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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is Master's in Business with Barry Ridholds on Bloomberg Radio.

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Speaker 1: This week on the podcast, yet another extra special guest,

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Speaker 1: Victor Kosla, founder CIO of the nineteen billion dollar Strategic

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Speaker 1: Value Partners. Victor has had a fascinating career stood up

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Speaker 1: the distressed debt department at Citibank before doing the same

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Speaker 1: thing at Merrill Lynch a few years later. He also

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Speaker 1: spent time at Cerebus and More Capital before launching his

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Speaker 1: own firm in two thousand and one. They do everything

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Speaker 1: from hard assets like real estate, infrastructure, aircraft, power plants,

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Speaker 1: to private debt event driven opportunities. Europe accounts for anyway

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Speaker 1: between a third and a half of their investments. They

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Speaker 1: have a number of businesses that they've taken over through

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Speaker 1: the debt side of the equation fifteen businesses with over

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Speaker 1: ninety thousand employees. Really just a fascinating person who has

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Speaker 1: seen the distressed debt business from day one. He was

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Speaker 1: there at the creation and has taken it to all

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Speaker 1: sorts of really interesting places. I found this conversation to

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Speaker 1: be absolutely fascinating if you're at all interested in things

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Speaker 1: like hard debt and what distressed asset buying is like,

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Speaker 1: and what it's like to take over a company not

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Speaker 1: through its equity but through its default to debt. I

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Speaker 1: think you'll find this to be an absolutely fascinating conversation.

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Speaker 1: I know I did with no further ado my discussion

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Speaker 1: with Strategic Value Partners Victor Cosla. Victor Cosla, welcome to Bloomberg.

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Speaker 2: Thank you, thanks for having me back.

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Speaker 1: So I skipped over a lot of your CV. We'll

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Speaker 1: get to some more details in a little while. Let's

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Speaker 1: just start with your educational background. Bachelor of Commerce with

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Speaker 1: honors from Delhi University, a master's in Economic from Vanderbilt,

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Speaker 1: and then an MBA from the University of Chicago. So

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Speaker 1: is it safe to say finance was always in the

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Speaker 1: career plans?

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Speaker 2: Oh gosh, yes, from the beginning, finance and business was

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Speaker 2: always in the career plans. Running a nineteen billion dollar

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Speaker 2: private equity opportunistic credit firm was not right. It doesn't

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Speaker 2: like that was the plan forty years.

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Speaker 1: You just tack into what was working and continue to

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Speaker 1: build on it. Talk a little bit about your professional experience,

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Speaker 1: because I find it absolutely fascinating. You're relatively young in

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Speaker 1: your career when you're at City Bank or was it

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Speaker 1: City Group. Then I keep track and you essentially created

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Speaker 1: their stress debt department. Tell us about that experience. Was

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Speaker 1: that twenty five thirty years ago? Maybe more?

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Speaker 2: It was more it was thirty years ago.

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Speaker 1: Nineteen eighties, early.

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Speaker 2: Nineties, right when it happened. Yes, I worked in all

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Speaker 2: the places Barry you described, right, the two places. I

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Speaker 2: think what's really interesting is I was there at the beginning,

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Speaker 2: at the creation of a loan trading business.

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Speaker 1: Like it did not exist at City or most of

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Speaker 1: Wall Street. It did before the early nineties. It did

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Speaker 1: not great novel.

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Speaker 2: Bloomingdale's filed for bankruptcy, SCITV filed for bankruptcy, and for

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Speaker 2: the first time, banks which owned the debt wanted to sell.

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Speaker 1: So they're sitting they're sitting on a lot of bed paper. Yeah,

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Speaker 1: and they don't really know what it's worth. They don't

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Speaker 1: know what to do with it. How do they come

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Speaker 1: to you and City and say, hey, we're stuck with

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Speaker 1: all this paper, and you know, we like to at

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Speaker 1: least have a partial recovery.

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Speaker 2: That was what really got it going. There was no price.

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Speaker 2: You had to kind of analyze it to come up

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Speaker 2: with a price, and at the same time there were

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Speaker 2: very few buyers more and more sellers, so the pricing

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Speaker 2: was really good where you could buy these loans.

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Speaker 1: So was City acting as a middleman looking for buyers

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Speaker 1: of distress dead or did someone like yourself have the

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Speaker 1: insight and say, hey, you know, at one hundred cents

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Speaker 1: on the dollar, this is junk, but at fifteen twenty cents,

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Speaker 1: there's some upside.

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Speaker 2: At City and at Merrill, I ran a proprietary trading business,

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Speaker 2: and proprietary trading is using the firm capital to kind

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Speaker 2: of buy it and also to distribute it to syndicated

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Speaker 2: more broadly at the same time. But I think if

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Speaker 2: I was to go back through my career, that moment

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Speaker 2: in time, you know when there is this big wave coming,

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Speaker 2: because it was the start of the high yield market.

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Speaker 2: The leverage loan market grew dramatically, you know, from two

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Speaker 2: hundred billion in the mid nineties to five trillion dollars today.

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Speaker 2: High yield and leverage loans right, and these deals which

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Speaker 2: never used to trade in the secondary market, they started

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Speaker 2: to change hands. I was there right at the beginning

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Speaker 2: of that big wave, and what has happened to me

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Speaker 2: career wise, is just riding that wave as it got bigger,

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Speaker 2: as it got more complicated, as it became US and Europe,

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Speaker 2: not just US. As it went from buying and selling

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Speaker 2: distress debt to going out and taking control of businesses,

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Speaker 2: operating them, and improving them. It was all set at

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Speaker 2: that moment of time in the early nineties.

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Speaker 1: So let's just stay in the early nineties at City

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Speaker 1: for a few minutes. At the time, you're early in

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Speaker 1: your career, you have some experience in an MBA when

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Speaker 1: you first started hearing that from banks, that hey, we

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Speaker 1: got all this Bloomingdale debt. Tell us what went through

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Speaker 1: your mind? Did you envision, Oh, you know there's a

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Speaker 1: market for here and there's an opportunity. How did you

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Speaker 1: look at this? And then how did you stand up

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Speaker 1: that whole distress debt department at.

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Speaker 2: City banks are wanting to sell. I have worked at biz,

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Speaker 2: Allen and Hamilton. I'm a strategic planning guy. I get

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Speaker 2: hired by City Bank in planning. I worked for a

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Speaker 2: really senior guy in the investment bank. This business is

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Speaker 2: just starting. I write a business plan for it.

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Speaker 1: Like a legitimate like it like it's a freestanding entity.

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Speaker 2: Like, you know, it's a business, we should get a startup. Yes,

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Speaker 2: it's a business. We should be bigger in, we should

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Speaker 2: grow in. And there were a couple of people inside

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Speaker 2: City Bank who were pioneers in trying to buy and

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Speaker 2: sell loans. Right, I get folded right into that group

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Speaker 2: after writing the business plan, and boy, we are off

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Speaker 2: to the races. Now. You know, when you look at

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Speaker 2: something like a Bloomingdale's, what you have to ask yourself

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Speaker 2: is Bloomingdale's is restructuring. It's going through a bankruptcy. It's

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Speaker 2: got the debt itself which banks want to sell. You

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Speaker 2: have to price it. And at this point in time,

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Speaker 2: the bankruptcy processes, the restructuring processes weren't that well developed. Right.

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Speaker 2: You had to really say, hey, it's a two year

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Speaker 2: stint in bankruptcy. We're going to cut costs. We'll make

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Speaker 2: this business much more efficient right as we do it.

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Speaker 2: And then you say what is the business worth?

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Speaker 1: And at the time they had a good good brands,

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Speaker 1: fantastic real estate locations, so there was some assets that

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Speaker 1: were salvageable. The question was do we continue as a

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Speaker 1: going concern or do we just liquid eate. You guys

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Speaker 1: have said, hey, let's reorganize this because there's still value here.

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Speaker 1: It's not We're not just going to sell it off for.

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Speaker 2: Parts exactly right. And by the way, most of the

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Speaker 2: businesses we invest in, there's much more value even like today,

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Speaker 2: there's much more value in fixing it and transforming it

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Speaker 2: and selling it for parts. But because these are really

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Speaker 2: good businesses which got levered, they got leveraged through these

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Speaker 2: leverage buyouts, right, But that valuation to be able to

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Speaker 2: come up with the valuation to be then able to

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Speaker 2: work in a restructuring process, bankruptcy process and say, hey,

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Speaker 2: I think at the end of this we are buying

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Speaker 2: debt at fifty cents, it could be worth eighteen ninety cents.

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Speaker 2: It could take two to four years to kind of

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Speaker 2: get there. That's how this business started. It was just

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Speaker 2: not well understood, even the fact that there was a

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Speaker 2: bankruptcy process which could be two years long or three

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Speaker 2: years long. Right, It was just not well understood in

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Speaker 2: the early nineties.

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Speaker 1: So I have so many questions for you about because

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Speaker 1: this is such a The nineties was such a fascinating era.

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Speaker 1: So first, was this like a small side project at city,

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Speaker 1: or did the higher up say, oh, Victor's onto something.

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Speaker 1: Let's put some capital into this and see where it goes.

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Speaker 1: Were what was the initial reaction within city.

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Speaker 2: And by the way, don't get me wrong place. It

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Speaker 2: wasn't just it it was It wasn't.

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Speaker 1: Just it's the You know, anytime we talk about Merrill

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Speaker 1: or City Ubs or Morgan, we're always talking about big teams. Yes,

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Speaker 1: a number of different people leading different departments. All that said,

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Speaker 1: you wrote the business plan, So how warmly was it

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Speaker 1: embraced or was it all right? Give the kid a

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Speaker 1: couple of bucks and let's see how far this goes.

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Speaker 2: It started out with give the kids a couple of bucks.

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Speaker 1: Uh huh.

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Speaker 2: And then what happened was like literally in the first

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Speaker 2: few weeks.

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Speaker 1: So not long at all, like immediate success.

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Speaker 2: Right, we are starting to get in the middle of

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Speaker 2: some of these secondary sales of debt. It's almost like liftoff,

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Speaker 2: right because the moment of time. You know, in those days, Barry,

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Speaker 2: a lot of debt was owned by Japanese banks.

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Speaker 1: I recall on banks, right, remember when everyone was terrified

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Speaker 1: they were going to buy Rockefeller Center and then take

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Speaker 1: over everything. Around the late eighties, early nineties. That was

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Speaker 1: peak Japan and they spent the next thirty years wandering

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Speaker 1: in the desert.

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Speaker 2: Well, they've had a tough few decades.

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Speaker 1: Right, although they seemed to be very much on the

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Speaker 1: on the comeback. But so immediately this looks successful.

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Speaker 2: Typically thirty percent of the market was owned by Japanese banks.

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Speaker 1: Really, that's a giant number.

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Speaker 2: In the early nineties right now. So now you have

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Speaker 2: these restructurings, you have these bankruptcies, and the Japanese banks

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Speaker 2: want to sell the debt huh, they drive it. Then

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Speaker 2: the European banks want to sell because US bankruptcy in

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Speaker 2: those days was not as well understood, right, And then boy,

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Speaker 2: it was almost like bankruptcy filings boom, debt for sale boom, boom,

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Speaker 2: and it just took off.

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Speaker 1: And my recollection is that when foreign banks come into

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Speaker 1: the US and buy up a bunch of assets or

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Speaker 1: debt or whatever it is, and when they start to

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Speaker 1: run into trouble back home, there's usually a change of leadership,

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Speaker 1: and whoever the new owner of the foreign banks are,

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Speaker 1: I tend to say, Hey, I didn't buy that junk.

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Speaker 1: You guys just get rid of this whatever you can

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Speaker 1: get for it. Hits a bid. They're very aggressive sellers

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Speaker 1: or am am I misremembering.

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Speaker 2: They are aggressive sellers, and foreign banks, foreign institutions tend

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Speaker 2: to be more aggressive. But there's also a very you know,

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Speaker 2: there's also very economic reason for it, right, because when

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Speaker 2: you're in a restructuring the debt you own has defaulted,

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Speaker 2: and the central bank which governs you, like the one

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Speaker 2: in Japan or like the one in the United States,

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Speaker 2: they make you take reserves mark it down.

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Speaker 1: Right, so you write it down to zero, So whatever

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Speaker 1: you get for it is practically found money. You've already

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Speaker 1: taken it.

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Speaker 2: So there's a very good economic reason why, you know, short,

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Speaker 2: they're far away, they don't quite understand what's going on.

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Speaker 1: It's a small part of their book right now.

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Speaker 2: So obvious reason, right, But then also the economic reason that, hey,

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Speaker 2: I have it marked down, I have all these nonfer

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Speaker 2: forming loans in my balance sheet. It's creating a drag

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Speaker 2: the way equity analysts look at my balance sheet, I

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Speaker 2: should be selling, I should be getting out right. So,

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Speaker 2: and by the way, it continues to today. If you have

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Speaker 2: a bankruptcy filing, you have a restructuring right, they will

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Speaker 2: sell the debt they'll sell it at a price which

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Speaker 2: is probably too low. But there's a very sound economic

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Speaker 2: reason for the banks or the clos to want to sell.

