1 00:00:18,400 --> 00:00:21,200 Speaker 1: Hello, and welcome to The Credit Edge, a weekly markets podcast. 2 00:00:21,480 --> 00:00:24,000 Speaker 1: My name is James Crombie. I'm a senior editor at Bloomberg. 3 00:00:24,560 --> 00:00:26,960 Speaker 1: This week, we're very pleased to welcome Mike Dennis, co 4 00:00:27,040 --> 00:00:29,680 Speaker 1: head of emia Credit at Aries Management in London. How 5 00:00:29,680 --> 00:00:32,040 Speaker 1: are you, Mike, Yeah, very well, James, thank you, Thank 6 00:00:32,040 --> 00:00:33,839 Speaker 1: you so much for joining us today. We're very excited 7 00:00:33,880 --> 00:00:37,000 Speaker 1: to dig into your credit market views. Also delighted to 8 00:00:37,000 --> 00:00:40,720 Speaker 1: welcome back Bloomberg's very own Lisa Lee covering markets from London. 9 00:00:40,720 --> 00:00:41,800 Speaker 1: Great see you and Lisa. 10 00:00:41,880 --> 00:00:43,680 Speaker 2: Great to see you and thanks for having me again. 11 00:00:44,040 --> 00:00:47,479 Speaker 1: And from Bloomberg Intelligence. Excellent to see Stefan cob Chef, 12 00:00:47,720 --> 00:00:49,280 Speaker 1: also in London. Welcome back to Stefan. 13 00:00:49,479 --> 00:00:50,839 Speaker 3: Hi James, thanks for having me. 14 00:00:51,080 --> 00:00:52,879 Speaker 1: So let's start with you, Mike. Great to see you 15 00:00:52,920 --> 00:00:55,120 Speaker 1: on the Credit Edge. We're going to get to the 16 00:00:55,160 --> 00:00:58,160 Speaker 1: specifics of your portfolio and your positioning, but let's start 17 00:00:58,280 --> 00:01:02,440 Speaker 1: with a macroview. The economy is chugging away, inflation is moderating. 18 00:01:02,480 --> 00:01:05,319 Speaker 1: It's all about rates now. Last year turned out to 19 00:01:05,319 --> 00:01:07,080 Speaker 1: be a good one for credit, mostly because of a 20 00:01:07,160 --> 00:01:10,000 Speaker 1: huge rally in November and December, which really did seem 21 00:01:10,000 --> 00:01:13,480 Speaker 1: to come from very aggressive policy easing priced in early 22 00:01:13,880 --> 00:01:17,400 Speaker 1: and probably too much, it would seem. Now those duvish 23 00:01:17,400 --> 00:01:20,200 Speaker 1: bets are being unwhelmed. The Fed's pushing back on any 24 00:01:20,200 --> 00:01:22,959 Speaker 1: imminent rate cuts. Markets are selling off just as we're 25 00:01:22,959 --> 00:01:26,240 Speaker 1: seeing corporate supply really ramping up. So where do we 26 00:01:26,280 --> 00:01:26,720 Speaker 1: go from here? 27 00:01:26,760 --> 00:01:26,960 Speaker 2: Mike? 28 00:01:27,080 --> 00:01:29,520 Speaker 1: Everyone keeps telling us this is a great credit market, 29 00:01:29,600 --> 00:01:32,320 Speaker 1: tons of opportunity out there. But when does the FED 30 00:01:32,360 --> 00:01:35,240 Speaker 1: start cutting? How much will they reduce rates? Do they 31 00:01:35,280 --> 00:01:37,480 Speaker 1: even need to do anything given how well the economy's 32 00:01:37,520 --> 00:01:39,360 Speaker 1: performing right now? What's your view? Yeah? 33 00:01:39,680 --> 00:01:42,880 Speaker 4: I think rates are due to come down this year, 34 00:01:43,520 --> 00:01:45,720 Speaker 4: but let's not forget you know, it wasn't too long ago. 35 00:01:45,760 --> 00:01:47,960 Speaker 4: We're in a zero rate environment, So even if they 36 00:01:48,000 --> 00:01:51,040 Speaker 4: come down, I think they're only going to moderately reduce 37 00:01:51,120 --> 00:01:54,800 Speaker 4: during twenty twenty four, and that creates a good environment 38 00:01:54,880 --> 00:01:58,520 Speaker 4: for credit. I think people have more confidence as to 39 00:01:58,560 --> 00:02:02,240 Speaker 4: where rates are going. That, combined with what you've just 40 00:02:02,280 --> 00:02:05,800 Speaker 4: said there, James, combined with the benign macro environment is 41 00:02:05,880 --> 00:02:09,800 Speaker 4: driving activity levels, and we definitely saw more activity in 42 00:02:09,919 --> 00:02:13,680 Speaker 4: Q four and I think that's translated into more activity 43 00:02:13,720 --> 00:02:16,520 Speaker 4: in Q one. So actually, in terms of the deal environment, 44 00:02:16,520 --> 00:02:19,200 Speaker 4: from an activity point of view, I think, actually, this 45 00:02:19,320 --> 00:02:22,680 Speaker 4: is a pretty good time to be in credit. And 46 00:02:22,760 --> 00:02:25,040 Speaker 4: as I say, even if rates come down a little bit, 47 00:02:25,320 --> 00:02:28,919 Speaker 4: you know, we're talking about rates at three four four 48 00:02:28,919 --> 00:02:31,720 Speaker 4: percent plus. You know that combined with the spreads you're 49 00:02:31,720 --> 00:02:36,360 Speaker 4: finding in credit today, still generate relatively good risk adjusted return. 50 00:02:36,840 --> 00:02:38,320 Speaker 1: So I just wanted to take advantage of that. You're 51 00:02:38,320 --> 00:02:40,440 Speaker 1: in Europe and you cover Europe to sort of dig 52 00:02:40,480 --> 00:02:43,320 Speaker 1: a little bit into that region. When we talk to 53 00:02:43,360 --> 00:02:46,360 Speaker 1: global portfolio managers about Europe, they'd certainly like the sound 54 00:02:46,360 --> 00:02:49,200 Speaker 1: of it for potential diversification, or too because it looks 55 00:02:49,520 --> 00:02:53,640 Speaker 1: relatively cheap. Of course they skew to the bigger US market, 56 00:02:53,720 --> 00:02:56,760 Speaker 1: and maybe Europe's cheap for a reason because of those economies. 