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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: No, you're listening to the Bloomberg Intelligence Podcast. Catch us

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Speaker 2: live weekdays at ten am Easter but Apple CarPlay and

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Speaker 3: One story that caught my eye today I actually had

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Speaker 3: to do with private equity firms and private equity firms

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Speaker 3: getting rid of their equity and the liquidity in the

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Speaker 3: market always a big question, but even more so now

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Speaker 3: as the IPO market in the amity market kind of

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Speaker 3: goes nowhere fast. Claire Ruckin is a Bloomberg News senior

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Speaker 3: reporter and she joins us on in the story. Claire,

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Speaker 3: we are kind of waiting for the private equity guys

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Speaker 3: to like offload all their stakes and companies this year.

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Speaker 4: Is that happening. It's not happening at the moment.

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Speaker 5: There's a bit of a sign of life, but it's

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Speaker 5: it's nowhere near where they wanted it to be. And

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Speaker 5: so because it's nowhere near where they wanted it to be,

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Speaker 5: they have to get creative and do other types of

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Speaker 5: dills in order to try and show some returns to shareholders,

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Speaker 5: and that's by dividends. They're loading their portfolio companies with

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Speaker 5: debts and they're taking it out as a dividend to

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Speaker 5: show some sort of distribution.

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Speaker 6: What are the lenders saying here, because I mean, you know,

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Speaker 6: this is a dividend recap, that's what we used to

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Speaker 6: call it back in the day here, and that's not

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Speaker 6: the type of loan that you generally like to make.

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Speaker 6: But it seems like lenders are going to step up here.

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Speaker 5: Yeah, so we're still calling at dividen recaps. They're happening

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Speaker 5: quite a lot. If you look at like where dillflow's

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Speaker 5: coming from, you've got a lot of like refinancing of

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Speaker 5: existing debt and then you've also got these dividends now happening.

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Speaker 5: It's like the next stage on Because the debt markets

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Speaker 5: are so hot, so there's been a record level of

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Speaker 5: inflows into credit funds and collacterize loan obligations, which are

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Speaker 5: the biggest buyers of loans, and they're desperate to put

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Speaker 5: their money to work. And because there's been a lack

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Speaker 5: of M and A and a lack of new places

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Speaker 5: to put this money, sponsors have been able to get creative.

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Speaker 5: That's private epty firms, and they are doing dividend recaps,

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Speaker 5: so they're adding debt onto companies and taking it out

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Speaker 5: in the former dividends. And this is something that investors

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Speaker 5: traditionally don't like because obviously you're piling leverage onto a company,

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Speaker 5: and it's something that's usually a nog. But because the

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Speaker 5: debt markets are so hot at the moment, they're like, yeah,

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Speaker 5: this is great. It's a new place to you know,

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Speaker 5: put new capital, and so they're giving the go ahead

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Speaker 5: to them. Basically, so we have seen quite a bit

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Speaker 5: of volatility hit the market at the moment because the

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Speaker 5: Trump and tariffs and Dell's are starting to get pulled.

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Speaker 5: But the ones that are not the dividend recaps.

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Speaker 3: So usually when we talk to private equity guys are like,

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Speaker 3: look like you're locketting your money five, seven, ten years,

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Speaker 3: it's going to be fine. We can manage any sort

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Speaker 3: of big swings in volatility. Does that still ring true

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Speaker 3: or are we seeing some issues here? When liquidity tightens up,

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Speaker 3: it gets harder and harder to find ways around it.

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Speaker 5: Yeah, that's right. They are having some difficulties. They're having

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Speaker 5: difficulties showing those exits. So whether it's via the IPO

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Speaker 5: market or the M and A market. They just haven't

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Speaker 5: come back yet to the level that they would have wanted.