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Speaker 1: They have a very different set of priorities than a

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Speaker 1: pure invested buyer.

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Speaker 2: Exactly right. But so Barry, can I tell you, but

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Speaker 2: go back, go back to one thought, though, I wanted

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Speaker 2: to make sure it just came through. Early nineties was

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Speaker 2: the start of the modern high yield leverage buyout business

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Speaker 2: done at scale. It was the start of the high

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Speaker 2: yield business exploding dramatically in size to where it is

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Speaker 2: today and still growing, right. And it was the start

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Speaker 2: of the secondary market to kind of buy and sell

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Speaker 2: kind of pieces of debt. And what I was lucky

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Speaker 2: enough to be in the early nineties was I was

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Speaker 2: one of the first people in this business, right overseeing

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Speaker 2: a trading desk like I did at Merrill Lynch.

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Speaker 1: So that was wide open white space. It was virgin snow.

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Speaker 1: It was very new. How long did you stay at

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Speaker 1: City before you left for other places?

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Speaker 2: I was working at City Bank for a couple of years,

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Speaker 2: working on kind of the secondary prop investing trading site,

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Speaker 2: and then I was hired by Merrill to start the.

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Speaker 1: Business Previously we were talking about your experience at the

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Speaker 1: very beginning of the distressed debt industry building the desk

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Speaker 1: at city. You join Merrill Lynch in ninety three and

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Speaker 1: start building their distressed prop trading businesses, which became wildly successful,

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Speaker 1: and you're there from ninety three to ninety eight, right

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Speaker 1: in the middle of the nineties. Tell us a little

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Speaker 1: bit about that experience. What was it like at Merrill

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Speaker 1: in the nineteen nineties.

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Speaker 2: Merril never really had very much of a proprietary culture

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Speaker 2: right as a firm, It's just not. In the nineties

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Speaker 2: it was very much a brokerage house with a growing

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Speaker 2: expanding investment bank. It wasn't really a proprietary investing trading

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Speaker 2: culture right in those Yes.

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Speaker 1: So what made them say, hey, let's go, you know,

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Speaker 1: let's go pull Victor out of city and set up

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Speaker 1: a prop desk.

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Speaker 2: The old fashioned rationale making money?

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Speaker 1: They so little fomo they saw city. Hey, since when

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Speaker 1: a city so big in distress debt they seem to

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Speaker 1: be doing really well. We need to have a little

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Speaker 1: bit of that for ourselves. So is it that simple?

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Speaker 2: It was early people could see the explosive growth taking place,

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Speaker 2: and as somebody who was a well known commodity, well

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Speaker 2: known player in that business already, right, they hired me

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Speaker 2: to go run it. So when I started at Meryl,

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Speaker 2: it was one of me and they said, okay, Victor,

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Speaker 2: here's one hundred million dollars. Right, it's kind of where

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Speaker 2: I started in nineteen ninety three.

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Speaker 1: Right. Was that a lot of money back then?

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Speaker 2: Or it was it was a lot of money back then,

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Speaker 2: so in ninety Funny, I.

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Speaker 1: Know that sounds silly because it's a little hard to

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Speaker 1: put thirty four years into context, for thirty years into context,

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Speaker 1: But like one hundred million dollars today, you know that's

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Speaker 1: a small account at a lot of shops. Back in

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Speaker 1: the early nineties, one hundred million dollars.

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Speaker 2: Was real cash. So what they and what they did

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Speaker 2: was they encouraged me. So I had a couple of

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Speaker 2: very supportive people I worked with. You know, success begets

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Speaker 2: more success. So we ended up getting the resources to

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Speaker 2: hire a bigger and bigger team, ended up setting up

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Speaker 2: a business in London. We were literally one of the

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Speaker 2: first people into Europe buying and selling debt, investing in

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Speaker 2: debt in Europe, and then in ninety seven set up

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Speaker 2: a business in Japan to buy debt from Japanese banks

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Speaker 2: in Japan. Right, So for me at Merrill, from that

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Speaker 2: one hundred million and nineteen ninety three, by the time

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Speaker 2: I left in early ninety eight, we had about two

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Speaker 2: billion dollars of proprietary capital and I had forty people

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Speaker 2: four zero people working with me in New York, in London,

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Speaker 2: in Tokyo.

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Speaker 1: Merrill also had an office in Hong Kong as well.

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Speaker 1: Were you buying debt out of Hong Kong also?

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Speaker 2: I was, now I was starting to dabble in it.

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Speaker 2: This was before the Thai bot the Thigh crisis eight, right,

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Speaker 2: So it was before that I was starting to look

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Speaker 2: at it. Yeah, but it wasn't kind of the focus.

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Speaker 2: It was really US era up Japan.

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Speaker 1: So one hundred million to two billion in five years,

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Speaker 1: that's a giant lift. That's a big expansion. Your next

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Speaker 1: couple of stops along the way were at some pretty

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Speaker 1: well regarded firms. Sarah Is Capital, you ran a joint

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Speaker 1: venture doing Japanese debt with more. Tell us a little

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Speaker 1: bit about your experiences away from the big brokerage firms

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Speaker 1: and some of these more nimble independent shops.

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Speaker 2: You know, the nimble independent shops had a lot more

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Speaker 2: money than the two billion dollars.

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Speaker 1: Really, I never would have guessed that what I.

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Speaker 2: Was overseeing at Merrill length right, But you know what

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Speaker 2: I found was, I think it's sobers you had a

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Speaker 2: very strong, very well known brand at that time. More

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Speaker 2: Capital was much more institutional in how it worked. It

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Speaker 2: had much more of a structure and process around it.

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Speaker 2: And I and I worked with Cypress, I worked with

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Speaker 2: more Capital between them for a total of about four years.

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Speaker 2: It was my first foray from working in a proprietary

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Speaker 2: trading business, which is what I did at Merrill, to

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Speaker 2: working on the buy side. Just the learning what it

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Speaker 2: takes to actually raise money, what it what it means

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Speaker 2: to actually build a really strong infrastructure, a finance, operations,

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Speaker 2: legal team. Right, my first foray out of merrile into

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Speaker 2: the buy side and learning kind of all these different

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Speaker 2: kind of skills, and those were four incredibly growth orientedy

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Speaker 2: as for me.

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Speaker 1: I could I can imagine it and for listeners who

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Speaker 1: may not be familiar with the distinction between buyside and

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Speaker 1: sell side. When you're at City or you're at Merrill,

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Speaker 1: you're trading on behalf of either the firms fund or

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Speaker 1: on behalf of clients. And we call that the sell

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Speaker 1: side because you have to sell that product to clients.

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Speaker 1: The buy side is Cerebrus or more have their own

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Speaker 1: pile of assets from their limited partners, and you are

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Speaker 1: investing in trading on behalf of the firm itself, And

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Speaker 1: so it's a little bit different in you're not dealing

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Speaker 1: with the clients at somebody else's job. You're investing the

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Speaker 1: money on behalf of of the firm. Ultimately, that leads

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Speaker 1: you to say, hey, this buyside thing seems like a

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Speaker 1: pretty good structure for making investments. What led you to say,

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Speaker 1: I think I could launch my own shop and stand

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Speaker 1: something up on behalf of myself instead of working for

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Speaker 1: someone else.

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Speaker 2: It takes a lot of confidence, a little bit woodspot right.

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Speaker 2: I was never lacking in that right.

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Speaker 1: So, but to be fair, you know, there's Kutsman, there's kutzpah.

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Speaker 1: You built a great desk at City, you built a

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Speaker 1: great desk at Merrill, you generate a lot of profits

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Speaker 1: for more and Serabis, So it wasn't a big leap

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Speaker 1: of faith. Hey can I do this? You obviously had

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Speaker 1: a great track record, so standing up your own firm

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Speaker 1: was why not why not be in charge? Why not

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Speaker 1: run my own ship?

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Speaker 2: In those days, there were ten fifteen people who were

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Speaker 2: probably well known in this business, and I was one

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Speaker 2: of the ten fifteen people. Right by the way, Well,

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Speaker 2: when I think about kind of more Capital, huh, what

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Speaker 2: a great firm, by the way.

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Speaker 1: Right, legendary founder, but just great track record.

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Speaker 2: All that, but also just a great firm. Right. But

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Speaker 2: when I think about kind of why start something, you know,

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Speaker 2: when I really cut through it, I really wanted to

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Speaker 2: work for myself. Understandable, right, So when we started Strategic

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Speaker 2: Value Partners, More Capital gave us one hundred million dollars system.

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Speaker 1: No, no kidding. So that's quite a vote of confidence.

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Speaker 1: You're not, you know, if Moore is giving you that much,

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Speaker 1: the same amount that you started with it at Merrill.

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Speaker 1: So so the firm is now nineteen billion dollars. When

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Speaker 1: you launched in two thousand and one, what were you

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Speaker 1: launching with Moore's one hundred plus? How much additional capital

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Speaker 1: did you raise?

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Speaker 2: Ten million?

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Speaker 1: Really, so they were ninety percent of what you had.

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Speaker 2: You know, we were launching the firm and the markets

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Speaker 2: crash in one Sure you were early days of that

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Speaker 2: markets crash and as a result of that crash and

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Speaker 2: markets we think we are going to launch with three

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Speaker 2: four hundred million, and we launched with one hundred and

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Speaker 2: ten million.

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Speaker 1: At the same time, you launch into a let's call

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Speaker 1: it a target rich field, there had to be a

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Speaker 1: lot of opportunity.

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Speaker 2: You know. The performance numbers out returns were just kind

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Speaker 2: of really great because it was a target rich world,

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Speaker 2: and that kind of set us up when I think

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Speaker 2: about those early years, right and I think about kind

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Speaker 2: of the firm we have become today.

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Speaker 1: So let's start with what you began with. How many

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Speaker 1: people did you launch with? How many you had two clients?

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Speaker 1: It sounds like, yes, one hundred and ten. How many

384
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Speaker 1: How big was the staff on you on it was

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Speaker 1: eight people, eight and today you're a little bigger than that.

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Speaker 2: We've got over two hundred people.

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Speaker 1: I mean, that's a substantial firm. Not only that, when

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Speaker 1: you launched it was primarily distressed debt. You've expanded into

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Speaker 1: so many different areas. Tell us a little bit about

390
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Speaker 1: that growth, especially the first few years, and what led

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Speaker 1: you to opening another London office in two thousand and four.

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Speaker 2: When we started, we've focused on distressed debt and restructurings

393
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Speaker 2: in two thousand and one, two thousand and two, that's

394
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Speaker 2: kind of that was the focus.

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Speaker 1: Well, what sort of companies was it was a lot

396
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Speaker 1: of the dot coms that had imploded, or was it

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Speaker 1: just generally across the economy.

398
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Speaker 2: You were in. We were in the middle of a recession.

399
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Speaker 2: M hm. WorldCom, if you remember, had had a file

400
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Speaker 2: for bankruptcy as there were a couple of big energy

401
00:24:22,320 --> 00:24:23,760
Speaker 2: companies in trouble.

402
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Speaker 1: And Ron and Ron.

403
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Speaker 2: So you know, we were never a dot com kind

404
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Speaker 2: of person. And even today we're really not a tech

405
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Speaker 2: or a software focused firm, right. We are very much

406
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Speaker 2: in old economy businesses, service businesses, consumer brands. That's very

407
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Speaker 2: much our focus as a firm. So in two thousand

408
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Speaker 2: and two, when we start, it's not the dot com

409
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Speaker 2: debrivia looking through, it's the recession and all the problems

410
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Speaker 2: it's caused in all these old economy businesses.

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Speaker 1: Huh. Really interesting. So you start with distressed debt, what's

412
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Speaker 1: the next division you, for lack of a better word,

413
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Speaker 1: opportunistic credit lending, money taking control. What were the next

414
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Speaker 1: businesses you added?

415
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Speaker 2: When we did distress that we were focused on buying

416
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Speaker 2: debt and restructuring it into equity, being on kind of

417
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Speaker 2: boards of directors, trying to work with the businesses. But

418
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Speaker 2: we were mostly had minority equity positions because you when

419
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Speaker 2: you all you have is a hedge fund parry, right,

420
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Speaker 2: you need liquidity, right, you can't do private equity.

421
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Speaker 1: You're not locking stuff up for forever.

422
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Speaker 2: No, really, you can't write. So the early years were

423
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Speaker 2: very much focused on this more liquid side of the world,

424
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Speaker 2: the distressed debt side of the world. And by the way,

425
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Speaker 2: we had success that fund of We started with one

426
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Speaker 2: hundred and ten million dollars. By the time two thousand

427
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Speaker 2: and eight came around, we had about five billion dollars.