57 00:02:56,800 --> 00:02:59,000 Speaker 1: You know, they seem a bit more challenged in the US, 58 00:02:59,440 --> 00:03:02,680 Speaker 1: A lot of issue with inflation, which is tying policy makers' hands. 59 00:03:02,919 --> 00:03:04,959 Speaker 1: Also seems to be you know, the headlines we're seeing 60 00:03:05,000 --> 00:03:09,560 Speaker 1: this week on property issues with the banks. What's the 61 00:03:09,600 --> 00:03:14,079 Speaker 1: macro outlook in terms of emia From where you sit, Mike. 62 00:03:14,480 --> 00:03:17,440 Speaker 4: Yeah, Look, I think this is a challenge that sitting 63 00:03:17,480 --> 00:03:20,079 Speaker 4: in London I get. I get a lot from global 64 00:03:20,080 --> 00:03:24,680 Speaker 4: investors and commentators. Look, the reality is most commentators would 65 00:03:24,680 --> 00:03:28,040 Speaker 4: have had the UK and the European markets in recession 66 00:03:28,360 --> 00:03:31,560 Speaker 4: at this point, and the fact is that's just not happened. Actually, 67 00:03:31,560 --> 00:03:35,080 Speaker 4: what we're seeing is is low but growth, positive growth. 68 00:03:35,480 --> 00:03:38,400 Speaker 4: And again let's let's let's you know, talk about what 69 00:03:38,440 --> 00:03:40,920 Speaker 4: we're trying to do, what credit investors are trying to do, 70 00:03:41,480 --> 00:03:44,760 Speaker 4: they're for the most part taking firstly in seeny secured 71 00:03:44,880 --> 00:03:48,720 Speaker 4: risk through thirty forty percent loan to value and therefore, 72 00:03:48,880 --> 00:03:53,360 Speaker 4: as long as you're in a stable economic environment, actually 73 00:03:53,400 --> 00:03:56,600 Speaker 4: the GDP growth doesn't need to be that positive to 74 00:03:56,680 --> 00:04:01,160 Speaker 4: make these senior investments attractive. So actually, as a senior 75 00:04:01,200 --> 00:04:04,720 Speaker 4: secured lender for the most part, seeing growth at zero 76 00:04:04,760 --> 00:04:07,560 Speaker 4: point five percent up to maybe one percent across most 77 00:04:07,640 --> 00:04:10,920 Speaker 4: of the markets in Europe, that's not a bad place 78 00:04:10,920 --> 00:04:13,200 Speaker 4: to be. It might not work for the equity, but 79 00:04:13,320 --> 00:04:17,320 Speaker 4: actually it works for credit investors. And so you know, 80 00:04:17,600 --> 00:04:19,640 Speaker 4: there's an overlay to that as well, James, which is 81 00:04:19,680 --> 00:04:23,960 Speaker 4: to say, you know, credit investors aren't buying GDP, right, 82 00:04:24,000 --> 00:04:27,920 Speaker 4: they're not buying the macro, We're not buying to a benchmark, right. 83 00:04:28,000 --> 00:04:31,440 Speaker 4: Private credit direct lending is a very selective asset class 84 00:04:31,480 --> 00:04:36,480 Speaker 4: where we're specifically choosing to invest in companies and sectors 85 00:04:36,920 --> 00:04:40,479 Speaker 4: that are actually in growth and don't exhibit some of 86 00:04:40,520 --> 00:04:43,919 Speaker 4: the cyclical characteristics maybe that you've just alluded to. So 87 00:04:43,960 --> 00:04:46,920 Speaker 4: when you look across direct lending or private credit portfolios, 88 00:04:46,960 --> 00:04:50,760 Speaker 4: generally you're not going to see a lot of consumer 89 00:04:51,000 --> 00:04:53,280 Speaker 4: B two C. You're not going to see a lot 90 00:04:53,279 --> 00:04:57,599 Speaker 4: of energy, construction, manufacturing. What you will find is actually 91 00:04:57,600 --> 00:05:00,440 Speaker 4: a lot of B to B type businesses. These are 92 00:05:00,440 --> 00:05:05,560 Speaker 4: the service based businesses, software, technology, healthcare, education, etc. And 93 00:05:05,600 --> 00:05:09,840 Speaker 4: so those sectors tend to exhibit more defensive characteristics, and 94 00:05:09,880 --> 00:05:13,360 Speaker 4: therefore whether the economy is growing at zero one two 95 00:05:13,440 --> 00:05:17,159 Speaker 4: percent actually doesn't really matter for senior secured credit investors. 96 00:05:17,440 --> 00:05:18,960 Speaker 2: You've been one of the areas is one of the 97 00:05:19,040 --> 00:05:23,040 Speaker 2: biggest and leading private credit lenders, and you also have 98 00:05:23,320 --> 00:05:27,520 Speaker 2: a sizeable liquid business. Let me bring up the example 99 00:05:27,640 --> 00:05:30,000 Speaker 2: ar Dona, which even a few months ago we were 100 00:05:30,040 --> 00:05:32,719 Speaker 2: expecting to go to the private credit lenders and perhaps 101 00:05:32,800 --> 00:05:36,719 Speaker 2: even be the biggest private credit loan ever, and instead 102 00:05:36,760 --> 00:05:40,520 Speaker 2: now it's going almost half two billion into the public 103 00:05:40,560 --> 00:05:44,040 Speaker 2: debt markets high yr bonds, and then three for direct lending. 104 00:05:44,360 --> 00:05:46,800 Speaker 2: Tell me, what does that tell you about the health 105 00:05:46,839 --> 00:05:48,960 Speaker 2: of the market and opportunities for private credit. 