

239
00:15:42,120 --> 00:15:44,200
Speaker 3: Now it remains a question on whether they will be

240
00:15:44,240 --> 00:15:46,480
Speaker 3: able to stick to the plan, but that they don't

241
00:15:46,520 --> 00:15:50,960
Speaker 3: want to do fire sales, so that they will try

242
00:15:51,000 --> 00:15:53,080
Speaker 3: to sell them, that there are a lot of parties

243
00:15:53,120 --> 00:15:56,480
Speaker 3: interested in their assets, and so that they will do

244
00:15:56,520 --> 00:16:00,480
Speaker 3: them as they see fit, slowly but surely. Slowly will

245
00:16:00,480 --> 00:16:02,720
Speaker 3: depend I guess on the offers that they get, but

246
00:16:02,760 --> 00:16:06,479
Speaker 3: they don't. They're not planning to sell at deep discounts.

247
00:16:07,000 --> 00:16:09,120
Speaker 1: So just to be clear, you're talking about SBB there

248
00:16:09,120 --> 00:16:12,800
Speaker 1: from Sweden, right correct? Yeah, okay, great, we all get

249
00:16:12,840 --> 00:16:15,000
Speaker 1: to catch up with Tolu al Mutu in the moment

250
00:16:15,360 --> 00:16:18,800
Speaker 1: from Bloomberg intalience about that, but before we do, only

251
00:16:18,840 --> 00:16:20,920
Speaker 1: what's the next big story to watch on your beat?

252
00:16:20,920 --> 00:16:25,040
Speaker 1: Are there any big football scoops out there coming? That's

253
00:16:25,440 --> 00:16:27,720
Speaker 1: soccer for our US listeners.

254
00:16:27,400 --> 00:16:31,480
Speaker 3: It is. It is getting busy. That's busy. It's definitely

255
00:16:31,480 --> 00:16:34,360
Speaker 3: getting busy. I guess in that front, we're all watching

256
00:16:34,400 --> 00:16:37,560
Speaker 3: what happens with the Italian League if they're going to

257
00:16:37,640 --> 00:16:42,040
Speaker 3: sell their broadcasting rights the same well revenue from their

258
00:16:42,080 --> 00:16:44,320
Speaker 3: broadcasting rights the same way that the Spanish and the

259
00:16:44,320 --> 00:16:47,840
Speaker 3: French league did. And also any any clubs that are

260
00:16:47,880 --> 00:16:54,040
Speaker 3: potentially for sale, that's something we're always looking for. And

261
00:16:54,080 --> 00:16:58,359
Speaker 3: then in the stress, Yeah, it's it's a matter to see,

262
00:16:58,840 --> 00:17:03,560
Speaker 3: well what what the owners of the companies are going

263
00:17:03,600 --> 00:17:05,760
Speaker 3: to do, if they're willing to inject more money in

264
00:17:05,800 --> 00:17:08,959
Speaker 3: their companies, or if they will give up and just

265
00:17:09,000 --> 00:17:11,040
Speaker 3: hand the cues to creators, and to what extent we

266
00:17:11,080 --> 00:17:15,560
Speaker 3: will see like real fights or it will be you know,

267
00:17:16,000 --> 00:17:17,720
Speaker 3: less less aggressive.

268
00:17:19,080 --> 00:17:22,440
Speaker 1: Great stuff. Gartha Perez with Bloomberg News, thanks so much

269
00:17:22,480 --> 00:17:25,560
Speaker 1: for joining us. Thank you for having me read all

270
00:17:25,560 --> 00:17:27,879
Speaker 1: of it and is great scoops on the Bloomberg terminal

271
00:17:27,960 --> 00:17:30,720
Speaker 1: and of course at Bloomberg dot com. So, as I

272
00:17:30,720 --> 00:17:33,639
Speaker 1: mentioned earlier, we're very pleased to have with us. Tolu Alamutu,

273
00:17:33,640 --> 00:17:36,200
Speaker 1: who looks at real estate and banks for Bloomberg Intelligence

274
00:17:36,280 --> 00:17:39,040
Speaker 1: based in London. What's going on in real estate toler

275
00:17:39,119 --> 00:17:41,360
Speaker 1: It seems like nothing but bad news when it comes

276
00:17:41,359 --> 00:17:44,280
Speaker 1: to offices with not enough people going back to work.