428
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Speaker 1: Really, that's a big that's a big number.

429
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Speaker 2: We had some really good success right in those years

430
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Speaker 2: doing what we do. But you know, what we found

431
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Speaker 2: was two thousand and eight was a really good.

432
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Speaker 1: You know I talked target rich environment.

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Speaker 2: It was in nineteen ninety one, we were there. I

434
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Speaker 2: was there on day one as the business of buying

435
00:26:25,600 --> 00:26:30,960
Speaker 2: and selling secondary debt, investing in secondary debt took off.

436
00:26:31,760 --> 00:26:35,320
Speaker 2: In two thousand and eight, there was another one of

437
00:26:35,320 --> 00:26:40,880
Speaker 2: those really dramatic changes. So what we told ourselves was Hey,

438
00:26:41,119 --> 00:26:45,199
Speaker 2: this is a really great target rich environment. Sure, but

439
00:26:45,280 --> 00:26:51,880
Speaker 2: the business has changed. Our view was, Hey, these distress

440
00:26:52,000 --> 00:26:56,760
Speaker 2: debt cycles, they only happen every two years out of ten.

441
00:26:57,520 --> 00:27:01,080
Speaker 2: It's not like a business you can do every right.

442
00:27:01,119 --> 00:27:06,280
Speaker 2: It's a super cyclical business. So as a firm in

443
00:27:06,320 --> 00:27:09,480
Speaker 2: two thousand and eight, we started to go down a

444
00:27:09,560 --> 00:27:14,639
Speaker 2: different path. We said, Okay, there are some really great

445
00:27:14,720 --> 00:27:20,320
Speaker 2: businesses which have had a really rough time with bankruptcies,

446
00:27:20,359 --> 00:27:25,240
Speaker 2: with restructurings. There's a lot of low hanging operational fruit.

447
00:27:26,320 --> 00:27:30,360
Speaker 2: Let's go out and buy into these businesses and take control.

448
00:27:31,160 --> 00:27:34,400
Speaker 1: Now you're talking about doing this through debt, not.

449
00:27:34,440 --> 00:27:39,159
Speaker 2: Equity exactly, but buying enough debt to own fifty one

450
00:27:39,280 --> 00:27:43,800
Speaker 2: percent or more of the company, becoming a private equity investor,

451
00:27:44,000 --> 00:27:48,800
Speaker 2: and then driving an operational transformation in the business.

452
00:27:49,000 --> 00:27:52,000
Speaker 1: So it's so funny different, it's so funny you talk

453
00:27:52,080 --> 00:27:56,399
Speaker 1: about this. I vividly remember having a conversation with a

454
00:27:56,480 --> 00:28:01,919
Speaker 1: friend who was originally from Canada relocated to the Grand Caymans,

455
00:28:02,440 --> 00:28:05,639
Speaker 1: and the first time I learned that it's got to

456
00:28:05,680 --> 00:28:09,960
Speaker 1: be ten fifteen years ago of an investor taking control

457
00:28:10,040 --> 00:28:13,119
Speaker 1: of an asset through the debt, not the equity was

458
00:28:13,160 --> 00:28:16,640
Speaker 1: there's a giant Ritz Carlton on the Grand Cayman. Oh yes,

459
00:28:17,000 --> 00:28:20,960
Speaker 1: and the under the owner was constantly floating notes and

460
00:28:21,040 --> 00:28:25,000
Speaker 1: during the financial crisis he ran into trouble and a

461
00:28:25,000 --> 00:28:28,680
Speaker 1: lot of big banks own that paper and somebody very

462
00:28:28,720 --> 00:28:32,280
Speaker 1: cleverly picked up a lot of that debt pennies on

463
00:28:32,359 --> 00:28:35,879
Speaker 1: the dollar ended up taking over that whole thing. It

464
00:28:35,920 --> 00:28:38,280
Speaker 1: was eye opening, like, oh, you can control a company,

465
00:28:38,520 --> 00:28:40,520
Speaker 1: not just through equity, through debt.

466
00:28:40,840 --> 00:28:44,840
Speaker 2: But you know, but if you just take control, you

467
00:28:44,960 --> 00:28:48,680
Speaker 2: could be the proverbial dog who chases that ice cream truck.

468
00:28:48,880 --> 00:28:50,120
Speaker 1: What do you do when you catch it?

469
00:28:50,240 --> 00:28:54,880
Speaker 2: Yes, you know, you need these operating skills to go

470
00:28:54,960 --> 00:28:59,360
Speaker 2: out and improve and transform these businesses. Right, So what

471
00:28:59,480 --> 00:29:02,160
Speaker 2: we start to do in two thousand and eight was

472
00:29:02,200 --> 00:29:05,480
Speaker 2: not just to take control, but to take control in

473
00:29:05,560 --> 00:29:10,160
Speaker 2: our very hands on way. Right. We strengthen management, we

474
00:29:10,320 --> 00:29:15,360
Speaker 2: build new business plans, we call them value creation plans

475
00:29:15,400 --> 00:29:19,680
Speaker 2: in our world, and we try and drive fundamental change

476
00:29:19,720 --> 00:29:23,080
Speaker 2: even sometimes in these businesses. So for us as a firm,

477
00:29:23,520 --> 00:29:28,520
Speaker 2: we went from buying and investing in debt after two

478
00:29:28,600 --> 00:29:33,120
Speaker 2: thousand and eight to taking control of businesses. We went

479
00:29:33,200 --> 00:29:36,480
Speaker 2: from a firm in two thousand and four even we said,

480
00:29:36,480 --> 00:29:41,680
Speaker 2: look there's this great growing opportunity in Europe. We set

481
00:29:41,760 --> 00:29:45,640
Speaker 2: up a London office and our London investment teams today

482
00:29:45,840 --> 00:29:49,520
Speaker 2: are almost the same size as the US teams. And

483
00:29:49,600 --> 00:29:53,360
Speaker 2: what we also did over those years was we said, hey,

484
00:29:53,400 --> 00:29:57,680
Speaker 2: look there are all these real assets airplanes, power plants,

485
00:29:57,800 --> 00:30:02,040
Speaker 2: real estate, toll roads. Right, these are all going through

486
00:30:02,560 --> 00:30:06,560
Speaker 2: these kind of restructurings, these kind of problems with their

487
00:30:06,600 --> 00:30:10,840
Speaker 2: capital structure. So as a firm, starting in two thousand

488
00:30:10,880 --> 00:30:15,080
Speaker 2: and eight, we went from our roots in value in

489
00:30:15,200 --> 00:30:20,160
Speaker 2: distress debt, right, we went into control, We went into

490
00:30:20,360 --> 00:30:24,200
Speaker 2: kind of real assets, and we started lending money to people,

491
00:30:24,800 --> 00:30:29,800
Speaker 2: not direct lending, much more the higher risk, higher return lending. Right.

492
00:30:30,040 --> 00:30:33,240
Speaker 2: But as a firm, we've gone through this journey from

493
00:30:33,320 --> 00:30:36,000
Speaker 2: two thousand and eight, that transformation.

494
00:30:35,480 --> 00:30:39,520
Speaker 1: Huh, really quite fascinating. Let's continue talking about some of

495
00:30:39,560 --> 00:30:46,080
Speaker 1: these operating businesses. Ninety thousand employees, fifteen different businesses. This

496
00:30:46,240 --> 00:30:49,400
Speaker 1: is more than just buying the bare debt of a

497
00:30:49,440 --> 00:30:53,440
Speaker 1: company that's hit a hard time. You are pretty much

498
00:30:53,640 --> 00:30:59,480
Speaker 1: fully taking over and running and operating substantial companies. Tell

499
00:30:59,560 --> 00:31:03,360
Speaker 1: us how came about and how did SVP develop the

500
00:31:03,400 --> 00:31:07,560
Speaker 1: expertise to effectively become operators and managers.

501
00:31:07,880 --> 00:31:10,480
Speaker 2: When you have a company which kind of hits a

502
00:31:10,600 --> 00:31:16,440
Speaker 2: really rough patch, you know, leverage buyouts. By definition, there's leverage.

503
00:31:17,160 --> 00:31:21,440
Speaker 2: They hit a rough patch, they have really big financial problems.

504
00:31:21,600 --> 00:31:28,080
Speaker 2: And when that happens, even really good businesses Barry Shick, right,

505
00:31:28,440 --> 00:31:30,720
Speaker 2: you know, some of the businesses we are invested in.

506
00:31:31,200 --> 00:31:34,160
Speaker 2: We own a toll road in Texas today, a toll

507
00:31:34,280 --> 00:31:40,720
Speaker 2: road between Austin and San Antonio. We just bought Hornblower,

508
00:31:41,000 --> 00:31:44,680
Speaker 2: which is we took operate majority control of it, which

509
00:31:44,720 --> 00:31:48,760
Speaker 2: is a ferry business, the New York City Ferries, the

510
00:31:48,800 --> 00:31:53,520
Speaker 2: Statue of Liberty ferry, right, it is. But all these businesses,

511
00:31:54,160 --> 00:31:55,959
Speaker 2: these are good businesses.

512
00:31:55,560 --> 00:31:57,400
Speaker 1: But they take on a lot of debt. There's no

513
00:31:57,560 --> 00:31:57,960
Speaker 1: room for.

514
00:31:58,080 --> 00:32:02,680
Speaker 2: Error, and things and everything shakes. You know. Often we

515
00:32:02,840 --> 00:32:07,840
Speaker 2: find some of the really good management teams they get frustrated.

516
00:32:07,920 --> 00:32:11,560
Speaker 2: Some of them leave, right because now you've got so

517
00:32:11,640 --> 00:32:14,920
Speaker 2: much leverage. You've got a good business, but so much leverage,

518
00:32:14,920 --> 00:32:17,280
Speaker 2: and you can't figure out how to how you're going

519
00:32:17,360 --> 00:32:20,000
Speaker 2: to pop your head up about the surface. Right. So

520
00:32:20,200 --> 00:32:23,360
Speaker 2: as a result of that, we find that when we

521
00:32:23,440 --> 00:32:27,840
Speaker 2: are investing short, we have to recapitalize it, so the

522
00:32:27,960 --> 00:32:30,520
Speaker 2: leverage numbers go down dramatically.

523
00:32:30,840 --> 00:32:33,400
Speaker 1: So let me ask you a question about what's just

524
00:32:33,440 --> 00:32:36,440
Speaker 1: been going on over the past couple of years. If

525
00:32:36,480 --> 00:32:40,320
Speaker 1: you're a leverage company and that debt is you know,

526
00:32:40,400 --> 00:32:43,360
Speaker 1: what used to be libor plus, it's no longer libor

527
00:32:43,440 --> 00:32:48,040
Speaker 1: now it's the new measure. Central banks raise interest five

528
00:32:48,120 --> 00:32:51,479
Speaker 1: hundred and twenty five basis points. Suddenly what was a

529
00:32:51,560 --> 00:32:56,280
Speaker 1: manageable amount of debt might become unmanageable. How has the

530
00:32:56,320 --> 00:33:02,240
Speaker 1: past few years of rapidly rising rates acted these leverage businesses.

531
00:33:02,720 --> 00:33:07,400
Speaker 2: It has been really tough for them, right. You know,

532
00:33:07,520 --> 00:33:11,440
Speaker 2: you borrowed money when interest rates were zero and you

533
00:33:11,480 --> 00:33:15,240
Speaker 2: were paying all in five percent. Right now you're paying

534
00:33:15,320 --> 00:33:19,080
Speaker 2: ten percent twelve percent, which is a lot of money, right,

535
00:33:19,160 --> 00:33:22,800
Speaker 2: and you are very levered. And by the way, these

536
00:33:22,920 --> 00:33:27,760
Speaker 2: old economy businesses they are not having that same growth

537
00:33:27,920 --> 00:33:29,040
Speaker 2: like tech or software.

538
00:33:29,280 --> 00:33:32,760
Speaker 1: They're not AI. They're at fery businesses and toll roads.

539
00:33:33,200 --> 00:33:36,880
Speaker 1: That's steady income, but you're not looking at double digit growth.

540
00:33:37,000 --> 00:33:40,680
Speaker 2: So you can't really grow into your capital structure. Right,

541
00:33:40,800 --> 00:33:45,160
Speaker 2: So easily you married the two things together. Growth, but

542
00:33:45,720 --> 00:33:49,840
Speaker 2: slow growth, modest growth in cash flow or EPA with

543
00:33:50,080 --> 00:33:53,440
Speaker 2: much higher interest rates, like in terms of what you

544
00:33:53,560 --> 00:33:56,200
Speaker 2: have to do. And by the way, remember some of

545
00:33:56,240 --> 00:33:59,560
Speaker 2: these businesses went through COVID where they had to take

546
00:33:59,600 --> 00:34:02,800
Speaker 2: on even more debt to kind of tide over COVID.