106 00:05:49,720 --> 00:05:52,839 Speaker 4: Yeah, and let's not forget Our Donna was financed in 107 00:05:52,839 --> 00:05:55,960 Speaker 4: the private credit markets for some time. But as I 108 00:05:56,000 --> 00:05:58,679 Speaker 4: said before, you know, given the confidence in the macro, 109 00:05:58,720 --> 00:06:03,520 Speaker 4: given the ability of the macro and the I think 110 00:06:03,600 --> 00:06:06,479 Speaker 4: most investors now have some kind of view as to 111 00:06:06,520 --> 00:06:09,920 Speaker 4: where rates are going, and probably down, not up. That 112 00:06:09,960 --> 00:06:13,280 Speaker 4: has given the confidence for this the public credit markets 113 00:06:13,320 --> 00:06:15,960 Speaker 4: to become more active. So I think it was inevitable 114 00:06:16,279 --> 00:06:19,400 Speaker 4: as we entered into twenty twenty four that the banks 115 00:06:19,440 --> 00:06:22,320 Speaker 4: and public credit investors would be more involved in assets 116 00:06:22,440 --> 00:06:24,440 Speaker 4: like Our Donna, And I think that's what's going to 117 00:06:24,480 --> 00:06:26,599 Speaker 4: happen in twenty twenty four. You're going to see this 118 00:06:26,720 --> 00:06:34,440 Speaker 4: continued convergence and coexistence between public and private credit. I 119 00:06:34,560 --> 00:06:38,679 Speaker 4: think that's especially true in the European markets, and even 120 00:06:38,680 --> 00:06:41,400 Speaker 4: more so in the Sterling markets, where liquidity I think 121 00:06:41,440 --> 00:06:42,760 Speaker 4: will continue to be constrained. 122 00:06:43,240 --> 00:06:45,840 Speaker 1: There's a sense of that the private credit came in 123 00:06:45,880 --> 00:06:48,719 Speaker 1: when times were rookie, and now that times aren't so rookie, 124 00:06:48,720 --> 00:06:51,440 Speaker 1: and you know, the public markets say gaining confidence that 125 00:06:51,760 --> 00:06:54,800 Speaker 1: the sort of the value proposition of private credit is 126 00:06:54,839 --> 00:06:58,400 Speaker 1: somewhat diminished, and public markets end up sort of naturally 127 00:06:58,800 --> 00:07:01,000 Speaker 1: taking those deals back in the you know, the whole 128 00:07:01,200 --> 00:07:03,560 Speaker 1: hype about the golden age of private credit that all 129 00:07:03,600 --> 00:07:05,279 Speaker 1: sort of fades now at this point, do do you 130 00:07:05,600 --> 00:07:07,240 Speaker 1: think that that's that's a possibility. 131 00:07:08,040 --> 00:07:11,240 Speaker 4: Well, James, I really don't like the term the golden 132 00:07:11,280 --> 00:07:14,240 Speaker 4: age of private credit because frankly, I think it's been 133 00:07:14,280 --> 00:07:16,480 Speaker 4: a good time for private credit for some time. So 134 00:07:17,360 --> 00:07:22,960 Speaker 4: now let me just address the public private credit coexistence 135 00:07:23,000 --> 00:07:27,000 Speaker 4: a little bit a little bit more. And the reality is, yes, 136 00:07:27,240 --> 00:07:29,840 Speaker 4: are done at tapped the private markets when the overall 137 00:07:29,880 --> 00:07:33,120 Speaker 4: market was a little bit bit trickier. But don't forget 138 00:07:33,440 --> 00:07:37,040 Speaker 4: private credit players or direct lending players in general, look 139 00:07:37,080 --> 00:07:40,720 Speaker 4: at that large end of the market Opportunistically, they're businesses. 140 00:07:41,240 --> 00:07:46,680 Speaker 4: Our businesses are not founded on those larger bit those 141 00:07:46,800 --> 00:07:50,520 Speaker 4: larger deals basically sustaining our business model. For the most part, 142 00:07:50,680 --> 00:07:54,960 Speaker 4: direct lenders heritage and foundation was really in the mid market, 143 00:07:55,160 --> 00:07:58,360 Speaker 4: and that's where most of that deal activity, most of 144 00:07:58,400 --> 00:08:01,280 Speaker 4: the deployment of direct lenders and private credit providers, that's 145 00:08:01,320 --> 00:08:05,040 Speaker 4: where it sits. And so, yes, our Donna was slightly 146 00:08:05,080 --> 00:08:07,320 Speaker 4: different in that it was a very large deal. Private 147 00:08:07,320 --> 00:08:11,360 Speaker 4: credit took that down in a difficult credit market, but 148 00:08:11,480 --> 00:08:16,440 Speaker 4: that doesn't take away the proposition or the value add 149 00:08:16,480 --> 00:08:19,640 Speaker 4: that direct lenders and private credit providers can provide to 150 00:08:19,680 --> 00:08:22,840 Speaker 4: middle market lenders. I think that's absolutely still true, and 151 00:08:22,920 --> 00:08:25,560 Speaker 4: the tailwinds in that market are as good as ever 152 00:08:26,040 --> 00:08:29,400 Speaker 4: the banks continue to retrench, the commercial banks, those middle 153 00:08:29,400 --> 00:08:32,000 Speaker 4: market banks are still risk off for the most part. 154 00:08:32,559 --> 00:08:34,760 Speaker 4: You know, we've talked about interest rates, but interest rates 155 00:08:34,800 --> 00:08:37,199 Speaker 4: are still going to be north of zero, and therefore 156 00:08:37,240 --> 00:08:39,360 Speaker 4: cash coupons on these loans are still going to be 157 00:08:39,400 --> 00:08:43,400 Speaker 4: relatively attractive in twenty twenty four and beyond, and so 158 00:08:44,280 --> 00:08:46,760 Speaker 4: again I don't think we should get hung up looking 159 00:08:46,840 --> 00:08:49,120 Speaker 4: at the one or two deals at the large end 160 00:08:49,120 --> 00:08:51,800 Speaker 4: of the market that the private credit providers did maybe 161 00:08:51,840 --> 00:08:54,400 Speaker 4: in twenty two to twenty twenty three. That does not 162 00:08:54,559 --> 00:08:58,080 Speaker 4: change the value proposition of private credit or direct lending 163 00:08:58,120 --> 00:08:58,800 Speaker 4: to investors. 