277
00:17:44,280 --> 00:17:45,080
Speaker 1: After the pandemic.

278
00:17:46,359 --> 00:17:50,920
Speaker 2: Well, it definitely seems like that from where we're sitting

279
00:17:51,080 --> 00:17:56,119
Speaker 2: in London. Not only are you seeing some of the

280
00:17:56,160 --> 00:18:01,879
Speaker 2: real estate issuers report negative valuation adjustments, but you're seeing

281
00:18:01,920 --> 00:18:05,920
Speaker 2: that result in losses at some of the companies. You're

282
00:18:05,960 --> 00:18:12,080
Speaker 2: also seeing negative actions from the rating agencies, and you're

283
00:18:12,119 --> 00:18:15,199
Speaker 2: not seeing the supply that you would have expected in

284
00:18:15,240 --> 00:18:18,200
Speaker 2: the bond markets from these issues. So there's concerned about

285
00:18:18,200 --> 00:18:24,520
Speaker 2: financing as well. So a lot going on and the

286
00:18:24,600 --> 00:18:28,439
Speaker 2: concerns are not going away. It seems I think, you know,

287
00:18:28,560 --> 00:18:31,200
Speaker 2: looking forward to the second half of the many of

288
00:18:31,240 --> 00:18:35,080
Speaker 2: the issues that people had earlier in the year are

289
00:18:35,119 --> 00:18:37,760
Speaker 2: going to carry through to that period unfortunately.

290
00:18:38,320 --> 00:18:41,680
Speaker 1: So let's talk about SBB. It's the landlord at the

291
00:18:41,720 --> 00:18:44,679
Speaker 1: center of Sweden's property crisis, which is wearying a lot

292
00:18:44,680 --> 00:18:47,680
Speaker 1: of people, especially in Europe. They loaded up on cheap

293
00:18:47,720 --> 00:18:50,720
Speaker 1: debt to snap up schools and healthcare centers that local

294
00:18:50,800 --> 00:18:54,200
Speaker 1: governments were looking to offload. Now they're facing off against

295
00:18:54,200 --> 00:18:58,040
Speaker 1: local councils who want the properties back. That sorry. They

296
00:18:58,080 --> 00:19:01,080
Speaker 1: recently postponed dividend payment for at least a year to

297
00:19:01,119 --> 00:19:04,160
Speaker 1: try and ease a funding crunch caused by sharply higher

298
00:19:04,200 --> 00:19:06,919
Speaker 1: interest rates. And we know that SPB has about eight

299
00:19:07,000 --> 00:19:09,520
Speaker 1: billion dollars in debt, So what is the situation TOALU,

300
00:19:09,760 --> 00:19:11,600
Speaker 1: how bad is it going to get? Do you think?

301
00:19:12,880 --> 00:19:17,399
Speaker 2: Okay? Well, SPB is being seen as I guess you know,

302
00:19:18,240 --> 00:19:20,439
Speaker 2: the canary and the coal mine in some ways in

303
00:19:20,480 --> 00:19:24,119
Speaker 2: some ways, and there are a number of reasons for that. First,

304
00:19:24,200 --> 00:19:27,800
Speaker 2: they've been under pressure since at least the early part

305
00:19:27,920 --> 00:19:31,160
Speaker 2: of i'd say last year because there was a short

306
00:19:31,160 --> 00:19:37,440
Speaker 2: Sellar report that targeted them. And since then, SBB has

307
00:19:37,520 --> 00:19:41,720
Speaker 2: done a number of things, including a spin off, including

308
00:19:41,840 --> 00:19:48,200
Speaker 2: changing some of its reporting to include some alternative reporting measures.