547
00:34:02,880 --> 00:34:05,360
Speaker 1: Right, that was a double WHAMMI COVID and then the

548
00:34:05,440 --> 00:34:06,080
Speaker 1: rate increase.

549
00:34:06,200 --> 00:34:10,920
Speaker 2: And now what is happening is there are maturities coming due.

550
00:34:11,280 --> 00:34:14,960
Speaker 2: There's a large maturity wall in twenty five, twenty six,

551
00:34:15,040 --> 00:34:18,720
Speaker 2: twenty seven. By the way, by our reckoning, there's almost

552
00:34:18,719 --> 00:34:23,200
Speaker 2: two trillion of that five trillion of high yield matures

553
00:34:23,280 --> 00:34:25,000
Speaker 2: in the next three and a half years.

554
00:34:25,160 --> 00:34:28,720
Speaker 1: Really, so I heard an expression a debt trader used,

555
00:34:29,200 --> 00:34:34,080
Speaker 1: survive till twenty five. You're suggesting, hey, twenty five isn't

556
00:34:34,080 --> 00:34:36,000
Speaker 1: good enough. You're gonna have to get through twenty six

557
00:34:36,080 --> 00:34:38,440
Speaker 1: and twenty seven exactly. Huh.

558
00:34:38,480 --> 00:34:41,720
Speaker 2: It's creating issues. By the way, this is not like, oh,

559
00:34:41,760 --> 00:34:43,239
Speaker 2: it's going to happen next year.

560
00:34:44,239 --> 00:34:45,280
Speaker 1: It's happening already.

561
00:34:45,360 --> 00:34:47,280
Speaker 2: It's been happening for the last eighteen months.

562
00:34:47,360 --> 00:34:50,160
Speaker 1: Well. Well, given the high rates, that makes perfect sense.

563
00:34:50,640 --> 00:34:56,359
Speaker 2: Our pace of investing has picked up substantially. Our pipeline

564
00:34:56,560 --> 00:35:00,600
Speaker 2: has almost quadrupled over the last eighteen months. This is

565
00:35:00,640 --> 00:35:04,520
Speaker 2: happening right now, Barry. Don't get the wrong idea. I'm

566
00:35:04,520 --> 00:35:06,640
Speaker 2: not trying to tell you there's some crash or something.

567
00:35:06,880 --> 00:35:07,839
Speaker 2: We don't think there is.

568
00:35:07,960 --> 00:35:11,560
Speaker 1: You seem to be enthusiastic about the opportunities ahead of you,

569
00:35:12,200 --> 00:35:15,520
Speaker 1: not that the world is coming to an end, but rather, Hey,

570
00:35:15,560 --> 00:35:17,200
Speaker 1: this is going to be a great period of time

571
00:35:17,280 --> 00:35:20,920
Speaker 1: if you're an opportunistic distress debt investor.

572
00:35:21,080 --> 00:35:24,120
Speaker 2: Or if you are in a special situation's private equity.

573
00:35:24,239 --> 00:35:28,200
Speaker 1: So let's talk about that. How do you define special situations?

574
00:35:28,760 --> 00:35:31,880
Speaker 2: You know, we are in the business of trying to

575
00:35:32,120 --> 00:35:35,960
Speaker 2: buy businesses at a good price, and then we're in

576
00:35:36,080 --> 00:35:40,960
Speaker 2: the business of trying to improve them, sometimes even transform

577
00:35:41,080 --> 00:35:45,200
Speaker 2: them operationally, right because they have been undermanaged with everything

578
00:35:45,239 --> 00:35:51,560
Speaker 2: I'd described to us, that's you know, that combination. You

579
00:35:51,600 --> 00:35:55,239
Speaker 2: can't really if somebody is having an auction of a

580
00:35:55,320 --> 00:35:58,279
Speaker 2: company and they have hired Goldman Sachs on the re

581
00:35:58,400 --> 00:36:02,080
Speaker 2: lane to sell it, it's very hard to buy something

582
00:36:02,120 --> 00:36:05,200
Speaker 2: at a really good price. Right, You've got to be

583
00:36:05,280 --> 00:36:07,880
Speaker 2: able to buy it either you buy it through the

584
00:36:08,000 --> 00:36:12,280
Speaker 2: debt right where you buy it through by buying debt

585
00:36:12,280 --> 00:36:16,839
Speaker 2: at a discount, or you buy it bi laterally in

586
00:36:16,880 --> 00:36:21,560
Speaker 2: a process without a process, right, the company has enough

587
00:36:21,640 --> 00:36:25,320
Speaker 2: issues and there's a way to just negotiate a price bilaterally.

588
00:36:25,800 --> 00:36:30,759
Speaker 2: So I think for us, the opportunity set today is

589
00:36:31,400 --> 00:36:34,319
Speaker 2: to kind of buy it well, but that is just

590
00:36:34,400 --> 00:36:39,880
Speaker 2: step one. The step two is to go strengthen the

591
00:36:39,960 --> 00:36:43,960
Speaker 2: management team, build a new business plan, often to inject

592
00:36:44,080 --> 00:36:45,440
Speaker 2: more capital into.

593
00:36:45,239 --> 00:36:48,360
Speaker 1: The restructure so it's not carrying all that debt.

594
00:36:48,880 --> 00:36:52,839
Speaker 2: Fourteen of the fifteen businesses we control have more employees

595
00:36:52,880 --> 00:36:54,239
Speaker 2: today than when we took over.

596
00:36:54,440 --> 00:36:55,800
Speaker 1: Wow, that pretty impressive.

597
00:36:56,280 --> 00:36:58,480
Speaker 2: But I think it's so this is not about just

598
00:36:58,600 --> 00:37:03,799
Speaker 2: cutting about kind of investing and looking to transform these

599
00:37:03,840 --> 00:37:08,919
Speaker 2: businesses which have been undermanaged, and those together is what

600
00:37:09,239 --> 00:37:14,120
Speaker 2: in our world, in our mind, constitute special situation private equity.

601
00:37:14,239 --> 00:37:18,040
Speaker 1: Let's talk a little bit about hard assets. You mentioned

602
00:37:18,080 --> 00:37:25,200
Speaker 1: infrastructure like ferrying, toll roads. Let's talk about real estate, airplanes,

603
00:37:25,239 --> 00:37:29,480
Speaker 1: and power plants. I would think power plants would be

604
00:37:29,640 --> 00:37:33,560
Speaker 1: very tied to the cost of energy plus whatever their

605
00:37:33,680 --> 00:37:40,880
Speaker 1: costs are for modernizing and reducing pollutants and their output.

606
00:37:41,920 --> 00:37:44,319
Speaker 1: Tell us about what you look at when you look

607
00:37:44,360 --> 00:37:46,240
Speaker 1: at a buying a power plant.

608
00:37:46,520 --> 00:37:49,759
Speaker 2: Yeah, you know, for us, about sixty percent of what

609
00:37:49,800 --> 00:37:57,759
Speaker 2: we do is corporate investing. So these industrial businesses, service businesses.

610
00:37:57,239 --> 00:38:02,279
Speaker 1: Right fold, economy, stolid, yeah, you know, ready steady businesses

611
00:38:02,640 --> 00:38:04,359
Speaker 1: that have run into a little trouble.

612
00:38:04,680 --> 00:38:09,760
Speaker 2: With generally very good market shares. Right. Four zero percent

613
00:38:09,840 --> 00:38:11,680
Speaker 2: of what we do are real assets.

614
00:38:12,080 --> 00:38:15,600
Speaker 1: Oh really that much? That's giant. So give us some

615
00:38:15,680 --> 00:38:21,120
Speaker 1: examples of First of all, I'm fascinated by hard assets

616
00:38:21,200 --> 00:38:26,560
Speaker 1: like airplanes. How do people get into trouble owning either

617
00:38:26,600 --> 00:38:28,080
Speaker 1: a single plane or a fleet of plane?

618
00:38:28,280 --> 00:38:31,399
Speaker 2: Can I tell you? Can we even start with infrastructure, right,

619
00:38:31,800 --> 00:38:38,160
Speaker 2: because barrye the prevailing view would be infrastructure, toll roads, ferries,

620
00:38:38,280 --> 00:38:42,600
Speaker 2: all these kind of businesses. They are really you've got

621
00:38:42,600 --> 00:38:47,280
Speaker 2: a monopoly or adopoly, right, they are. They they should

622
00:38:47,280 --> 00:38:51,799
Speaker 2: be really strong, they should be good growers, and they

623
00:38:51,800 --> 00:38:56,880
Speaker 2: should be steady. Eddy, And infrastructure today is bought by

624
00:38:57,440 --> 00:39:01,480
Speaker 2: sovereign funds, big pension funds with a view that it

625
00:39:01,640 --> 00:39:06,799
Speaker 2: is very steady seven eight nine percent kind of returns. Right,

626
00:39:07,040 --> 00:39:08,360
Speaker 2: that's the prevailing.

627
00:39:08,000 --> 00:39:11,080
Speaker 1: View, assuming you're purching purchasing it at the right price.

628
00:39:11,239 --> 00:39:15,560
Speaker 2: Right. Now, what has happened in infrastructure is there were

629
00:39:15,600 --> 00:39:20,280
Speaker 2: a couple of very aggressive people who bought infrastructure toll

630
00:39:20,400 --> 00:39:25,160
Speaker 2: roads with eighty ninety percent debt, right, not forty percent,

631
00:39:25,239 --> 00:39:28,160
Speaker 2: fifty percent, eighty ninety percent debt.

632
00:39:28,440 --> 00:39:29,520
Speaker 1: No room for error there.

633
00:39:30,000 --> 00:39:34,799
Speaker 2: And if you had if you hit COVID, you or

634
00:39:34,840 --> 00:39:38,799
Speaker 2: if you hit a financial recession, it's really hard to

635
00:39:39,160 --> 00:39:42,400
Speaker 2: dig yourself out of eighteen ninety percent debt. Right. So

636
00:39:42,520 --> 00:39:46,680
Speaker 2: what we saw was a whole class of toll roads,

637
00:39:46,760 --> 00:39:51,280
Speaker 2: which are supposed to be core infrastructure safe, A whole

638
00:39:51,360 --> 00:39:55,279
Speaker 2: class of toll roads, the ferry business I'm kind of

639
00:39:55,320 --> 00:39:59,480
Speaker 2: talking about, right, a waste of energy business in London

640
00:39:59,520 --> 00:40:04,520
Speaker 2: we in in called Cory Right. All these businesses ended

641
00:40:04,600 --> 00:40:12,000
Speaker 2: up kind of crashing. Now, for US has never been distressed, right,

642
00:40:12,560 --> 00:40:17,360
Speaker 2: there's no broad infrastructure distress cycle. But for us it

643
00:40:17,480 --> 00:40:21,360
Speaker 2: started about ten years ago. Right. We were one of

644
00:40:21,400 --> 00:40:25,160
Speaker 2: the first ones who started to take a part infrastructure

645
00:40:25,520 --> 00:40:30,280
Speaker 2: and say, hey, it's not like corporate Right, It's valued

646
00:40:30,440 --> 00:40:34,000
Speaker 2: very differently than how you'd value a company. There's a

647
00:40:34,080 --> 00:40:38,400
Speaker 2: whole what it takes to operate it is really quite different.

648
00:40:38,520 --> 00:40:41,719
Speaker 2: You need some really great government skills, by the way,

649
00:40:41,760 --> 00:40:44,080
Speaker 2: to manage the agency which regulates you.

650
00:40:44,440 --> 00:40:46,920
Speaker 1: A lot of complexity there, not just you're not just

651
00:40:47,000 --> 00:40:47,760
Speaker 1: selling widgets.

652
00:40:48,239 --> 00:40:51,520
Speaker 2: It's different, right, and you've got to understand it. And

653
00:40:51,560 --> 00:40:54,000
Speaker 2: we were one of the first people in our business

654
00:40:54,080 --> 00:40:56,359
Speaker 2: to really drive into it, and I think we've been

655
00:40:56,440 --> 00:41:00,319
Speaker 2: the biggest investors in our industry in infra.

656
00:41:00,719 --> 00:41:03,360
Speaker 1: So I got to ask, who the hell is buying

657
00:41:03,400 --> 00:41:06,560
Speaker 1: a toll road with ninety percent debt. I mean, it's

658
00:41:06,600 --> 00:41:09,520
Speaker 1: one thing if you're buying your first house and you

659
00:41:09,560 --> 00:41:12,360
Speaker 1: put ten percent down in finance, then the other ninety

660
00:41:12,360 --> 00:41:14,880
Speaker 1: percent because you're gonna live there over the next thirty

661
00:41:14,960 --> 00:41:17,960
Speaker 1: years and you got to live somewhere. But who would

662
00:41:17,960 --> 00:41:21,560
Speaker 1: buy like that? Just seems kind of reckless or am I.