164 00:08:59,440 --> 00:09:02,920 Speaker 3: Great and maybe a question on the potential risks ahead 165 00:09:03,040 --> 00:09:06,800 Speaker 3: from me. I'm coming from a cyclical industrial background, so 166 00:09:07,400 --> 00:09:10,520 Speaker 3: obviously in the US we have elections and around Europe 167 00:09:10,559 --> 00:09:13,520 Speaker 3: as well, and a lot of geopolitical risk as well, 168 00:09:13,840 --> 00:09:18,000 Speaker 3: especially here in Europe. So wondering how are you thinking 169 00:09:18,040 --> 00:09:23,680 Speaker 3: about allocation of risk in the year ahead. It will 170 00:09:23,679 --> 00:09:27,400 Speaker 3: there be some potential traps or land minds to avoid. 171 00:09:27,960 --> 00:09:30,720 Speaker 4: Yeah, well, it's interesting you've picked up on the geopolitical 172 00:09:30,760 --> 00:09:33,679 Speaker 4: point because I actually do think whilst there has been 173 00:09:33,679 --> 00:09:36,800 Speaker 4: more activity from the public, credit markets and banks have 174 00:09:36,840 --> 00:09:40,040 Speaker 4: come back pretty strongly, I guess in early twenty twenty four. 175 00:09:40,559 --> 00:09:44,079 Speaker 4: I think the capital markets in general are still pretty fragile. Right, 176 00:09:44,160 --> 00:09:47,760 Speaker 4: It wouldn't take much for that liquidity to reverse out 177 00:09:47,760 --> 00:09:50,640 Speaker 4: of the system. Some of those geopolitical risks you've just 178 00:09:50,720 --> 00:09:53,480 Speaker 4: talked about may welcome to the forum. We've got elections 179 00:09:53,520 --> 00:09:56,760 Speaker 4: later in the year. I do think that creates quite 180 00:09:56,760 --> 00:09:59,960 Speaker 4: a bit of fragility, and therefore actually maybe private market 181 00:10:00,040 --> 00:10:03,520 Speaker 4: it will play a larger role in these larger deals 182 00:10:03,520 --> 00:10:06,200 Speaker 4: this year if that comes to fruition in terms of 183 00:10:06,200 --> 00:10:08,120 Speaker 4: the way we think about risk, and go back to 184 00:10:08,160 --> 00:10:11,080 Speaker 4: something I said earlier, you know, look, we are cash 185 00:10:11,120 --> 00:10:13,920 Speaker 4: flow lenders. For the most part. We are looking at 186 00:10:14,080 --> 00:10:19,000 Speaker 4: or trying to find companies in sectors which demonstrate real 187 00:10:19,160 --> 00:10:23,080 Speaker 4: resilience at the revenue line with really good margin structure. 188 00:10:23,600 --> 00:10:26,520 Speaker 4: Right on top of that, these businesses have to generate 189 00:10:26,640 --> 00:10:29,400 Speaker 4: really good levels of cash conversion. So when you ask 190 00:10:29,440 --> 00:10:34,000 Speaker 4: me about industrial cyclicals, those types of businesses are never 191 00:10:34,080 --> 00:10:37,360 Speaker 4: going to be or find their way into kind of 192 00:10:37,559 --> 00:10:40,360 Speaker 4: the direct lending portfolios in any big way, right. I mean, 193 00:10:40,400 --> 00:10:43,240 Speaker 4: there's always exceptions to the rule, but there's never going 194 00:10:43,320 --> 00:10:45,680 Speaker 4: to be big allocations to those kind of cyclicals for 195 00:10:45,720 --> 00:10:47,520 Speaker 4: the reason the reason I mentioned. 196 00:10:48,280 --> 00:10:50,920 Speaker 1: We've talked a lot about all the money being raised 197 00:10:50,960 --> 00:10:54,160 Speaker 1: for this strategy. Private credit, you know, is the big 198 00:10:54,200 --> 00:10:57,640 Speaker 1: thing when there is too much money tasing too few goods. 199 00:10:57,640 --> 00:10:59,520 Speaker 1: I mean, there aren't that many deals to go around. 200 00:11:00,000 --> 00:11:02,720 Speaker 1: Sometimes there's a there's a risk of you know, bad 201 00:11:02,720 --> 00:11:07,360 Speaker 1: deals happening. Do you fear that some you know, there 202 00:11:07,360 --> 00:11:09,160 Speaker 1: may be some lemons out there, there may be a 203 00:11:09,240 --> 00:11:13,440 Speaker 1: bigger default risk appearing. I mean, it's it's also very 204 00:11:13,440 --> 00:11:15,400 Speaker 1: hard to see the defaults because these things get amended. 205 00:11:15,440 --> 00:11:18,200 Speaker 1: But do you feel that, you know, we are going 206 00:11:18,280 --> 00:11:20,319 Speaker 1: to get a lot more defaults in private credit? 207 00:11:20,679 --> 00:11:22,080 Speaker 4: Well let me let me come on to the default 208 00:11:22,120 --> 00:11:25,120 Speaker 4: question in a minute, James. But just to you know, 209 00:11:25,240 --> 00:11:28,400 Speaker 4: think about you know, too much capital chasing too few 210 00:11:28,400 --> 00:11:32,160 Speaker 4: deals or that that's your I guess perception potentially, But 211 00:11:32,640 --> 00:11:35,560 Speaker 4: let's look at Europe. Europe is a market for direct 212 00:11:35,640 --> 00:11:38,640 Speaker 4: lenders and private credit providers where they are continuing to 213 00:11:38,679 --> 00:11:41,880 Speaker 4: take share from banks. So this is not necessarily just 214 00:11:42,160 --> 00:11:44,760 Speaker 4: about the size of the market. It's about the relative 215 00:11:44,760 --> 00:11:47,320 Speaker 4: shares within it. And actually, as I said before, there's 216 00:11:47,360 --> 00:11:50,160 Speaker 4: a lot of tailwinds for direct lenders as they take 217 00:11:50,200 --> 00:11:54,000 Speaker 4: market share away from the commercial banks. So I would argue, actually, 218 00:11:54,040 --> 00:11:58,800 Speaker 4: there isn't sufficient dry powder in the private lending community, 219 00:11:58,840 --> 00:12:01,839 Speaker 4: the direct lending community, to actually meet the demand. I