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Speaker 5: We are seeing some dells happen. So Walgreen Boots was

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Speaker 5: a massive deal. It's most probably one of the biggest

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Speaker 5: LBO since the financial crisis, and that's something that banks

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Speaker 5: have piled into and they feel confident that they can

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Speaker 5: sell down to investors. But those megadills are few and

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Speaker 5: far between. We might see some mortil flow happening in

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Speaker 5: the second half, but it really it's not where people

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Speaker 5: would have wanted it to be, and therefore privateity firms

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Speaker 5: are having to get creative and investors are you know,

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Speaker 5: holding their noses and buying in Basically, this isn't the

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Speaker 5: type of dills that they would have liked. In essence,

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Speaker 5: you are piling debt onto companies, you're increasing leverage, but

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Speaker 5: it is an opportunity to invest new money, and therefore

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Speaker 5: they're doing it even if that means that the existing

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Speaker 5: debt is getting refinanced at a lower rate and therefore

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Speaker 5: they're getting a lower return on their money.

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Speaker 6: Clear one of the one of the key key variables

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Speaker 6: and these types of deals is what kind of return

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Speaker 6: does the equity investor get paid here on this dividend?

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Speaker 6: If I know, if this person, you know, investment firm,

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Speaker 6: put in a dollar and I loan them money for

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Speaker 6: a dividend recap, do I value that dollar at a dollar,

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Speaker 6: a dollar, fifty two dollars, three, three dollars. Are they

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Speaker 6: getting returns when they get these divnd recaps?

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Speaker 4: It depends.

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Speaker 5: It depends how much they're able to take out. I mean,

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Speaker 5: Clarios's is one of the biggest, most recent examples. It's

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Speaker 5: the biggest dividend recap that we've seen in a very

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Speaker 5: long time. They took out, they raised four point five

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Speaker 5: billion of debt and they took all of it out

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Speaker 5: as a dividend, and they got one and a half

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Speaker 5: time's return on their equity. And we are asking other

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Speaker 5: companies come back and they're issuing, you know, not just

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Speaker 5: one division, but it might be their second or their

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Speaker 5: third time that they're doing this. So in some instances

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Speaker 5: they're just getting their initial equity return or reducing the

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Speaker 5: amount of equity that they have in a company. But

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Speaker 5: in other instances, yeah, they're getting all their equity back,

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Speaker 5: if not more. And the debt markets are allowing for that,

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Speaker 5: there's a lot of money out there that needs to

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Speaker 5: be invested, and this is a place where they can

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Speaker 5: invest it. So there is a caveat. It has to

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Speaker 5: be for most probably a strong issuer, a well known

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Speaker 5: company with a borrower that you know that they know,

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Speaker 5: and a privateity sponsor that is liked.

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Speaker 4: Really great reporting.

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Speaker 3: It was such a great story I recommend that everyone

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Speaker 3: read it on the terminal there. Again, it's about private

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Speaker 3: equity firms getting rid of their equity. Claire, thank you

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Speaker 3: very much. Claire Reckon, Bloomberg News Senior Reporter.

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Speaker 2: You were listening to the Bloomberg Intelligence podcast program live

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Speaker 2: station Just Say Alexa played Bloomberg eleven thirty.

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Speaker 3: Well later on today, Ukrainian President Vladimir Lenski will speak

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Speaker 3: with you, as President Donald Trump, following Trump's conversation with

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Speaker 3: Putin that lasted nearly two hours on a ceasefire yesterday.

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Speaker 3: Nasty Whitcoff is a White House Special Envoy to the

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Speaker 3: Middle East and he joined Bloomberg Surveillance this morning, and

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Speaker 3: when asked about a ceasefire between the two countries, he said,

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Speaker 3: it is very likely to happen.

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Speaker 7: What was agreed between the two presidents was, and it

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Speaker 7: was at President Trump's suggestion, that there'd be a cessation

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Speaker 7: of attacks on energy infrastructure from both sides and all

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Speaker 7: and civilian infrastructure for that matter, also working towards a

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Speaker 7: black Sea moratorium on hits on naval vessels and freighters

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Speaker 7: carrying grain and things of that, and ultimately that would

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Speaker 7: evolve into a full on ceasefire.

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Speaker 3: That was Steve Woodcoff, White House Special Envoy two the

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Speaker 3: Middle East. Let's get more perspective on this with Shelby McGee,

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Speaker 3: a Deputy Director of Eurasia Center at the Atlantic Council,

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Speaker 3: joining us now on this.

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Speaker 4: Lots of questions to unpack.