663
00:41:22,239 --> 00:41:25,399
Speaker 2: You know, it was viewed in the old days. It

664
00:41:25,520 --> 00:41:29,279
Speaker 2: was viewed fifteen years ago. It was viewed as such

665
00:41:29,320 --> 00:41:34,800
Speaker 2: a safe asset class. Not only could not everybody did it? Okay,

666
00:41:35,160 --> 00:41:38,399
Speaker 2: they have a few real outliers who did a lot

667
00:41:38,440 --> 00:41:41,359
Speaker 2: of it right, and they did it with eighty five

668
00:41:41,400 --> 00:41:45,040
Speaker 2: percent debt. Eighty percent debt, ninety percent debt. And by

669
00:41:45,040 --> 00:41:49,200
Speaker 2: the way, most of the industry does not do this right.

670
00:41:49,600 --> 00:41:53,319
Speaker 1: You are very much confirming my long held belief that

671
00:41:53,360 --> 00:41:58,160
Speaker 1: there's no such thing as toxic assets, only toxic prices

672
00:41:58,320 --> 00:42:01,719
Speaker 1: and toxic debt level. Yeah, it sounds like that's a

673
00:42:01,840 --> 00:42:04,239
Speaker 1: key part of how you guys have grown.

674
00:42:04,400 --> 00:42:07,799
Speaker 2: It is it has been, right. But what's kind of

675
00:42:07,840 --> 00:42:10,960
Speaker 2: interesting also is like you know that waste to energy

676
00:42:11,000 --> 00:42:15,440
Speaker 2: business in London, right when we bought it, they had

677
00:42:15,480 --> 00:42:19,160
Speaker 2: a really great I'll tell you this, forgive me, I'll

678
00:42:19,239 --> 00:42:20,400
Speaker 2: just die digress.

679
00:42:21,200 --> 00:42:22,040
Speaker 1: I'm fascinated.

680
00:42:22,160 --> 00:42:27,200
Speaker 2: Right, So there's a there's a this business corry in London.

681
00:42:27,719 --> 00:42:30,200
Speaker 2: So if you go, if you're on the River Thames,

682
00:42:30,239 --> 00:42:35,239
Speaker 2: you'll see these barges taking garbage. They take garbage from

683
00:42:35,280 --> 00:42:39,000
Speaker 2: some of the richest burrows in London. They take it

684
00:42:39,040 --> 00:42:42,560
Speaker 2: to a plant called Riverside where they burn it and

685
00:42:42,600 --> 00:42:48,120
Speaker 2: they produce electricity for those same burrows. Right, this business

686
00:42:48,320 --> 00:42:51,319
Speaker 2: great business, by the way, Right now, what they had

687
00:42:51,360 --> 00:42:55,520
Speaker 2: done was they also had a landfill business. They also

688
00:42:55,719 --> 00:42:59,680
Speaker 2: had a garbage collection business, and those businesses got them

689
00:43:00,040 --> 00:43:05,319
Speaker 2: into real trouble. So the company itself got into a

690
00:43:05,400 --> 00:43:09,880
Speaker 2: pickle too much debt and with this one really great

691
00:43:09,920 --> 00:43:14,799
Speaker 2: core business and two other really troubled and so soo businesses. Right,

692
00:43:15,200 --> 00:43:17,640
Speaker 2: And what we ended up doing was when we kind

693
00:43:17,680 --> 00:43:22,440
Speaker 2: of took control of the business. Yes, we fixed and

694
00:43:22,520 --> 00:43:26,560
Speaker 2: sold the two businesses which weren't so great, but at

695
00:43:26,560 --> 00:43:30,040
Speaker 2: the same time, the core business we invested in it.

696
00:43:30,640 --> 00:43:33,640
Speaker 2: We hired a new chairman, we hired a new CEO

697
00:43:33,760 --> 00:43:36,920
Speaker 2: and a management team. And by the way, the business

698
00:43:37,040 --> 00:43:40,719
Speaker 2: itself had long term You know what makes infrastructure is

699
00:43:40,760 --> 00:43:44,799
Speaker 2: when you have long term contracts. They had long term

700
00:43:44,840 --> 00:43:50,040
Speaker 2: contracts for about fifty five percent of their output in Riverside.

701
00:43:50,640 --> 00:43:54,760
Speaker 2: We increased that to seventy percent. We started to build

702
00:43:54,800 --> 00:43:57,960
Speaker 2: a plan to expand the plant, to build a new

703
00:43:58,080 --> 00:44:00,640
Speaker 2: data center next to the plant.

704
00:44:00,400 --> 00:44:02,520
Speaker 1: Right, And they're so energy intensive.

705
00:44:02,719 --> 00:44:06,960
Speaker 2: It is because they produce electricity also, which so you

706
00:44:07,000 --> 00:44:09,759
Speaker 2: can create a data center kind of right next to it,

707
00:44:10,160 --> 00:44:14,080
Speaker 2: so you can see the transformational work which is going on.

708
00:44:14,200 --> 00:44:17,120
Speaker 2: It wasn't like, hey, we just bought it. It's great, right, right,

709
00:44:17,480 --> 00:44:21,040
Speaker 2: And we subsequently ended up kind of selling it three

710
00:44:21,160 --> 00:44:24,440
Speaker 2: four years later after we'd finished doing all that, and

711
00:44:24,480 --> 00:44:29,480
Speaker 2: it was a very successful investment. But you can buy infrastructure.

712
00:44:30,000 --> 00:44:32,520
Speaker 2: But if we just bought it and just put it

713
00:44:32,560 --> 00:44:35,680
Speaker 2: on auto control, nothing would have happened.

714
00:44:35,840 --> 00:44:39,560
Speaker 1: This isn't a passive investment. This is active management. I'm

715
00:44:39,600 --> 00:44:42,920
Speaker 1: fascinated by some of the other hard assets. Tell us

716
00:44:42,960 --> 00:44:47,200
Speaker 1: about what you do with aircraft, Like how do people

717
00:44:47,320 --> 00:44:50,440
Speaker 1: over leverage themselves with either a jet or a fleet

718
00:44:50,440 --> 00:44:53,920
Speaker 1: of jets and have to have a distressed buyer come

719
00:44:53,960 --> 00:44:54,759
Speaker 1: in and take it over.

720
00:44:55,200 --> 00:45:01,000
Speaker 2: We find that investing in aircraft for us two out

721
00:45:01,000 --> 00:45:04,960
Speaker 2: of ten years we really lean in. It's not a

722
00:45:05,000 --> 00:45:08,919
Speaker 2: steady state. Hey, we're going to invest ex melion every year.

723
00:45:09,600 --> 00:45:14,719
Speaker 2: It's a very cyclical business. So like so like take COVID, right,

724
00:45:15,040 --> 00:45:21,120
Speaker 2: COVID happens, flying shuts down. Right. A couple of couple

725
00:45:21,200 --> 00:45:25,920
Speaker 2: of really large airlines. There's one called LATINAM in Latin America,

726
00:45:26,000 --> 00:45:29,759
Speaker 2: there's Aero Mexico. A couple of large airlines end up

727
00:45:29,840 --> 00:45:34,320
Speaker 2: kind of filing for bankruptcy. Now they are in bankruptcy

728
00:45:34,640 --> 00:45:37,839
Speaker 2: and people and they have like LATINAM in those days

729
00:45:37,880 --> 00:45:40,600
Speaker 2: had a fleet of three hundred plus airplanes.

730
00:45:40,719 --> 00:45:42,200
Speaker 1: Oh really, that's a big fleet.

731
00:45:42,280 --> 00:45:46,960
Speaker 2: Yeah. So by the way, Latham's really it's a big airline, right.

732
00:45:46,640 --> 00:45:49,200
Speaker 1: One of mostly South American and Central America.

733
00:45:49,239 --> 00:45:53,320
Speaker 2: And flying to the United States. Right, they're the market

734
00:45:53,400 --> 00:45:59,399
Speaker 2: leader in South in Latin America. Right, But now they

735
00:45:59,880 --> 00:46:04,600
Speaker 2: are the people have given them the planes on these leases.

736
00:46:05,040 --> 00:46:08,160
Speaker 2: They have leases with all these kind of financial guys,

737
00:46:08,719 --> 00:46:11,000
Speaker 2: which is how they bought a lot of their airplanes.

738
00:46:11,880 --> 00:46:16,440
Speaker 2: They're in bankruptcy. They want to redo the lease, recut

739
00:46:16,480 --> 00:46:20,760
Speaker 2: the lease. And by the way, this is COVID. Lease

740
00:46:20,840 --> 00:46:25,040
Speaker 2: pricing has collapsed right right, So now all of a sudden,

741
00:46:25,440 --> 00:46:29,720
Speaker 2: the leases aren't the person who's lent them the money

742
00:46:29,719 --> 00:46:32,520
Speaker 2: on the lease. It's no longer worth that because lease

743
00:46:32,600 --> 00:46:37,960
Speaker 2: prices have collapsed and they are being reset right now

744
00:46:38,320 --> 00:46:43,040
Speaker 2: because of the bankruptcy of Latin. So for us, you know,

745
00:46:43,120 --> 00:46:46,000
Speaker 2: we ended up kind of buying. We ended up buying

746
00:46:46,040 --> 00:46:50,040
Speaker 2: twenty three of those airplanes right from some of the

747
00:46:50,120 --> 00:46:51,960
Speaker 2: leaseholders in Latin.

748
00:46:51,640 --> 00:46:54,359
Speaker 1: For buying the planes outright buying the planes and then

749
00:46:54,400 --> 00:46:55,440
Speaker 1: what do you do with that aircraft?

750
00:46:55,440 --> 00:46:59,719
Speaker 2: We actually bought the debt. We've foreclosed on the planes,

751
00:47:00,560 --> 00:47:04,239
Speaker 2: so now we own the planes. Most of them we

752
00:47:04,400 --> 00:47:08,720
Speaker 2: leased back to Latin. Some of them. There were actually

753
00:47:08,880 --> 00:47:14,399
Speaker 2: four very large eight three fifties right, which is which

754
00:47:14,440 --> 00:47:18,520
Speaker 2: is like a wide body large a three fifties, and

755
00:47:18,560 --> 00:47:21,479
Speaker 2: we sold them to Luftanza. We had to fix them.

756
00:47:21,600 --> 00:47:23,839
Speaker 2: We bought them in the desert we fixed them and

757
00:47:23,880 --> 00:47:24,400
Speaker 2: we sold them.

758
00:47:24,520 --> 00:47:26,400
Speaker 1: They can't sit for very long though, they have to

759
00:47:26,560 --> 00:47:30,000
Speaker 1: constantly be tended. So if you're going through a bankruptcy,

760
00:47:30,200 --> 00:47:32,600
Speaker 1: you can't have a plane on the tarmac for eighteen months.

761
00:47:32,680 --> 00:47:37,319
Speaker 2: And so what's interesting to us about the airline business

762
00:47:37,560 --> 00:47:41,680
Speaker 2: when it's really active, like in those periods, right, somebody

763
00:47:41,800 --> 00:47:45,160
Speaker 2: like us, we'll invest. We invested a few billion dollars

764
00:47:46,120 --> 00:47:48,200
Speaker 2: buying airplanes in those two three years.

765
00:47:48,360 --> 00:47:50,640
Speaker 1: Oh really, that's a lot. That's a lot of aircraft.

766
00:47:50,719 --> 00:47:53,720
Speaker 2: We bought the aircraft, by the way, at this point

767
00:47:53,800 --> 00:47:57,399
Speaker 2: we've sold most of them, right, But we also ended

768
00:47:57,480 --> 00:48:02,160
Speaker 2: up with a claim which became equity. So today we

769
00:48:02,239 --> 00:48:06,040
Speaker 2: are actually a very significant holder of equity in Latin

770
00:48:06,360 --> 00:48:11,239
Speaker 2: and Aero Mexico. Right. So, but this is what we

771
00:48:11,400 --> 00:48:16,480
Speaker 2: find is this business of investing in aircraft. It's a

772
00:48:16,680 --> 00:48:19,120
Speaker 2: it's a very cyclical business for us because we have

773
00:48:19,160 --> 00:48:22,400
Speaker 2: a very high rate of return expectation, so it's not

774
00:48:22,520 --> 00:48:26,800
Speaker 2: in every year business. And what's really helpful for us

775
00:48:27,200 --> 00:48:31,080
Speaker 2: as we do this, Barry, we own a company called Ukalion.

776
00:48:31,800 --> 00:48:36,600
Speaker 2: Deucalion has sixty five employees and they manage the aircraft

777
00:48:36,640 --> 00:48:40,399
Speaker 2: for us. So when we take over the planes, if

778
00:48:40,400 --> 00:48:43,160
Speaker 2: we have to park them in the desert, if we

779
00:48:43,280 --> 00:48:47,720
Speaker 2: have to fix them, lease them, finance them. Deucalion gives

780
00:48:47,800 --> 00:48:50,480
Speaker 2: us the arms and legs to kind of do it.