mean, 220 00:12:01,840 --> 00:12:04,560 Speaker 4: you think about the amount of dry powder in the 221 00:12:04,600 --> 00:12:07,320 Speaker 4: private equity markets in Europe today. You know, we're talking 222 00:12:07,360 --> 00:12:10,400 Speaker 4: about two hundred and fifty billion plus. The dry powder 223 00:12:10,400 --> 00:12:13,120 Speaker 4: in the direct lending market in Europe we would estimate 224 00:12:13,240 --> 00:12:16,400 Speaker 4: closer to sixty seventy billion. So I would argue, actually, 225 00:12:16,440 --> 00:12:18,920 Speaker 4: there's a mismatch the other way, James. And if the 226 00:12:18,960 --> 00:12:22,160 Speaker 4: commercial banks aren't going to fill that void, right, who is? 227 00:12:22,679 --> 00:12:24,800 Speaker 4: And in Europe, clearly it's going to be the direct lenders. 228 00:12:24,800 --> 00:12:27,920 Speaker 4: You know, in Europe, we don't have BDC structures, we 229 00:12:28,000 --> 00:12:31,160 Speaker 4: don't really have mid market clos we don't have those 230 00:12:31,200 --> 00:12:35,120 Speaker 4: other sources of credit and capital creation that you do 231 00:12:35,160 --> 00:12:37,720 Speaker 4: in the US, it's really just the commercial banks and 232 00:12:37,760 --> 00:12:40,360 Speaker 4: the direct lenders, and so I think we're in a 233 00:12:40,360 --> 00:12:43,840 Speaker 4: market actually where the supply demand imbalance is in favor 234 00:12:43,880 --> 00:12:47,840 Speaker 4: of the direct lenders potentially rather than the other way around. 235 00:12:48,600 --> 00:12:52,400 Speaker 2: Well, since you did mentioned dry powder areas is one 236 00:12:52,400 --> 00:12:55,720 Speaker 2: of the most active fundraiser what is the fundraising environment 237 00:12:55,800 --> 00:12:58,120 Speaker 2: right like right now? And how often are you on 238 00:12:58,120 --> 00:13:00,920 Speaker 2: a plane? And when's the first destination go to in 239 00:13:01,080 --> 00:13:03,560 Speaker 2: the least is it Japan less? 240 00:13:03,800 --> 00:13:05,520 Speaker 4: Well, so you know, I'm not going to talk about 241 00:13:05,520 --> 00:13:10,800 Speaker 4: specific fundraisers, but look, I would say that generally speaking, 242 00:13:11,320 --> 00:13:15,880 Speaker 4: investors are still looking to allocate to direct lending and 243 00:13:15,920 --> 00:13:18,640 Speaker 4: private credit generally for all the reasons we've talked about 244 00:13:18,679 --> 00:13:22,719 Speaker 4: over the last ten to fifteen minutes, because effectively they 245 00:13:22,800 --> 00:13:27,560 Speaker 4: can access high cash yielding investments with relatively low risk 246 00:13:27,720 --> 00:13:30,280 Speaker 4: right as I say, these are senior secured investments thirty 247 00:13:30,280 --> 00:13:34,920 Speaker 4: forty percent loan to value and with good governance and 248 00:13:35,000 --> 00:13:39,480 Speaker 4: structures around them. So I think from an allocation point 249 00:13:39,520 --> 00:13:41,839 Speaker 4: of view, we're certainly hearing from LPs that they want 250 00:13:41,880 --> 00:13:46,960 Speaker 4: to allocate more to the space. That said, there are 251 00:13:47,000 --> 00:13:51,320 Speaker 4: also global investor challenges, and those challenges come in the 252 00:13:51,320 --> 00:13:54,400 Speaker 4: form of liquidity. You know, let's not forget there's been 253 00:13:54,400 --> 00:13:57,480 Speaker 4: an awful lot of capital or allocations been made to 254 00:13:58,920 --> 00:14:01,640 Speaker 4: alternative asset class is over the last three, four, five, 255 00:14:01,679 --> 00:14:05,800 Speaker 4: six years. Question the amount of distributable proceeds that have 256 00:14:05,840 --> 00:14:08,800 Speaker 4: been given back to investors. So there is this the 257 00:14:08,840 --> 00:14:13,440 Speaker 4: liquidity or cash profiling challenge that some investors will face. 258 00:14:14,080 --> 00:14:17,319 Speaker 4: But I think they're doing all they can to allocate 259 00:14:17,480 --> 00:14:20,320 Speaker 4: to this vintage. I'm not going to use the word 260 00:14:20,640 --> 00:14:23,640 Speaker 4: Golden age, James, but you know they are doing all 261 00:14:23,680 --> 00:14:26,600 Speaker 4: they can to allocate to a vintage where you know, 262 00:14:27,040 --> 00:14:30,760 Speaker 4: interest rates will remain elevated, spreads are pretty stable, and 263 00:14:30,800 --> 00:14:33,880 Speaker 4: therefore the risk adjusted return of the asset class still 264 00:14:33,920 --> 00:14:34,960 Speaker 4: remains pretty attractive. 265 00:14:35,840 --> 00:14:40,680 Speaker 2: So fundraising is still going on and you're making your finding. 266 00:14:40,840 --> 00:14:45,160 Speaker 2: LPs are interested. One of the reasons why LPs like 267 00:14:45,320 --> 00:14:48,280 Speaker 2: private credit is the fact that you don't have as 268 00:14:48,360 --> 00:14:53,720 Speaker 2: much volatility. But as private credit and public markets sort 269 00:14:53,760 --> 00:14:56,960 Speaker 2: of converge and like take ARDNA once again, where you 270 00:14:57,000 --> 00:15:00,000 Speaker 2: are going to have a higher bond and a private 271 00:15:00,120 --> 00:15:04,880 Speaker 2: credit option, does the volatility starts to bleed in, it 272 00:15:04,920 --> 00:15:08,200 Speaker 2: will still be sort of a sort of immune from 273 00:15:08,240 --> 00:15:13,560 Speaker 2: volatility and more more commer more marks will be stable 274 00:15:13,720 --> 00:15:16,640 Speaker 2: or will it will there be more volatilely going forward? 