309
00:19:48,440 --> 00:19:52,040
Speaker 2: They've also carried out some asset sales, but none of

310
00:19:52,080 --> 00:19:58,360
Speaker 2: this has really worked. And most recently they got downgraded

311
00:19:58,520 --> 00:20:03,360
Speaker 2: by Pitch, SM and Scope, so they lost their investment

312
00:20:03,400 --> 00:20:07,000
Speaker 2: grade ratings at S and P and Fitch and a Scope.

313
00:20:07,040 --> 00:20:11,280
Speaker 2: There is a possibility of a further downgrade and as

314
00:20:11,280 --> 00:20:13,400
Speaker 2: a result of the S and P downgrade, as you mentioned,

315
00:20:13,640 --> 00:20:18,400
Speaker 2: they decided to skip the dividend. They also postponed a

316
00:20:18,480 --> 00:20:23,960
Speaker 2: rights issue with SBB. It's basically at a point where

317
00:20:24,560 --> 00:20:27,480
Speaker 2: we're getting at least one headline or one story a day.

318
00:20:28,400 --> 00:20:35,719
Speaker 2: So yesterday we had a story about them converting a

319
00:20:35,800 --> 00:20:39,720
Speaker 2: mandatory convertible of about I think two billion krona or

320
00:20:39,760 --> 00:20:43,480
Speaker 2: so into shares, which I think would have been expected.

321
00:20:43,960 --> 00:20:48,840
Speaker 2: And today we had the pleasure of a headline saying

322
00:20:49,040 --> 00:20:55,840
Speaker 2: that the Swedish FSA will be probing SBB's accounting, primarily

323
00:20:55,880 --> 00:20:59,040
Speaker 2: focused on the twenty twenty one reporting, but also potentially

324
00:20:59,080 --> 00:21:03,880
Speaker 2: twenty twenty and SBB has has responded to that sorry,

325
00:21:04,280 --> 00:21:10,240
Speaker 2: saying that in their view the valuations and other metrics

326
00:21:10,240 --> 00:21:12,879
Speaker 2: that they reported are correct and they're looking forward to

327
00:21:12,920 --> 00:21:17,520
Speaker 2: having a constructive dialogue with the Swedish FSA. The problem

328
00:21:17,600 --> 00:21:21,199
Speaker 2: from a bondholder perspective is clearly the headline risk is

329
00:21:21,240 --> 00:21:27,560
Speaker 2: extremely elevated at this point on SBB, and every day

330
00:21:27,600 --> 00:21:31,560
Speaker 2: the headlines that we're getting and not particularly encouraging. In

331
00:21:31,640 --> 00:21:35,400
Speaker 2: the meantime, we are waiting for the outcome of what

332
00:21:35,520 --> 00:21:41,639
Speaker 2: SBB is calling a broad broader strategic review, which is

333
00:21:41,680 --> 00:21:44,199
Speaker 2: supposed to look at whether they should sell all or

334
00:21:44,240 --> 00:21:47,880
Speaker 2: some of their assets and so on, and I think

335
00:21:47,920 --> 00:21:52,480
Speaker 2: what this probe from the FSA does is increase the

336
00:21:52,520 --> 00:21:54,919
Speaker 2: urgency of them completing that review.

337
00:21:55,400 --> 00:21:57,520
Speaker 1: And as you say, they were cut to junk in May,

338
00:21:58,080 --> 00:22:00,399
Speaker 1: and since then the share price has dropped very deeply.

339
00:22:00,720 --> 00:22:03,720
Speaker 1: Now hedge funds and rival landlords are circling the trebled

340
00:22:03,760 --> 00:22:07,639
Speaker 1: company's holdings. You mentioned, you know, we're kind of getting

341
00:22:07,680 --> 00:22:11,240
Speaker 1: this bad headline to day. What exactly we're looking for next?

342
00:22:11,280 --> 00:22:14,480
Speaker 1: Is there a deadline on the horizon that we're trying

343
00:22:14,520 --> 00:22:18,119
Speaker 1: to you know, focus on and what could happen next?