781
00:48:50,560 --> 00:48:53,840
Speaker 2: You don't want to do this business just as a

782
00:48:53,840 --> 00:48:58,520
Speaker 2: paper investor. You need those operating skills. And by the way,

783
00:48:58,600 --> 00:49:03,520
Speaker 2: Deucalion today manages one hundred and twenty five airplanes for

784
00:49:03,600 --> 00:49:06,839
Speaker 2: third parties even away from us. Right, So for us

785
00:49:07,239 --> 00:49:10,640
Speaker 2: having Deucalion, it's a big piece of kind of what

786
00:49:10,760 --> 00:49:14,080
Speaker 2: makes our airplane aircraft platform.

787
00:49:13,640 --> 00:49:17,359
Speaker 1: Really really interesting. Last heart asset, I have to ask

788
00:49:17,400 --> 00:49:23,200
Speaker 1: you about real estate. Return to office has been, you know,

789
00:49:23,320 --> 00:49:26,759
Speaker 1: only a part way success, depending on the city you

790
00:49:26,800 --> 00:49:31,640
Speaker 1: look at. It's twenty thirty forty fifty percent vacancy rates,

791
00:49:32,280 --> 00:49:35,719
Speaker 1: and what I mean by that is fifty percent occupancy

792
00:49:35,800 --> 00:49:39,719
Speaker 1: rates of already lease spaces, to say nothing of the

793
00:49:40,080 --> 00:49:44,319
Speaker 1: vacancy rates that come up as leases expire and some

794
00:49:44,600 --> 00:49:47,520
Speaker 1: anchor tenants move out. How are you looking at the

795
00:49:47,520 --> 00:49:51,680
Speaker 1: world of commercial real estate these days? Given the stress

796
00:49:51,760 --> 00:49:53,759
Speaker 1: we see in the office space.

797
00:49:54,000 --> 00:50:00,080
Speaker 2: There is a tsunami working its way through parts of

798
00:50:00,120 --> 00:50:01,880
Speaker 2: the commercial real estate sector.

799
00:50:02,160 --> 00:50:04,120
Speaker 1: Slow motion tsunami, isn't.

800
00:50:03,920 --> 00:50:09,720
Speaker 2: It, And it's around maturities of the debt. Right, where

801
00:50:09,960 --> 00:50:15,319
Speaker 2: people are foreclosing, title of the property is passing over

802
00:50:15,400 --> 00:50:20,439
Speaker 2: to lenders. Right, that's so round numbers. Today there's eight

803
00:50:20,600 --> 00:50:26,239
Speaker 2: trillion dollars of commercial mortgage debt in the US and Europe.

804
00:50:26,440 --> 00:50:29,680
Speaker 1: Eight trillion US in Europe that you think is going

805
00:50:29,719 --> 00:50:32,640
Speaker 1: to eventually go How much of that goes bad?

806
00:50:32,800 --> 00:50:34,920
Speaker 2: Twenty two percent of its office?

807
00:50:35,400 --> 00:50:38,800
Speaker 1: Oh really? Yeah, so that's let's call that two trillion

808
00:50:38,880 --> 00:50:41,640
Speaker 1: almost two trillion, yeah, and a trillion here and a

809
00:50:41,680 --> 00:50:42,200
Speaker 1: trillion in.

810
00:50:42,160 --> 00:50:45,480
Speaker 2: Europe exactly right, right, And to our point of view,

811
00:50:46,160 --> 00:50:51,080
Speaker 2: a third of it is going to kind of go

812
00:50:51,200 --> 00:50:56,120
Speaker 2: broke in this particular cycle away from kind of office

813
00:50:56,719 --> 00:51:00,279
Speaker 2: if there are other sectors. So, if you look at multifamily, right,

814
00:51:01,040 --> 00:51:05,279
Speaker 2: multifamily is generally a very stable asset class. But with

815
00:51:05,400 --> 00:51:10,120
Speaker 2: these higher rates, people were buying multifamily at a four

816
00:51:10,200 --> 00:51:17,560
Speaker 2: percent cap rate. Today public rates multifamily public rates are

817
00:51:17,680 --> 00:51:21,040
Speaker 2: six percent or so cap rates. That means that prices

818
00:51:21,080 --> 00:51:24,600
Speaker 2: have fallen fifty percent. Right if you just take the

819
00:51:24,680 --> 00:51:26,400
Speaker 2: four going to kind of six.

820
00:51:26,800 --> 00:51:28,319
Speaker 1: If you have to sell it or if you have

821
00:51:28,360 --> 00:51:31,319
Speaker 1: to service the debt. Yes, why does it always come

822
00:51:31,360 --> 00:51:35,960
Speaker 1: back to too much debt, too much leverage invariably leads

823
00:51:36,000 --> 00:51:39,720
Speaker 1: to a bad outcome. Am I overstating that? It seems

824
00:51:39,719 --> 00:51:43,160
Speaker 1: that every one of these stories begins with and they

825
00:51:43,200 --> 00:51:45,840
Speaker 1: bought this with way too much debt. And here's what happened.

826
00:51:46,000 --> 00:51:47,840
Speaker 2: A barrier made a career art.

827
00:51:48,880 --> 00:51:52,080
Speaker 1: That's amazing. So I know, I only have you for

828
00:51:52,560 --> 00:51:56,799
Speaker 1: a limited amount of time before we move on from

829
00:51:56,920 --> 00:52:00,760
Speaker 1: residential from commercial real estate. A truly in the US,

830
00:52:00,800 --> 00:52:03,600
Speaker 1: a trillion in Europe about a third is going to

831
00:52:03,680 --> 00:52:09,120
Speaker 1: go bad. And it's a slow motion tsunami. In a

832
00:52:09,160 --> 00:52:14,480
Speaker 1: way that's almost encouraging because, not to be glib, but

833
00:52:14,680 --> 00:52:19,440
Speaker 1: three hundred billion dollars it's not the financial crisis. Not

834
00:52:19,640 --> 00:52:23,960
Speaker 1: trillions and trillions and trillions of securitized debt blowing up.

835
00:52:24,400 --> 00:52:27,960
Speaker 1: It almost sounds as if that's manageable over time.

836
00:52:28,520 --> 00:52:34,120
Speaker 2: It's not systemic, right, So, whether it is the corporate world,

837
00:52:34,440 --> 00:52:37,840
Speaker 2: you know, when I was describing all these maturities in

838
00:52:37,920 --> 00:52:41,960
Speaker 2: a five trillion dollar pool of high yield or in

839
00:52:42,000 --> 00:52:46,359
Speaker 2: the this is not systemic. Two thousand and eight, the

840
00:52:46,440 --> 00:52:52,120
Speaker 2: banks were really levered, right, it became systemic, right, right?

841
00:52:52,560 --> 00:52:57,640
Speaker 2: So I think, look, I tend to economic growth is Okay,

842
00:52:58,480 --> 00:53:01,760
Speaker 2: it's it's not it's much. It's much less than okay

843
00:53:01,760 --> 00:53:04,600
Speaker 2: in the era, but in the US it's kind of okay. Right,

844
00:53:05,000 --> 00:53:07,200
Speaker 2: So I don't think I don't think one needs to

845
00:53:07,280 --> 00:53:10,760
Speaker 2: kind of say, you know, that systemic stuff which causes

846
00:53:11,000 --> 00:53:16,080
Speaker 2: shocks across the economy. Right, Look, we could be wrong,

847
00:53:16,400 --> 00:53:18,840
Speaker 2: but we don't think that's in the cards. What's in

848
00:53:18,920 --> 00:53:23,640
Speaker 2: the cards is just this very gnarly all these kind

849
00:53:23,680 --> 00:53:27,880
Speaker 2: of credit issues which will keep biting for the next

850
00:53:27,920 --> 00:53:30,359
Speaker 2: three years, and we'll just kind of work our way

851
00:53:30,400 --> 00:53:30,759
Speaker 2: through them.

852
00:53:30,840 --> 00:53:33,400
Speaker 1: Right, if you're in the wrong sector, you're going to

853
00:53:33,440 --> 00:53:37,040
Speaker 1: get hurt. And if you've avoided that, it shouldn't it

854
00:53:37,080 --> 00:53:40,839
Speaker 1: shouldn't have that spillover effect like we saw with securitized

855
00:53:40,880 --> 00:53:44,000
Speaker 1: mortgage in eight oh nine, if I'm hearing you correctly.

856
00:53:44,320 --> 00:53:47,000
Speaker 1: So I also have to ask, I know you open

857
00:53:47,120 --> 00:53:50,520
Speaker 1: the London office in two thousand and four. Did you

858
00:53:50,560 --> 00:53:54,439
Speaker 1: ever expect that Europe would expand to just about half

859
00:53:54,480 --> 00:53:58,160
Speaker 1: your assets? That that seems to be really substantial. Tell

860
00:53:58,239 --> 00:54:01,360
Speaker 1: us a little bit about what's going going on in Europe,

861
00:54:02,000 --> 00:54:05,799
Speaker 1: both their economy and the prospects for growth there, and

862
00:54:05,840 --> 00:54:07,520
Speaker 1: what you're doing with your portfolio.

863
00:54:07,880 --> 00:54:11,040
Speaker 2: Well, Europe is if you just think about the broad

864
00:54:11,160 --> 00:54:16,560
Speaker 2: market in high yield, seventy five percent US twenty five

865
00:54:16,600 --> 00:54:21,080
Speaker 2: percent of Europe for somebody like US, Europe is always

866
00:54:21,280 --> 00:54:25,120
Speaker 2: just a much bigger part, a third, maybe even a

867
00:54:25,200 --> 00:54:26,160
Speaker 2: half of our book.

868
00:54:26,400 --> 00:54:27,240
Speaker 1: Why is that.

869
00:54:28,560 --> 00:54:34,359
Speaker 2: Europe has Europe has more problems than the.

870
00:54:34,400 --> 00:54:38,359
Speaker 1: US, right, and a lot of old industries and old

871
00:54:39,000 --> 00:54:41,480
Speaker 1: businesses that might run into trouble.

872
00:54:41,280 --> 00:54:44,400
Speaker 2: And you know, and every two years there's a crisis

873
00:54:44,480 --> 00:54:48,600
Speaker 2: there right, right, Like the US is Fortress America. But

874
00:54:48,719 --> 00:54:52,359
Speaker 2: when you look at Europe, right, whether it is Brexit,

875
00:54:52,560 --> 00:54:55,720
Speaker 2: whether it is other Italian advisories.

876
00:54:55,320 --> 00:54:59,279
Speaker 1: That go on, it's something every now everywhere else that's

877
00:54:59,320 --> 00:54:59,719
Speaker 1: going on.

878
00:55:00,160 --> 00:55:04,200
Speaker 2: You have frequent crises, you have economic growth which is

879
00:55:04,280 --> 00:55:08,359
Speaker 2: much slower than the United States. Right. And by the way,

880
00:55:08,400 --> 00:55:11,640
Speaker 2: they're suffering from some of the same high rates.

881
00:55:11,480 --> 00:55:14,880
Speaker 1: And their inflation seems to be stickier and more stubborn

882
00:55:14,920 --> 00:55:16,759
Speaker 1: than inflation rates here.

883
00:55:16,880 --> 00:55:20,200
Speaker 2: It is, right, So you take all that kind of together,

884
00:55:20,920 --> 00:55:23,719
Speaker 2: you know what we find is Europe when I think

885
00:55:23,760 --> 00:55:27,400
Speaker 2: about it in the context of twenty years, we find

886
00:55:27,440 --> 00:55:32,840
Speaker 2: that Europe just gives us more frequent opportunity, right, just

887
00:55:32,920 --> 00:55:35,480
Speaker 2: the way it's set up. And the second thing which

888
00:55:35,520 --> 00:55:40,719
Speaker 2: makes Europe really interesting for us, we are we are

889
00:55:40,880 --> 00:55:48,880
Speaker 2: really I could be we are really one of the

890
00:55:48,920 --> 00:55:53,520
Speaker 2: market leaders in Europe. We are one of the acknowledged

891
00:55:53,640 --> 00:55:57,000
Speaker 2: market leaders in Europe for what we do. And it's

892
00:55:57,040 --> 00:56:00,200
Speaker 2: a world where there are much fewer people with the

893
00:56:00,239 --> 00:56:02,840
Speaker 2: skills we have. In the US, there are more people.

894
00:56:03,280 --> 00:56:05,959
Speaker 2: So you look at a market which is big, which

895
00:56:06,000 --> 00:56:11,239
Speaker 2: gives you constant opportunity. You look at the marketplace positioning

896
00:56:11,360 --> 00:56:16,120
Speaker 2: we have. You take that together for us, Europe is

897
00:56:16,400 --> 00:56:20,080
Speaker 2: much more interesting, which is why it always for us

898
00:56:20,480 --> 00:56:24,080
Speaker 2: is a bigger piece of our portfolio than the market.