275 00:15:17,600 --> 00:15:20,880 Speaker 4: Potentially a little bit. But again, think about the portfolio 276 00:15:21,520 --> 00:15:25,200 Speaker 4: formation of these direct lenders and private credit providers. For 277 00:15:25,200 --> 00:15:27,160 Speaker 4: the most part, you know, a lot of the allocation 278 00:15:27,240 --> 00:15:29,080 Speaker 4: is going to be into a liquid middle market debt, 279 00:15:29,120 --> 00:15:32,640 Speaker 4: which obviously doesn't exhibit the same levels of volatility. So 280 00:15:32,840 --> 00:15:35,400 Speaker 4: I think you might be right, but for a small 281 00:15:35,400 --> 00:15:38,040 Speaker 4: proportion of these portfolios. So I actually don't think it's 282 00:15:38,080 --> 00:15:41,760 Speaker 4: a too big a challenge for LPs to to get 283 00:15:41,800 --> 00:15:42,720 Speaker 4: their head around. 284 00:15:42,880 --> 00:15:45,000 Speaker 1: Going back to defaults. Like I know you want to 285 00:15:45,000 --> 00:15:49,040 Speaker 1: talk about them. The idea is that you're getting very 286 00:15:49,080 --> 00:15:51,880 Speaker 1: high yields, which is great for the investor, but possibly 287 00:15:51,880 --> 00:15:54,480 Speaker 1: not so much for the issuer in going into a 288 00:15:54,520 --> 00:15:57,160 Speaker 1: downturn where the earnings are going to be suffering at 289 00:15:57,160 --> 00:15:59,040 Speaker 1: the same time. You know, when we talk to private 290 00:15:59,080 --> 00:16:02,000 Speaker 1: credit investors, they'll say, well, we only do the good deals. 291 00:16:03,120 --> 00:16:06,360 Speaker 1: Surely that can't be always the case. What do you 292 00:16:06,400 --> 00:16:09,640 Speaker 1: think about the fault rates in this market? 293 00:16:09,840 --> 00:16:12,880 Speaker 4: Yeah, Look, I think the first thing to say is, actually, 294 00:16:12,960 --> 00:16:16,480 Speaker 4: when you look at private credit portfolios generally, what you 295 00:16:16,600 --> 00:16:21,960 Speaker 4: are seeing is actually pretty robust earnings growth. Right, Revenues 296 00:16:21,960 --> 00:16:24,680 Speaker 4: and earnings are growing. I would accept James, that in 297 00:16:24,840 --> 00:16:28,760 Speaker 4: most portfolios that we see, you're seeing some kind of 298 00:16:28,800 --> 00:16:32,560 Speaker 4: margin pressure. We all know twenty twenty three we saw 299 00:16:32,600 --> 00:16:36,200 Speaker 4: wage inflation, energy inflation, etc. That has a margin impact 300 00:16:36,720 --> 00:16:40,920 Speaker 4: at the underlying issuer level. That said, absolute earnings are 301 00:16:40,920 --> 00:16:45,560 Speaker 4: still continuing to grow in these niche segments, these sectors 302 00:16:45,560 --> 00:16:48,480 Speaker 4: that I've already talked to where we're focusing our time. 303 00:16:48,840 --> 00:16:53,680 Speaker 4: So I don't think today's issues one of operating performance 304 00:16:53,880 --> 00:16:58,600 Speaker 4: or profitability. Liquidity is more of a challenge because you've 305 00:16:58,600 --> 00:17:01,000 Speaker 4: gone from a zero to a four five base percent 306 00:17:01,040 --> 00:17:07,160 Speaker 4: base rate environment, so liquidity is more more challenged. But again, 307 00:17:07,480 --> 00:17:10,720 Speaker 4: you know, when you have well structured firstly in deals 308 00:17:10,720 --> 00:17:14,480 Speaker 4: through thirty forty percent LTV, you're very very well covered 309 00:17:14,480 --> 00:17:17,560 Speaker 4: from a valuation perspective. And even if you get a 310 00:17:17,600 --> 00:17:20,560 Speaker 4: tick up in defaults, which you could be right, James, 311 00:17:20,600 --> 00:17:23,040 Speaker 4: I think that's a possibility than in twenty twenty four 312 00:17:23,080 --> 00:17:26,280 Speaker 4: we see an increase in defaults, we actually should be 313 00:17:26,320 --> 00:17:29,360 Speaker 4: looking at loss given default you know, I think that's 314 00:17:29,480 --> 00:17:34,280 Speaker 4: much more of an important metric. And I think where 315 00:17:34,320 --> 00:17:35,720 Speaker 4: I think what you're going to find is in these 316 00:17:35,720 --> 00:17:39,879 Speaker 4: senior secured portfolio is the lost given default actually doesn't 317 00:17:39,960 --> 00:17:42,600 Speaker 4: doesn't go up. Actually, the recovery rates are very very 318 00:17:42,640 --> 00:17:45,240 Speaker 4: high on these senior secured loans. So I don't worry 319 00:17:45,280 --> 00:17:48,600 Speaker 4: too much about defaults because let's not forget, if you 320 00:17:48,720 --> 00:17:50,919 Speaker 4: have a default and you're a senior secured lender, that 321 00:17:50,920 --> 00:17:53,360 Speaker 4: actually gives you quite a lot of control. You can 322 00:17:53,359 --> 00:17:56,560 Speaker 4: reprice risk, you can take control of the asset in 323 00:17:56,640 --> 00:18:00,520 Speaker 4: extra miss So actually defaults in and of themselves are 324 00:18:00,560 --> 00:18:02,240 Speaker 4: not the issue. I think what we should be looking 325 00:18:02,240 --> 00:18:03,359 Speaker 4: at is loss given default. 