344
00:22:19,480 --> 00:22:24,280
Speaker 2: So there are to me every day it seems like

345
00:22:25,040 --> 00:22:27,119
Speaker 2: a deadline at the at the moment because of the

346
00:22:28,920 --> 00:22:31,119
Speaker 2: level of headlines that we're getting, all the amount of

347
00:22:31,400 --> 00:22:35,399
Speaker 2: headlines that we're getting. But there is one date that

348
00:22:35,480 --> 00:22:39,120
Speaker 2: people are focusing on at the moment, and that is

349
00:22:39,760 --> 00:22:42,480
Speaker 2: towards the end of this month, I think around twenty

350
00:22:42,600 --> 00:22:46,159
Speaker 2: ninth of this month. The reason for that is that

351
00:22:47,640 --> 00:22:51,920
Speaker 2: according to a report, there are bondholders that have written

352
00:22:51,920 --> 00:22:55,960
Speaker 2: a letter to SBB stating that they have reached an

353
00:22:55,960 --> 00:23:02,959
Speaker 2: interest coverage ratio covenant and SBB has i think ninety

354
00:23:03,040 --> 00:23:07,199
Speaker 2: days to respond to that or to remedy that. SBB

355
00:23:07,359 --> 00:23:12,520
Speaker 2: has already publicly said that they meet the covenants or

356
00:23:12,560 --> 00:23:17,000
Speaker 2: the covenants under their Euroborn documentation. At least that's what

357
00:23:17,040 --> 00:23:19,280
Speaker 2: we know in terms of what they said publicly. We

358
00:23:19,320 --> 00:23:23,040
Speaker 2: don't know whether there's been any bilateral negotiations between them

359
00:23:23,359 --> 00:23:27,679
Speaker 2: and this bondholder group, but if the report of the

360
00:23:27,680 --> 00:23:31,520
Speaker 2: bondholder action is correct, then I guess the bondholders will

361
00:23:31,760 --> 00:23:35,320
Speaker 2: expect some action from SBB before the end of this month.

362
00:23:36,280 --> 00:23:41,159
Speaker 2: Having said that, there is another bondholder group that's on

363
00:23:41,200 --> 00:23:44,320
Speaker 2: the other side of that argument that's stating that SBB

364
00:23:44,440 --> 00:23:49,560
Speaker 2: actually has not reached that covenant, and I think one

365
00:23:49,560 --> 00:23:53,200
Speaker 2: can understand why there would be players on that side

366
00:23:53,240 --> 00:23:59,879
Speaker 2: as well. That's because if SBB were forced to in

367
00:24:00,200 --> 00:24:04,359
Speaker 2: default at this point, that would obviously potentially mean that

368
00:24:04,400 --> 00:24:07,560
Speaker 2: they'd have to pay off all the debt that they

369
00:24:07,640 --> 00:24:09,959
Speaker 2: have or the senior debt that they have, and they

370
00:24:09,960 --> 00:24:12,479
Speaker 2: don't necessarily have the cash on hand to do that.

371
00:24:13,920 --> 00:24:17,320
Speaker 2: So the outcome for the bondholders may not be positive

372
00:24:17,400 --> 00:24:20,359
Speaker 2: if they were to precipitate a default at this point.

373
00:24:20,720 --> 00:24:22,439
Speaker 1: And is that the base case right now, that they

374
00:24:22,480 --> 00:24:25,159
Speaker 1: will default on the debt and there will be a restructuring.

375
00:24:26,760 --> 00:24:32,199
Speaker 2: I wouldn't say so. I think that there is still hope.