899
00:56:24,320 --> 00:56:30,280
Speaker 1: Huh. That's really really fascinating since we're talking about inflation

900
00:56:30,440 --> 00:56:34,960
Speaker 1: and rates. You said something about a year ago that

901
00:56:35,040 --> 00:56:38,080
Speaker 1: I very much agreed with. About a year ago, it

902
00:56:38,160 --> 00:56:42,120
Speaker 1: was last summer you said the FED was behind the curve.

903
00:56:42,680 --> 00:56:45,160
Speaker 1: Now it's twelve months later. Tell us a little bit

904
00:56:45,160 --> 00:56:49,520
Speaker 1: about your especially from your vantage at looking at debt

905
00:56:49,719 --> 00:56:54,120
Speaker 1: and what the distress that's out there caused in part

906
00:56:54,200 --> 00:56:57,480
Speaker 1: by five hundred and twenty five basis points of hikes

907
00:56:57,480 --> 00:56:59,880
Speaker 1: in eighteen months. Tell us a little bit about what

908
00:57:00,080 --> 00:57:03,360
Speaker 1: you see from central banks here in the United States

909
00:57:03,480 --> 00:57:04,239
Speaker 1: or elsewhere.

910
00:57:04,600 --> 00:57:07,640
Speaker 2: You know, we are now on the other side of

911
00:57:07,760 --> 00:57:11,560
Speaker 2: the you know, we're now in the we're trying to

912
00:57:11,560 --> 00:57:15,080
Speaker 2: figure out how quickly do rates come down, how much

913
00:57:15,120 --> 00:57:19,320
Speaker 2: and how quickly, So we're not really now we're on

914
00:57:19,360 --> 00:57:22,000
Speaker 2: the other side of the mountain, right right. And I think,

915
00:57:22,160 --> 00:57:25,680
Speaker 2: and you've already seen it with Europe. Europe has already reduced.

916
00:57:26,640 --> 00:57:29,680
Speaker 2: So I think our point of view would be these

917
00:57:30,000 --> 00:57:33,040
Speaker 2: short term rates, the five and a quarter five and

918
00:57:33,080 --> 00:57:36,560
Speaker 2: a half percent fed funds rate, it is going to

919
00:57:36,640 --> 00:57:39,560
Speaker 2: be kind of coming down. And we can all debate

920
00:57:40,200 --> 00:57:44,000
Speaker 2: is it two cuts, three cuts, fifty basis points twenty?

921
00:57:44,200 --> 00:57:46,880
Speaker 2: We can all debate that. But I think the path

922
00:57:47,000 --> 00:57:52,200
Speaker 2: going forward is that what is different is just look

923
00:57:52,240 --> 00:57:55,440
Speaker 2: at the tenure, not so much the short term fed

924
00:57:55,520 --> 00:57:59,000
Speaker 2: fund rate. Right the tenier rate is three point eight

925
00:57:59,080 --> 00:58:02,360
Speaker 2: five percent, it's not the one and a half or

926
00:58:02,360 --> 00:58:03,320
Speaker 2: two percent.

927
00:58:03,200 --> 00:58:05,520
Speaker 1: That era seems to be over.

928
00:58:05,640 --> 00:58:09,520
Speaker 2: Yeah, that era is over. So the fact that rates

929
00:58:09,520 --> 00:58:12,360
Speaker 2: are going to be higher now over the course of

930
00:58:12,400 --> 00:58:15,919
Speaker 2: the next three five years, I think that's the part

931
00:58:16,040 --> 00:58:18,480
Speaker 2: we should all be just kind of focused.

932
00:58:17,960 --> 00:58:22,440
Speaker 1: On higher than zero. But isn't three money and a

933
00:58:22,480 --> 00:58:26,440
Speaker 1: half kind of normal or even reasonable. I mean, how

934
00:58:26,480 --> 00:58:31,160
Speaker 1: do you contextualize the ten year briefly kissed five percent?

935
00:58:31,640 --> 00:58:34,840
Speaker 1: And then it's headed south since if we end up

936
00:58:34,920 --> 00:58:37,880
Speaker 1: at credit rates being in the three three and a

937
00:58:37,920 --> 00:58:41,680
Speaker 1: half percent range, seventy five two hundred bases points below

938
00:58:41,680 --> 00:58:45,840
Speaker 1: where they are, now, what does that mean for distressed

939
00:58:45,840 --> 00:58:48,800
Speaker 1: dead investing? What does that mean for the economy?

940
00:58:49,080 --> 00:58:51,919
Speaker 2: It points to the fact that you know, I think

941
00:58:51,920 --> 00:58:55,480
Speaker 2: you were saying Barry lived till twenty twenty.

942
00:58:55,240 --> 00:58:58,720
Speaker 1: Five, survived to twenty five.

943
00:58:58,560 --> 00:59:01,280
Speaker 2: Survived to twenty five. You get three and a half

944
00:59:01,320 --> 00:59:06,280
Speaker 2: percent tenure rates, right, you add the usual four five

945
00:59:06,400 --> 00:59:11,800
Speaker 2: hundred basis point high yield spread. You're borrowing at eight

946
00:59:11,840 --> 00:59:13,160
Speaker 2: and a half percent.

947
00:59:13,560 --> 00:59:16,920
Speaker 1: Which which is not twelve percent, which is not twelve

948
00:59:16,960 --> 00:59:17,320
Speaker 1: it's not.

949
00:59:17,320 --> 00:59:20,000
Speaker 2: Four, but but it's not for So I think what

950
00:59:20,040 --> 00:59:25,440
Speaker 2: all this kind of means is, look, things will improve

951
00:59:25,920 --> 00:59:31,040
Speaker 2: slowly right as short term rates kind of come in.

952
00:59:31,360 --> 00:59:35,240
Speaker 2: But the problems which we've set up, they're here. You

953
00:59:35,400 --> 00:59:42,960
Speaker 2: have a slower old world economy, You have maturities kind

954
00:59:43,000 --> 00:59:46,320
Speaker 2: of coming up. You have to kind of default or

955
00:59:46,360 --> 00:59:49,480
Speaker 2: you have to do some pretty unusual things to extend

956
00:59:49,520 --> 00:59:54,480
Speaker 2: your maturities. Those problems with eight and a half percent rates,

957
00:59:54,560 --> 00:59:57,600
Speaker 2: not four or five all in cost for a lender,

958
00:59:58,000 --> 01:00:01,560
Speaker 2: for a borrower, those problems really now stay with us

959
01:00:01,560 --> 01:00:02,000
Speaker 2: for a us.

960
01:00:02,080 --> 01:00:06,320
Speaker 1: So not just to talk your book, but an opportunistic

961
01:00:06,440 --> 01:00:10,320
Speaker 1: distress then investor, These look like pretty good times coming

962
01:00:10,400 --> 01:00:11,200
Speaker 1: up over the next.

963
01:00:11,000 --> 01:00:14,000
Speaker 2: Fel I do think they're good times, but I think

964
01:00:14,600 --> 01:00:18,440
Speaker 2: I don't think, but they're time. I'm talking my book now.

965
01:00:19,280 --> 01:00:23,240
Speaker 2: They're really good times for somebody like us who can

966
01:00:23,400 --> 01:00:26,120
Speaker 2: operate businesses, improve businesses.

967
01:00:26,200 --> 01:00:29,640
Speaker 1: It's not just paper transactions. You are more hands on than.

968
01:00:29,960 --> 01:00:33,640
Speaker 2: You know the You know, most people in our industry,

969
01:00:33,720 --> 01:00:37,680
Speaker 2: in my industry, are really focused on buying debt at

970
01:00:37,760 --> 01:00:43,360
Speaker 2: fifty sixty seventy cents, trading it, having it kind of

971
01:00:43,400 --> 01:00:46,200
Speaker 2: appreciate and price, and then trading out of it.

972
01:00:46,280 --> 01:00:49,000
Speaker 1: Right, that's so nineteen ninety one. You've done that already.

973
01:00:49,400 --> 01:00:53,360
Speaker 2: Now, this cycle, the one we are in, is not

974
01:00:53,640 --> 01:00:58,760
Speaker 2: kind of that wholesale move down in prices. It's much

975
01:00:58,840 --> 01:01:04,680
Speaker 2: more buying into these businesses through debt, sometimes through equity,

976
01:01:04,720 --> 01:01:09,600
Speaker 2: transforming the businesses operating them. That's the opportunity, it's not

977
01:01:09,720 --> 01:01:14,960
Speaker 2: a trading opportunity in distress debt which is what we

978
01:01:14,840 --> 01:01:17,920
Speaker 2: we just don't think it's a trading opportunity now for

979
01:01:17,960 --> 01:01:18,919
Speaker 2: the next three four years.

980
01:01:19,000 --> 01:01:22,000
Speaker 1: Huh really really fascinating. I only have you for a

981
01:01:22,040 --> 01:01:25,640
Speaker 1: few minutes. More So, let me jump to some of

982
01:01:25,680 --> 01:01:29,320
Speaker 1: my favorite questions that we asked well our guests, starting

983
01:01:29,360 --> 01:01:31,840
Speaker 1: with tell us, what's keeping you entertained these days? What

984
01:01:31,880 --> 01:01:38,040
Speaker 1: are you listening or watching podcasts? Netflix? What keeps you entertained?

985
01:01:38,680 --> 01:01:41,880
Speaker 2: I like watching sports before I.

986
01:01:41,800 --> 01:01:43,040
Speaker 1: Know you're a big tennis fan.

987
01:01:43,200 --> 01:01:45,800
Speaker 2: Yeah, I like watching Breakpoint.

988
01:01:45,600 --> 01:01:49,400
Speaker 1: Oh really on Netflix? On Netflix sort of to drive

989
01:01:49,480 --> 01:01:52,440
Speaker 1: to survive, but for tennis exactly, By the way, I

990
01:01:52,480 --> 01:01:54,520
Speaker 1: have that in my cue, and I haven't started yet.

991
01:01:54,640 --> 01:01:57,560
Speaker 2: You know, I've been playing tennis for fifty years. Nicely,

992
01:01:57,800 --> 01:01:59,960
Speaker 2: I should be better, right.

993
01:02:00,080 --> 01:02:01,800
Speaker 1: You just need a good coach, that's all.

994
01:02:02,280 --> 01:02:05,919
Speaker 2: But but watching Breakpoint, at least for a while, transforms

995
01:02:05,960 --> 01:02:06,400
Speaker 2: it for me.

996
01:02:06,720 --> 01:02:08,200
Speaker 1: What's the worst part of your game?

997
01:02:09,160 --> 01:02:09,680
Speaker 2: Backhand?

998
01:02:10,120 --> 01:02:10,480
Speaker 1: Really?

999
01:02:10,520 --> 01:02:14,520
Speaker 2: By the way, everybody who knows me, they are merciless.

1000
01:02:14,560 --> 01:02:16,000
Speaker 2: They hit at my backhand.

1001
01:02:16,120 --> 01:02:22,440
Speaker 1: Huh. I I'm a lefty, but I've always played tennis righty,

1002
01:02:22,680 --> 01:02:25,960
Speaker 1: so the backhand is never done. I you know, it's

1003
01:02:26,000 --> 01:02:27,920
Speaker 1: as a kid. They stick a baseball bat in your

1004
01:02:28,000 --> 01:02:31,560
Speaker 1: right hand, so I right lefty, do everything else lefty.

1005
01:02:32,040 --> 01:02:35,600
Speaker 1: So the serve is my weakest part. But I find

1006
01:02:35,640 --> 01:02:39,400
Speaker 1: the backhand is easy because it's it's natural, right, It's

1007
01:02:39,440 --> 01:02:43,840
Speaker 1: almost natural. It's so crazy. Let's talk about your mentors

1008
01:02:43,880 --> 01:02:45,680
Speaker 1: who helped shape your career.

1009
01:02:46,920 --> 01:02:51,160
Speaker 2: I had. I had a lot of I had a

1010
01:02:51,200 --> 01:02:54,479
Speaker 2: lot of support from people I worked for or worked

1011
01:02:54,600 --> 01:02:55,960
Speaker 2: it right.

1012
01:02:55,800 --> 01:02:58,400
Speaker 1: At City and at Meryll City, starting out.

1013
01:02:58,240 --> 01:03:02,600
Speaker 2: At Meryl right and it more particularly right, I had

1014
01:03:02,640 --> 01:03:06,000
Speaker 2: a lot of support like that. You know, a mentor.