326 00:18:03,760 --> 00:18:05,359 Speaker 1: And as Lisa has written a lot about, you know, 327 00:18:05,359 --> 00:18:07,679 Speaker 1: the recoveries have gone substantially down. You know, there used 328 00:18:07,680 --> 00:18:09,840 Speaker 1: to be about eighty percent. Now they're in the twenties 329 00:18:09,920 --> 00:18:12,560 Speaker 1: or thirties, So you're going to take a much bigger 330 00:18:12,600 --> 00:18:14,000 Speaker 1: hit potentially. Do you do you have a kind of 331 00:18:14,080 --> 00:18:16,520 Speaker 1: number in terms of your when you think about default rate, 332 00:18:16,520 --> 00:18:19,400 Speaker 1: because on the syndicated loans, I think Moody's is saying 333 00:18:19,400 --> 00:18:21,880 Speaker 1: around six percent or something, which doesn't seem presced into 334 00:18:21,640 --> 00:18:24,439 Speaker 1: the to the loan market. But is the default rate 335 00:18:24,520 --> 00:18:26,960 Speaker 1: much higher or is it lower? In direct lending? 336 00:18:26,960 --> 00:18:29,640 Speaker 4: Do you think it's I think it's a lot lower 337 00:18:29,640 --> 00:18:34,680 Speaker 4: into direct lending today, and I wouldn't recognize loss as 338 00:18:34,920 --> 00:18:39,040 Speaker 4: a loss given default at twenty percent because again, most 339 00:18:39,080 --> 00:18:41,440 Speaker 4: of the assets in the middle market where direct lenders 340 00:18:41,440 --> 00:18:44,720 Speaker 4: spend most of their time. You know you have one lender. 341 00:18:45,320 --> 00:18:48,639 Speaker 4: You're structuring these deals at very low loan to value. 342 00:18:48,960 --> 00:18:52,639 Speaker 4: Just think about all the equity value that sits across 343 00:18:52,680 --> 00:18:55,679 Speaker 4: these loans. You know that the equity value from these 344 00:18:55,720 --> 00:18:59,280 Speaker 4: private equity firms. They've invested a huge amount of capital 345 00:18:59,640 --> 00:19:03,280 Speaker 4: in thesesets and therefore there's a significant amount of value 346 00:19:03,280 --> 00:19:07,040 Speaker 4: to burn before actually the lenders start to lose money. 347 00:19:07,080 --> 00:19:09,840 Speaker 4: So I wouldn't recognize a loss given to fault anywhere 348 00:19:09,840 --> 00:19:10,600 Speaker 4: close to eighty. 349 00:19:10,400 --> 00:19:14,200 Speaker 3: Percent on your sector allocation preferences. You mentioned a very 350 00:19:14,240 --> 00:19:17,879 Speaker 3: benign macro environment, and a lot of people are also 351 00:19:17,960 --> 00:19:21,639 Speaker 3: talking about AI or the big tech So just wondering 352 00:19:21,680 --> 00:19:25,720 Speaker 3: if you have any specific picks in terms of big sectors. 353 00:19:26,359 --> 00:19:30,480 Speaker 4: No, Look, we're trying to create sector diversification for our investors. 354 00:19:30,480 --> 00:19:32,680 Speaker 4: That's something that's you know, that's important to them, it's 355 00:19:32,680 --> 00:19:37,240 Speaker 4: important to us as portfolio managers. And as I said before, 356 00:19:37,280 --> 00:19:41,320 Speaker 4: we're focusing on a number of sectors that show defensive characteristics, 357 00:19:41,680 --> 00:19:45,879 Speaker 4: so that would include a number We're not thematic investors 358 00:19:45,880 --> 00:19:48,440 Speaker 4: in that sense, right. It is very much bottom up 359 00:19:48,480 --> 00:19:51,439 Speaker 4: asset by assets specific. So I'm not trying as a 360 00:19:51,440 --> 00:19:55,720 Speaker 4: portfolio manager to invest to a theme in twenty twenty four. 361 00:19:56,200 --> 00:19:59,520 Speaker 4: I'm trying to originate as much as we can from 362 00:19:59,560 --> 00:20:01,879 Speaker 4: the market that we operate in and then be very 363 00:20:01,920 --> 00:20:04,040 Speaker 4: selective on an a set biast basis. 364 00:20:04,359 --> 00:20:07,200 Speaker 2: So ting to go back mic onto recoveries. And you're 365 00:20:07,200 --> 00:20:10,480 Speaker 2: saying they expect higher recoveries from little market loans. Now, 366 00:20:10,560 --> 00:20:12,800 Speaker 2: I was at ge Capital, but very short time, not 367 00:20:12,960 --> 00:20:15,239 Speaker 2: like you, not a senior level person like you, but 368 00:20:15,720 --> 00:20:17,880 Speaker 2: I do remember how long it took and how much 369 00:20:17,920 --> 00:20:20,760 Speaker 2: work it took to work out a troubled loan. Do 370 00:20:20,800 --> 00:20:24,080 Speaker 2: you think the industry as a general is aware of that. 371 00:20:24,080 --> 00:20:26,480 Speaker 2: There's a lot of new entrants, they have never seen 372 00:20:26,960 --> 00:20:31,160 Speaker 2: a real true default cycle or recession, and you can't 373 00:20:31,240 --> 00:20:34,760 Speaker 2: trade out of these things, and there's not I don't 374 00:20:34,800 --> 00:20:38,439 Speaker 2: see that many restructuring people in many of these shops. 375 00:20:38,480 --> 00:20:41,399 Speaker 2: So what is your forecast maybe for the industry wide? 376 00:20:41,480 --> 00:20:43,440 Speaker 4: I think that's a really interesting question. I mean It's 377 00:20:43,440 --> 00:20:46,840 Speaker 4: something that the areas we put a lot of resource 378 00:20:46,880 --> 00:20:51,200 Speaker 4: and focus on is the whole portfolio management, the restricturing capability, 379 00:20:52,000 --> 00:20:54,119 Speaker 4: the human talent, you know, human capsule we have in 380 00:20:54,160 --> 00:20:57,400 Speaker 4: that area. I think as an industry, yes, I think 381 00:20:57,440 --> 00:21:01,280 Speaker 4: people have built out origination teams, but the portfolio management 382 00:21:01,600 --> 00:21:05,040 Speaker 4: functionality has probably lagged. We've seen that change a little 383 00:21:05,080 --> 00:21:08,040 Speaker 4: bit in the last twelve, eighteen, twenty four