376
00:24:32,359 --> 00:24:37,160
Speaker 2: I guess that some kind of resolution can be reached

377
00:24:37,200 --> 00:24:43,480
Speaker 2: and that there will be progress with the broader strategic

378
00:24:43,520 --> 00:24:47,880
Speaker 2: review and that there will be some way to appease

379
00:24:47,960 --> 00:24:52,480
Speaker 2: these bondholders that have raised concerns. I should say that

380
00:24:52,520 --> 00:24:55,880
Speaker 2: the issue is all around definitions and so on, and

381
00:24:57,480 --> 00:25:01,880
Speaker 2: it's the definitions of the interest coverageeration that of its

382
00:25:01,880 --> 00:25:06,840
Speaker 2: obviously have come into focus in this instance. The problem

383
00:25:06,960 --> 00:25:10,240
Speaker 2: is there are many ways that one, I guess, can

384
00:25:10,720 --> 00:25:15,720
Speaker 2: calculate that, and I guess SBB is justifying its own calculation.

385
00:25:16,119 --> 00:25:20,919
Speaker 2: The bondholders will be justifying their own. The issue with

386
00:25:21,200 --> 00:25:27,400
Speaker 2: SBB is that they restated their Q one results, and

387
00:25:28,000 --> 00:25:32,120
Speaker 2: restatements are never could right, and the restatement didn't contain

388
00:25:32,200 --> 00:25:37,560
Speaker 2: as much information as the initial reporting, and I think

389
00:25:37,640 --> 00:25:42,320
Speaker 2: that's also added to the worry basically, and is one

390
00:25:42,320 --> 00:25:45,119
Speaker 2: of the reasons I guess why you're seeing this bondholder action.

391
00:25:45,480 --> 00:25:47,439
Speaker 1: But in a worst case scenario, which we have to

392
00:25:47,480 --> 00:25:49,560
Speaker 1: be kind of always looking out for, what do we

393
00:25:49,600 --> 00:25:51,399
Speaker 1: think recoveries might look like.

394
00:25:54,040 --> 00:26:00,479
Speaker 2: That's a tricky fun because what normally well, these are

395
00:26:00,480 --> 00:26:07,600
Speaker 2: never normal circumstances. What can happen in these disorderly situations

396
00:26:08,080 --> 00:26:12,320
Speaker 2: is that the amount of secured that the people that

397
00:26:12,400 --> 00:26:16,280
Speaker 2: maybe was reported was last reported might be higher, the

398
00:26:16,359 --> 00:26:20,320
Speaker 2: valuations that they get for the properties might be lower

399
00:26:20,320 --> 00:26:24,959
Speaker 2: than was last reported, and so as an unsecured bondholder,

400
00:26:25,880 --> 00:26:29,760
Speaker 2: which all these people would be, you end up in

401
00:26:29,760 --> 00:26:34,800
Speaker 2: a worse position than maybe you were bargaining for based

402
00:26:34,840 --> 00:26:37,920
Speaker 2: on the last reported figures. And that is the primary concern,

403
00:26:38,280 --> 00:26:41,159
Speaker 2: right that you know, all those that rank ahead of

404
00:26:41,160 --> 00:26:47,800
Speaker 2: you might do much better, or might be there might

405
00:26:47,840 --> 00:26:50,480
Speaker 2: be greater amounts ahead of you, and there might be

406
00:26:50,560 --> 00:26:56,439
Speaker 2: less security left for you to claim.

407
00:26:56,600 --> 00:26:59,320
Speaker 1: That was a fascinating story for Sweden, and you know,

408
00:27:00,080 --> 00:27:03,040
Speaker 1: there's tons of really interesting things going on that we'll

409
00:27:03,080 --> 00:27:05,520
Speaker 1: be watching very closely. But when you sort of zoom

410
00:27:05,560 --> 00:27:08,760
Speaker 1: out a bit, how much is this a Sweden and

411
00:27:08,920 --> 00:27:12,640
Speaker 1: or credit specific SBB story and to what extent could

412
00:27:12,640 --> 00:27:15,840
Speaker 1: it become a bigger issue for credit markets.

413
00:27:15,920 --> 00:27:20,080
Speaker 2: I think that you really hit on what the concern is,

414
00:27:20,160 --> 00:27:25,360
Speaker 2: which is that this may not be SBB specific and

415
00:27:25,359 --> 00:27:31,800
Speaker 2: that when or if the SBB situation is resolved, there

416
00:27:31,880 --> 00:27:35,520
Speaker 2: might be concerns about whoever the next weekest link is.