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Speaker 3: Here, Shelby, but based on what we saw overnight in

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Speaker 3: terms of some attacks, in terms of some attacks on

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Speaker 3: energy infrastructure, what did you make of where the ceasefire

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Speaker 3: is and where the reality is?

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Speaker 8: Thank you, and I'm glad you mentioned those attacks and

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Speaker 8: those are Russian attacks. Russia sent over one hundred and

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Speaker 8: fifty drones and hit Ukraine including taking out the power

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Speaker 8: in one city, hitting hospitals and other infrastructure. So what

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Speaker 8: we're seeing is that President Trump yesterday said and he

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Speaker 8: posted on true social that there was an immediate limited

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Speaker 8: agreement for a ceasefire and that would cover energy.

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Speaker 4: And I'm not sure.

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Speaker 8: How immediate that is because as we now see Russia

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Speaker 8: immediately violated it. They might say that this will be

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Speaker 8: a read on later looking at how to actually enact

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Speaker 8: this and execute it in the talks in the Middle

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Speaker 8: East with the US and Russia. But unfortunately, I do

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Speaker 8: think Wikkoff's assessment of the call in the situation is

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Speaker 8: a bit optimistic. Though we are moving in the direction

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Speaker 8: where we could see a c spire, but it doesn't

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Speaker 8: look like Putin's overall goals and demands have changed.

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Speaker 6: Shelby, as we sit at this stage here at the

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Speaker 6: US slash Ukraine on one side, and maybe I don't

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Speaker 6: Russia on the other, is there where's the leverage right now?

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Speaker 6: Do you think so?

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Speaker 8: Of course, the US has leverage, and we saw President

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Speaker 8: Trump using that leverage against Ukraine and that was a

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Speaker 8: painful roller coaster. But I think we're in an okay

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Speaker 8: position there right now. But Trump also threatened recently that

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Speaker 8: there's still more leverage and pressure that he can put

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Speaker 8: against Russia. There is more economic pressure that we can

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Speaker 8: do with increased sanctions, and I believe Senator Lindsay Graham

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Speaker 8: also is preparing a package of legislation that could put

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Speaker 8: that pain on Russia as well.

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Speaker 3: What do you think the conversation is going to be

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Speaker 3: later on today, when Zelenski and Trump wind up having

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Speaker 3: this phone conversation in light of the last twenty four hours.

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Speaker 8: I'm glad they're speaking. It's really important that Ukraine is

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Speaker 8: not left out of this conversation, and it's great that

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Speaker 8: President Trump is taking the time to speak to him. Immediately,

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Speaker 8: I imagine that President Zolensky will point to the Kremlins readout

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Speaker 8: of the call, which differed from the White House readout.

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Speaker 8: The Kremlins readout reiterated many of these maximalist demands that

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Speaker 8: Putin has that are red lines for Ukraine and truly

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Speaker 8: would be existential threats to their security. So Zelenski will

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Speaker 8: point to that. He'll talk about the damage that Ukraine's

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Speaker 8: all every night. But Zelensky will also smartly, I hope

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Speaker 8: thank the US for the continued engagement and support, and

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Speaker 8: also talk about Ukraine's willingness and desire for peace, because

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Speaker 8: as we've seen, Putin and Russia are the obstacle.

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Speaker 6: So I guess just yesterday's call, some could read it

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Speaker 6: as a disappointment that Russia did not agree to the

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Speaker 6: seaspire as Ukraine has done.

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Speaker 1: Do you read it that way?

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Speaker 8: I'm not surprised. I am disappointed with everything that Russia does, frankly,

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Speaker 8: but I read it as a positive, neutral or slightly

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Speaker 8: positive on the US side, And that is actually more

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Speaker 8: important because we did not see President Trump move away

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Speaker 8: from support for Ukraine. We did not see him bend

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Speaker 8: too many of these demands from Putin, and on the

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Speaker 8: Russian side, they're stalling for time. Putin is very good

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Speaker 8: at playing people, and so I hope that Trump does

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Speaker 8: not get played well.

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Speaker 3: To that point, what was interesting is that Steve Woodcop,

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Speaker 3: the White House Special Envoy, said that we're gonna trust

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Speaker 3: Putin and take him at his word.

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Speaker 4: What is the history in that happening.