1015
01:03:06,640 --> 01:03:11,280
Speaker 2: The word mentor means I think also somebody who helps

1016
01:03:11,320 --> 01:03:14,360
Speaker 2: you grow, who helps you develop, who talks to you

1017
01:03:14,480 --> 01:03:18,360
Speaker 2: every few weeks or a month officially unofficially, right, Hu.

1018
01:03:18,880 --> 01:03:22,120
Speaker 2: You know, what I've found is the business I chose

1019
01:03:22,200 --> 01:03:27,920
Speaker 2: to be in was such a new, emerging business where

1020
01:03:28,680 --> 01:03:30,000
Speaker 2: you know, I can't.

1021
01:03:29,920 --> 01:03:32,640
Speaker 1: There were no people with decades's experience, And.

1022
01:03:32,960 --> 01:03:36,760
Speaker 2: It wasn't like I had a quote mentors in the business, right,

1023
01:03:36,960 --> 01:03:39,240
Speaker 2: But what I found was and by the way, every

1024
01:03:39,280 --> 01:03:42,000
Speaker 2: time you do something which is new and different and

1025
01:03:42,040 --> 01:03:44,480
Speaker 2: you're one of the first guys on the wave, right,

1026
01:03:45,080 --> 01:03:48,400
Speaker 2: it is you learn as you go. Sure, but having

1027
01:03:48,480 --> 01:03:53,080
Speaker 2: that support, right, from kind of all those different parts.

1028
01:03:53,360 --> 01:03:56,080
Speaker 2: I think that's kind of what I would say, become.

1029
01:03:55,880 --> 01:03:59,720
Speaker 1: An approach of everybody, kind of lifting everybody else. Let's

1030
01:03:59,720 --> 01:04:01,960
Speaker 1: talk about books. What are some of your favorites and

1031
01:04:01,960 --> 01:04:03,320
Speaker 1: what are you reading right now?

1032
01:04:05,080 --> 01:04:10,919
Speaker 2: I like historical fiction. So there's a there's a guy.

1033
01:04:11,040 --> 01:04:14,600
Speaker 2: There's an English author, a guy called con Igillen. I

1034
01:04:14,640 --> 01:04:20,040
Speaker 2: don't know. He's written five six books about the Roman Empire,

1035
01:04:20,200 --> 01:04:25,160
Speaker 2: the Caesars, right, He's written about Koklai Khan and the

1036
01:04:25,280 --> 01:04:31,000
Speaker 2: Khan dynasty out of Mongolia, right, Chengiz. I love reading

1037
01:04:31,040 --> 01:04:33,600
Speaker 2: that sort of historical fiction. He just came out with

1038
01:04:33,680 --> 01:04:36,920
Speaker 2: a new book on Nero, the Roman Emperor, and it's

1039
01:04:36,920 --> 01:04:38,960
Speaker 2: a new series. Right then, I'm reading that.

1040
01:04:39,280 --> 01:04:43,320
Speaker 1: Huh, sounds really interesting. Our final two questions, what sort

1041
01:04:43,360 --> 01:04:46,240
Speaker 1: of advice would you give to a recent college grad

1042
01:04:46,960 --> 01:04:50,960
Speaker 1: interested in a career in distress debt or credit investing?

1043
01:04:53,520 --> 01:04:57,960
Speaker 2: Be ready to work really hard, right? Yeah? Yeah. You know.

1044
01:04:58,120 --> 01:05:03,760
Speaker 2: The typical person we hire at SVP is we have

1045
01:05:03,800 --> 01:05:07,840
Speaker 2: two entry points, right, so we'll hire twenty six twenty

1046
01:05:07,880 --> 01:05:13,280
Speaker 2: seven year olds. So you should have gone to undergraduate school,

1047
01:05:13,440 --> 01:05:16,600
Speaker 2: couple of years at an investment bank with the eighty

1048
01:05:16,720 --> 01:05:20,440
Speaker 2: hundred dollars a week two three years at a private

1049
01:05:20,440 --> 01:05:23,800
Speaker 2: equity firm, right, and then you come work with us.

1050
01:05:24,000 --> 01:05:27,480
Speaker 2: And then the second entry point is you're that twenty

1051
01:05:27,520 --> 01:05:30,280
Speaker 2: seven year old you go to business school and then

1052
01:05:30,320 --> 01:05:32,600
Speaker 2: you come work with us. Right. So those are our

1053
01:05:32,600 --> 01:05:35,280
Speaker 2: two entry points. But when you look at kind of

1054
01:05:35,320 --> 01:05:37,440
Speaker 2: you know, the people who are kind of coming in

1055
01:05:38,720 --> 01:05:41,040
Speaker 2: by the time you are that twenty six twenty seven

1056
01:05:41,120 --> 01:05:44,360
Speaker 2: year old, you know, if you were in that class

1057
01:05:44,360 --> 01:05:49,240
Speaker 2: at Dartmouth or Yale or whatever, you're probably already that

1058
01:05:49,520 --> 01:05:54,440
Speaker 2: one in one hundred, maybe one in five hundred kind

1059
01:05:54,520 --> 01:05:57,840
Speaker 2: of person to have made it that far. Right, This

1060
01:05:58,240 --> 01:06:04,760
Speaker 2: is a tough, incredibly demanding profession. Just be ready for that.

1061
01:06:05,040 --> 01:06:11,200
Speaker 2: It is extraordinarily rewarding, right, and I don't mean financially right.

1062
01:06:11,520 --> 01:06:15,400
Speaker 2: It's fun, you know, the people you work with, the

1063
01:06:15,440 --> 01:06:18,840
Speaker 2: culture of what you have it is fun. Yeah, it's

1064
01:06:18,840 --> 01:06:22,760
Speaker 2: financially good too. But to be but to position yourself

1065
01:06:22,840 --> 01:06:26,520
Speaker 2: to be in this world, right, especially in a world

1066
01:06:27,000 --> 01:06:30,040
Speaker 2: like ours. Look, we're not looking for people who are

1067
01:06:30,120 --> 01:06:33,360
Speaker 2: just kind of you know, paper investors. We want you

1068
01:06:33,440 --> 01:06:37,640
Speaker 2: to work with our portfolio companies, with our management teams.

1069
01:06:37,680 --> 01:06:40,440
Speaker 2: You've got to have the EQ You've got to have

1070
01:06:40,560 --> 01:06:44,560
Speaker 2: the presence and the communication skills too. Right. You look

1071
01:06:44,600 --> 01:06:48,200
Speaker 2: at kind of the training we need for somebody who

1072
01:06:48,240 --> 01:06:51,200
Speaker 2: can do that at age thirty or age thirty five. Right,

1073
01:06:51,600 --> 01:06:55,040
Speaker 2: it is it's very much that sort of a growth

1074
01:06:55,120 --> 01:06:56,280
Speaker 2: track you've got to follow.

1075
01:06:56,360 --> 01:07:01,200
Speaker 1: Huh. Really really quite fascinating. And our final question, what

1076
01:07:01,240 --> 01:07:04,280
Speaker 1: do you know about the world of investing today that

1077
01:07:04,320 --> 01:07:07,440
Speaker 1: you wish you knew in the nineteen nineties when you

1078
01:07:07,440 --> 01:07:08,640
Speaker 1: were first getting started?

1079
01:07:09,960 --> 01:07:20,000
Speaker 2: Oh my gosh, Barry, I was. I was in when

1080
01:07:20,040 --> 01:07:23,520
Speaker 2: we got started right as a firm. In two thousand

1081
01:07:23,560 --> 01:07:29,880
Speaker 2: and one. Somebody asked me and said, hey, Victor, what

1082
01:07:29,960 --> 01:07:33,840
Speaker 2: would you what would you consider success in five years?

1083
01:07:34,480 --> 01:07:38,000
Speaker 2: And remember this is when the world was young, alts

1084
01:07:38,440 --> 01:07:41,120
Speaker 2: was really young, right, And I said, boy, if I

1085
01:07:41,160 --> 01:07:44,080
Speaker 2: could be running for five hundred million in five years,

1086
01:07:44,600 --> 01:07:48,880
Speaker 2: wouldn't that be great? Right? We went through five hundred

1087
01:07:48,880 --> 01:07:51,640
Speaker 2: million in a year and a half. Right, But I

1088
01:07:51,680 --> 01:07:56,320
Speaker 2: think I think what I what I've learned about, what

1089
01:07:56,400 --> 01:08:01,200
Speaker 2: I've learned about investing, because boy, when you do what

1090
01:08:01,360 --> 01:08:05,840
Speaker 2: I've done, you make mistakes. What I've learned about managing

1091
01:08:05,960 --> 01:08:11,720
Speaker 2: and growing people and developing people, right, it's like I

1092
01:08:11,760 --> 01:08:16,800
Speaker 2: have been in this laboratory of learning. So when I

1093
01:08:16,880 --> 01:08:21,560
Speaker 2: think about the person I was twenty five thirty years ago,

1094
01:08:21,800 --> 01:08:26,120
Speaker 2: right running a proprietary desk at Merrill Lynch, right to

1095
01:08:26,280 --> 01:08:30,680
Speaker 2: kind of the person I am today, right in so

1096
01:08:30,800 --> 01:08:36,400
Speaker 2: many different ways, I couldn't I couldn't even have told

1097
01:08:36,439 --> 01:08:39,720
Speaker 2: you twenty five thirty years ago. I couldn't even have

1098
01:08:39,800 --> 01:08:42,840
Speaker 2: told you what it would take right to kind of

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01:08:42,880 --> 01:08:45,599
Speaker 2: be here. And I think it's like, I think, you've

1100
01:08:45,760 --> 01:08:50,559
Speaker 2: just got to constantly be ready to learn, to evolve.

1101
01:08:51,320 --> 01:08:55,280
Speaker 2: You can't get stuck. And if anything, if my journey

1102
01:08:55,320 --> 01:08:58,200
Speaker 2: says anything, it is you know, I've seen the evolution

1103
01:08:58,800 --> 01:09:02,400
Speaker 2: in the firm, shure, I've seen the evolution in me right.

1104
01:09:02,840 --> 01:09:05,280
Speaker 2: And I think if you were, if I was to

1105
01:09:05,320 --> 01:09:08,680
Speaker 2: give advice to somebody who goes down this journey, it

1106
01:09:08,760 --> 01:09:11,880
Speaker 2: is to have a lot of people around you who

1107
01:09:11,920 --> 01:09:14,880
Speaker 2: can not just in your firm, but outside your firm,

1108
01:09:14,960 --> 01:09:17,639
Speaker 2: some people you can trust, you can talk to, who

1109
01:09:17,680 --> 01:09:21,080
Speaker 2: can court you, who can make you think because you

1110
01:09:21,120 --> 01:09:24,280
Speaker 2: are in an evolutionary journey to grow up to be

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01:09:24,320 --> 01:09:25,599
Speaker 2: a leader in this business.

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01:09:25,800 --> 01:09:29,439
Speaker 1: Huh really quite fascinating. Thank you, Victor for being so

1113
01:09:29,640 --> 01:09:33,639
Speaker 1: generous with your time. We have been speaking with Victor Kosla,

1114
01:09:34,200 --> 01:09:38,800
Speaker 1: founder and CIO of Strategic Value Partners. If you enjoy

1115
01:09:38,880 --> 01:09:42,040
Speaker 1: this conversation, well check out any of the five hundred

1116
01:09:42,120 --> 01:09:45,639
Speaker 1: or so discussions we've had over the past ten years.

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01:09:46,160 --> 01:09:50,479
Speaker 1: You can find those at iTunes, Spotify, YouTube, wherever you

1118
01:09:50,560 --> 01:09:54,320
Speaker 1: find your favorite podcast. Be sure and check out my

1119
01:09:54,439 --> 01:09:59,639
Speaker 1: new podcast At the Money, short conversations with experts about

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01:09:59,680 --> 01:10:04,160
Speaker 1: top related to your money, earning it, spending it, and

1121
01:10:04,240 --> 01:10:08,920
Speaker 1: most importantly investing it At the Money wherever you find

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01:10:09,120 --> 01:10:13,639
Speaker 1: your favorite podcast, or in the Masters in Business podcast feed.

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01:10:14,280 --> 01:10:16,040
Speaker 1: I would be remiss if I do not thank the

1124
01:10:16,080 --> 01:10:19,439
Speaker 1: crack staff that helps put these conversations together each week.

1125
01:10:19,840 --> 01:10:23,720
Speaker 1: Meredith Frank is my audio engineer. Attika Valbron is my

1126
01:10:23,880 --> 01:10:29,360
Speaker 1: project manager. Sean Russo is my researcher. Anna Luke is

1127
01:10:29,400 --> 01:10:34,040
Speaker 1: my producer. Sage Bauman is the head of Podcasts at Bloomberg.

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01:10:34,720 --> 01:10:38,679
Speaker 1: I'm Barry Retolts. You've been listening to Masters in Business

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01:10:39,280 --> 01:10:40,519
Speaker 1: on Bloomberg Radio.