417
00:27:35,960 --> 00:27:38,439
Speaker 2: I mean, if we look at how some of the

418
00:27:38,520 --> 00:27:42,360
Speaker 2: other issuers have performed year today, not just in Sweden,

419
00:27:42,560 --> 00:27:44,919
Speaker 2: and I'm talking about the performance of their bonds. It

420
00:27:45,000 --> 00:27:48,600
Speaker 2: tells you that the concerns are definitely not restricted to

421
00:27:48,920 --> 00:27:53,320
Speaker 2: just that Nordic country. I was looking at some of

422
00:27:53,359 --> 00:27:57,560
Speaker 2: the year to day performance figures today and looking at

423
00:27:57,600 --> 00:28:01,800
Speaker 2: the likes of time Staden, the around town perps and

424
00:28:01,840 --> 00:28:04,720
Speaker 2: so on. They haven't done very well year to date.

425
00:28:04,840 --> 00:28:07,560
Speaker 2: So I think what the market is telling us is

426
00:28:07,600 --> 00:28:12,120
Speaker 2: that they are concerned about real estate more broadly than

427
00:28:13,640 --> 00:28:16,679
Speaker 2: just SBB. Of course SPB is it seems to be

428
00:28:16,720 --> 00:28:18,639
Speaker 2: in the eye of the storm at the moment, but

429
00:28:18,720 --> 00:28:20,920
Speaker 2: there are definitely broader concerns.

430
00:28:20,560 --> 00:28:23,200
Speaker 1: So there could be some contagion if SPP goes down.

431
00:28:24,640 --> 00:28:28,359
Speaker 2: In a sense. Yes. The other thing I guess I

432
00:28:28,400 --> 00:28:33,320
Speaker 2: should say is in the last few weeks we have

433
00:28:33,920 --> 00:28:40,520
Speaker 2: had statements from the Swedish FSAs stating that leverage is

434
00:28:40,560 --> 00:28:43,680
Speaker 2: too high in the commercial real estate sector, which I

435
00:28:43,720 --> 00:28:48,720
Speaker 2: guess will make lenders more cautious towards that sector, which

436
00:28:48,760 --> 00:28:52,000
Speaker 2: is not positive for the other entities in Sweden that

437
00:28:52,040 --> 00:28:56,840
Speaker 2: are operating in real estate. So the regulators already sounding

438
00:28:57,760 --> 00:29:01,080
Speaker 2: out their concerns, or was already sounding out their concerns

439
00:29:01,120 --> 00:29:06,240
Speaker 2: even before the probe was launched against SBB today that.

440
00:29:06,240 --> 00:29:11,959
Speaker 1: It is something also that resonates beyond just Sweden, of course. Yes, okay,

441
00:29:12,400 --> 00:29:14,960
Speaker 1: so I'm the one on this podcast that I saw

442
00:29:15,040 --> 00:29:17,719
Speaker 1: the dumb questions and I have one, just very simple

443
00:29:18,080 --> 00:29:20,640
Speaker 1: one about real estate generally. You've got all these companies

444
00:29:20,680 --> 00:29:24,120
Speaker 1: that have, for example, office buildings that you know, no

445
00:29:24,160 --> 00:29:25,840
Speaker 1: one wants to use anymore because they're not going back

446
00:29:25,880 --> 00:29:29,520
Speaker 1: to work. Why can't they just be repurposed? Because you know,

447
00:29:30,400 --> 00:29:34,120
Speaker 1: cities have a lack of housing, they have a lack

448
00:29:34,160 --> 00:29:35,520
Speaker 1: of schools, they have a lack of all sorts of

449
00:29:35,520 --> 00:29:37,680
Speaker 1: other infrastructure. Why can't they just be repurposed.

450
00:29:39,960 --> 00:29:43,440
Speaker 2: The simple answer is that it's not that easy, and

451
00:29:43,480 --> 00:29:48,160
Speaker 2: it's all it's never that straightforward. So first let's just

452
00:29:48,200 --> 00:29:52,360
Speaker 2: consider what's going on in parts of the office space.