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Speaker 8: The history is that you should never take Putin at

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Speaker 8: his words. So again, as I said earlier, that's an

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Speaker 8: optimistic take. Of course, you need to listen to what

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Speaker 8: Putin is saying, but you also need to look at

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Speaker 8: his actions. As for the history, Russia has violated ceasefire

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Speaker 8: agreements with Ukraine. I don't know the exact number of times,

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Speaker 8: think it's in between one hundred and two hundred times

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Speaker 8: over the Menska agreements. And they continuously act aggressively even

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Speaker 8: after they say they won't and that they want peace,

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Speaker 8: that they care about saving human lives. And Putin has

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Speaker 8: shown he doesn't even care about the lives of his

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Speaker 8: own soldiers.

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Speaker 6: So I guess you know. White House special Onenway wid

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Speaker 6: Coughin did say that the seasfire could happen in a

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Speaker 6: couple of weeks. Do you share that timeline view?

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Speaker 8: I think that could be realistic. It depends on what

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Speaker 8: the US continues to push on Russia. I do think

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Speaker 8: that Putin and the Russians are hesitant to completely say

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Speaker 8: no to Trump and risk hurting their warming relationship and

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Speaker 8: angering him, So a ceasefire there's a lot to work

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Speaker 8: out on the technicality side. Ukraine is not the hold up,

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Speaker 8: so we'll have to see. But I think i'd say

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Speaker 8: sooner than a couple of weeks does not seem likely,

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Speaker 8: But a lot of discussions can happen in a couple

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Speaker 8: of weeks, so maybe.

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Speaker 3: Maybe it doesn't sound like you're particularly optimistic necessarily. What role,

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Speaker 3: if I'm paraphrasing you, what role do you think that

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Speaker 3: europe will be playing in this Because we make a

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Speaker 3: lot of hay about Germany expanding its ability to reindustrialize

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Speaker 3: and rearm, but all of that's going to take a while.

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Speaker 4: In your estimation, what does that part of the story

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Speaker 4: look like.

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Speaker 8: That's a good question, and you were right in your

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Speaker 8: paraphrasing of me. I'm not overly optimistic, but I do

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Speaker 8: feel better when I look at the European angle. I

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Speaker 8: don't see a European role in the upcoming negotiations on

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Speaker 8: the ceasefire, which I think is a mistake because they

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Speaker 8: have a huge stake here. But what has been great

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Speaker 8: is that while the catalyst was unfortunate following the Oval

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Speaker 8: Office blow up with Trump and Zelenski, you're really stepped

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Speaker 8: up their commitment and their action, and we've seen a

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Speaker 8: lot of progress, and they're trying to do more than

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Speaker 8: just words and meetings. So we see movements about this

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Speaker 8: idea of a coalition of the willing that would be

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Speaker 8: European forces to go in after a peace agreement. Of course,

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Speaker 8: we're not out there yet. We see more commitments on

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Speaker 8: European defense and the moves in Germany are really important.

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Speaker 8: And this all adds up to signs and signals to

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Speaker 8: poot in two.

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Speaker 4: So I think it all is.

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Speaker 8: Positive, but we might not see the immediate effect.

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Speaker 6: All right, Shelby, thank you so much. Really appreciate getting

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Speaker 6: your thoughts here. Shelby McGee, Deputy Director, Atlantic Council's Eurasia Center.

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Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 2: weekdays at ten am Easter on Apple car Play and

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Speaker 2: Android Auto with the Bloomberg Business App. Listen on demand

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Speaker 4: Every day. We like to delve into the big take stories.

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Speaker 3: They're deep, deep, deep reporting and digging onto the top

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Speaker 3: financial business and economic stories of our time. And the

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Speaker 3: latest one today has to do with TD Securities, Tidbank,

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Speaker 3: I should say, losing billions in a money laundering scam complicated,

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Speaker 3: and we're here to help break it down for you.

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Speaker 3: David Arrakis is a Bloomberg law reporter. David, can you

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Speaker 3: just remind US as to what this story is actually about.