453
00:29:52,440 --> 00:29:56,480
Speaker 2: It is true, of course, many people prefer working from

454
00:29:56,560 --> 00:29:58,560
Speaker 2: home for at least a portion of the week now,

455
00:29:58,880 --> 00:30:01,600
Speaker 2: and so the demand for offices is not as strong

456
00:30:01,640 --> 00:30:06,840
Speaker 2: as it was maybe prior to the pandemic. But when

457
00:30:06,880 --> 00:30:09,240
Speaker 2: you have people still coming in for part of the week,

458
00:30:09,520 --> 00:30:14,640
Speaker 2: you still do need to maintain some office space, but

459
00:30:14,720 --> 00:30:17,600
Speaker 2: you need to be flexible around it. And in some

460
00:30:17,720 --> 00:30:22,400
Speaker 2: cases the issuers are not organized in a way that

461
00:30:22,440 --> 00:30:26,200
Speaker 2: allows for such flexible working, so it's almost like an

462
00:30:26,280 --> 00:30:29,680
Speaker 2: all or nothing approach. The second issue for the issuers

463
00:30:29,800 --> 00:30:33,560
Speaker 2: is the quality of the building. So we're finding that

464
00:30:33,600 --> 00:30:37,800
Speaker 2: if the doings are basically greener, and we are privileged

465
00:30:37,800 --> 00:30:41,000
Speaker 2: here to have a building that has like one of

466
00:30:41,000 --> 00:30:46,120
Speaker 2: the highest green ratings if you like. But with greener

467
00:30:46,120 --> 00:30:48,960
Speaker 2: buildings there is great demand, but it takes a lot

468
00:30:49,000 --> 00:30:53,760
Speaker 2: of time and finances to meet those standards, and it's

469
00:30:53,800 --> 00:30:59,040
Speaker 2: not always easy for the issuers to make those investments.

470
00:30:59,320 --> 00:31:04,640
Speaker 2: And in terms of repurposing them into flats or whatever else,

471
00:31:05,160 --> 00:31:09,440
Speaker 2: the location of the offices may not be ideal. You

472
00:31:09,520 --> 00:31:16,640
Speaker 2: need permissions to do that, you need funding to repurpose

473
00:31:16,680 --> 00:31:20,680
Speaker 2: them as well, So it's not as straightforward as I

474
00:31:20,680 --> 00:31:23,280
Speaker 2: guess it might seem, and it can take a lot

475
00:31:23,280 --> 00:31:26,120
Speaker 2: of time to do as well, and that time that

476
00:31:26,240 --> 00:31:31,320
Speaker 2: maybe some of the lead issuers probably don't have in abundance.

477
00:31:31,640 --> 00:31:34,520
Speaker 1: Thank you very much, Tollu al Mutu of Bloomberg Intelligence.

478
00:31:34,600 --> 00:31:37,360
Speaker 1: Read all of her great analysis on the Bloomberg Terminal.

479
00:31:37,440 --> 00:31:39,080
Speaker 1: Do check it out and hope to see back on

480
00:31:39,120 --> 00:31:39,600
Speaker 1: the show soon.

481
00:31:39,640 --> 00:31:43,320
Speaker 2: Tollu, thank you so much. James, hope to be back

482
00:31:43,360 --> 00:31:44,520
Speaker 2: on the show soon.

483
00:31:44,960 --> 00:31:49,000
Speaker 1: Thanks and thanks again to Erni Gartier Perez from Bloomberg News.

484
00:31:49,040 --> 00:31:52,360
Speaker 1: Get all her great distressed debt and football scoops on

485
00:31:52,400 --> 00:31:57,560
Speaker 1: the Bloomberg Terminal and at Bloomberg dot Com. I'm James Crombie.

486
00:31:57,560 --> 00:31:59,600
Speaker 1: It's been a pleasure having you join us again next

487
00:31:59,640 --> 00:32:01,000
Speaker 1: week on the Credit Edge