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Speaker 1: This is a major money laundering scandal involving TD Bank

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Speaker 1: after it did a large expansion in the United States,

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Speaker 1: and the bank pleaded guilty to conspiracy to commit money

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Speaker 1: laundering in federal court in New Jersey last year, and

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Speaker 1: it paid a three point one billion dollar fine to

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Speaker 1: various US agencies. What became clear and what our story

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Speaker 1: is about, is how TD Bank failed to implement basic

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Speaker 1: money laundering controls that all banks are required to use

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Speaker 1: so that criminals cannot wash money, as they say, into

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Speaker 1: the financial system.

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Speaker 6: Well, I've learned all about this money laundering thing for

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Speaker 6: various TV shows, you know, including Breast Breaking Bad. That's

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Speaker 6: where I get most of my knowledge is from you know,

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Speaker 6: Breaking Note that this happened in the great state of

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Speaker 6: New Jersey. That's how we do that is coincidence, folks.

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Speaker 6: All right, So David, if you're Toronto Dominion, how did

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Speaker 6: this happen? How does this stuff like go undetected in

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Speaker 6: such size like this?

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Speaker 1: Well, what happened was TD Bank expanded rapidly over a

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Speaker 1: decade and spent something like twenty billion dollars to increase

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Speaker 1: its footprint in the United States, and as it did that,

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Speaker 1: it was also supposed to scale up its anti money

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Speaker 1: laundering controls. However, it failed to do that and there

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Speaker 1: were a lot of red flags along the way indicating

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Speaker 1: that its system was not working and because of its

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Speaker 1: cost cutting measures, it did not spend the money it

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Speaker 1: needed to spend and to make sure that criminals were

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Speaker 1: not accessing its branches. And I would just say that

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Speaker 1: the story really begins when we talk about a Chinese

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Speaker 1: born businessman in Queens, New York named David C who

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Speaker 1: had gotten into money laundering, and he, as part of

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Speaker 1: his money laundering organization, helped drug dealers put their money

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Speaker 1: into the financial system, and through a series of tests,

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Speaker 1: he determined that the controls at TD Bank were the

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Speaker 1: most lacks of any of the banks that he used,

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Speaker 1: and so he was able to bribe tellers to be

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Speaker 1: able to put large sacks of cash into the bank.

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Speaker 1: And the bank was supposed to follow federal regulations to

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Speaker 1: ask a lot more questions than they did. For instance,

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Speaker 1: if someone wants to put more than ten thousand dollars

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Speaker 1: in cash into the bank, the bank is supposed to

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Speaker 1: file a report called a currency transaction report, which alerts

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Speaker 1: the Treasury Department to this deposit, and in hundreds of instances,

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Speaker 1: TD Bank did not file accurate currency transaction reports about

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Speaker 1: the deposits made by David C and the people he

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Speaker 1: was working with in this criminal enterprise, and so that

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Speaker 1: allowed CIS organization to launder more than five hundred million dollars.

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Speaker 1: Even though the regulations were in place and the bank

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Speaker 1: knew what it was supposed to do, it failed to

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Speaker 1: do so. And more than two dozen people have now

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Speaker 1: been criminally charged as a result of the investigation stemming

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Speaker 1: from TD Bank. David C has pleaded guilty, he's awaiting sentencing,

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Speaker 1: and there's several bank insiders who've also been criminally charged

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Speaker 1: by the Justice Department.

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Speaker 4: All right, we really appreciate it. Thank you so much.

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Speaker 3: David David rikas Bloomberg Legal reporter joining us in that

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Speaker 3: Big Take.

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Speaker 4: Definitely check it out in the Bloomberg terminal.

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Speaker 3: Also Bloomberg dot com slash Big Take the money laundering

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Speaker 3: scams that cost TD Bank billions.

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Speaker 4: Wow, something you know.

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Speaker 6: Having learned about this on various television shows, The hard

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Speaker 6: part of being a criminals is laundering the money. I think,

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Speaker 6: I mean, how do you take your all those you know,

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Speaker 6: singles and fives and tens and put him into a

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Speaker 6: bank and write checks and do all that kind of

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Speaker 6: stuff atm cards.

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Speaker 4: Hey, you know, it's tough stuff. It's a lot of work.

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Speaker 4: It's a lot of work.

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Speaker 8: He needs to do that.

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Speaker 6: There you go.

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