months, but 384 00:21:08,800 --> 00:21:10,480 Speaker 4: I think you're right. I think there's still a little 385 00:21:10,520 --> 00:21:13,560 Speaker 4: bit of a gap in that area. And we all 386 00:21:13,600 --> 00:21:16,399 Speaker 4: know that restructurings do take a lot of time. And 387 00:21:16,440 --> 00:21:18,679 Speaker 4: I think we saw this a little bit in covidly, so, 388 00:21:18,720 --> 00:21:21,920 Speaker 4: which is to say, you know, a number of peers 389 00:21:22,359 --> 00:21:26,240 Speaker 4: really were inwardly looking during covid Ie. They were focused 390 00:21:26,240 --> 00:21:29,440 Speaker 4: on the portfolio. And it's really interesting because when you 391 00:21:29,480 --> 00:21:32,480 Speaker 4: go through periods of dislocation like that, actually what you 392 00:21:32,520 --> 00:21:35,000 Speaker 4: want to be doing is focusing on the new deal 393 00:21:35,040 --> 00:21:37,840 Speaker 4: market because frankly, the risk of just in return for 394 00:21:37,960 --> 00:21:41,280 Speaker 4: new deals when you go through periods of dislocation tend 395 00:21:41,359 --> 00:21:44,520 Speaker 4: to be attractive. So for me, you need to be 396 00:21:44,600 --> 00:21:47,879 Speaker 4: able to and have the resources to play both. I 397 00:21:48,000 --> 00:21:50,960 Speaker 4: use the American term offense and defense, right, you need 398 00:21:51,000 --> 00:21:54,000 Speaker 4: to be able to defend the portfolio, but at the 399 00:21:54,000 --> 00:21:56,159 Speaker 4: same time have the resources to go out into the 400 00:21:56,160 --> 00:21:58,960 Speaker 4: market and find that risk ad just a return which 401 00:21:59,000 --> 00:22:02,000 Speaker 4: potentially could be better because of the dislocation that's going 402 00:22:02,000 --> 00:22:03,359 Speaker 4: on in the wider market. 403 00:22:03,840 --> 00:22:06,360 Speaker 2: Since you mentioned discal location, it does seem like right 404 00:22:06,400 --> 00:22:09,280 Speaker 2: now the dislocation that we've experienced for the past year 405 00:22:09,280 --> 00:22:11,560 Speaker 2: and a half is sort of dissipating. But I wonder 406 00:22:11,640 --> 00:22:14,560 Speaker 2: how truly is that when you look at the levish 407 00:22:14,600 --> 00:22:17,960 Speaker 2: loan market and the higher bomb market across US and Europe. 408 00:22:18,240 --> 00:22:22,560 Speaker 2: For instance, in Europe, I mean in the US, cultivity 409 00:22:22,600 --> 00:22:25,080 Speaker 2: is going seems to be going to towards the bank route, 410 00:22:25,359 --> 00:22:28,000 Speaker 2: but in Ardna, like as you said, there's only five 411 00:22:28,080 --> 00:22:31,240 Speaker 2: hundred million that's coming to the European market. So how 412 00:22:31,280 --> 00:22:34,760 Speaker 2: strong is the bid in Europe and in the US? 413 00:22:34,960 --> 00:22:37,359 Speaker 2: And are base getting a little ahead of themselves given 414 00:22:37,400 --> 00:22:42,480 Speaker 2: that COLO issuance is better but not like rebounding in 415 00:22:42,520 --> 00:22:43,160 Speaker 2: a massive way. 416 00:22:43,280 --> 00:22:45,040 Speaker 4: Yeah, Look, I think the bank bid in the in 417 00:22:45,400 --> 00:22:48,520 Speaker 4: the US is absolutely stronger than it is in Europe, 418 00:22:48,520 --> 00:22:53,480 Speaker 4: and is stronger than the sterling markets. And that's probably 419 00:22:53,480 --> 00:22:58,080 Speaker 4: always been the case, COLO issuance actually look at is 420 00:22:58,080 --> 00:23:01,640 Speaker 4: still muted. Actually with we saw twenty six twenty seven 421 00:23:01,680 --> 00:23:04,320 Speaker 4: billion I think euros of new COLO issuance last year. 422 00:23:04,800 --> 00:23:07,800 Speaker 4: I think commentators would say that that should increase slightly 423 00:23:07,840 --> 00:23:11,119 Speaker 4: in twenty twenty four. But actually in terms of the 424 00:23:12,280 --> 00:23:15,760 Speaker 4: forecast for new lev loan activity, that's not going to 425 00:23:15,760 --> 00:23:18,800 Speaker 4: fill the gap. So it's really interesting. We've seen, you know, 426 00:23:18,920 --> 00:23:24,440 Speaker 4: the activity levels for refinancings, repricings, etc. When the new 427 00:23:24,560 --> 00:23:27,760 Speaker 4: M and A markets come back, then has is there 428 00:23:27,800 --> 00:23:30,840 Speaker 4: sufficient capital being raised within the COLO market and the 429 00:23:30,840 --> 00:23:34,360 Speaker 4: public credit markets to actually satisfy that. I think that's 430 00:23:34,400 --> 00:23:35,920 Speaker 4: a really big question, and I think it's a really 431 00:23:35,920 --> 00:23:39,000 Speaker 4: big question in the euro markets, but actually in the 432 00:23:39,000 --> 00:23:43,359 Speaker 4: Sterly markets more particularly. So we will see on that one. 433 00:23:43,400 --> 00:23:46,639 Speaker 2: I think since you mentioned M and A is it 434 00:23:46,640 --> 00:23:49,119 Speaker 2: coming back, because we have a lot of processes and 435 00:23:49,440 --> 00:23:51,679 Speaker 2: a lot of deals that don't seem to actually close. 436 00:23:52,400 --> 00:23:55,320 Speaker 2: When will we get a healthy M and A market? 437 00:23:55,320 --> 00:23:57,280 Speaker 2: Bag you talked to a lot of the PEA guys. 438 00:23:57,359 --> 00:24:00,520 Speaker 4: Sure, what is their thinking? Yeah, Look, it's the million 439 00:24:00,520 --> 00:24:03,280 Speaker 4: dollar question. There is no doubt there is pent up 440 00:24:03,320 --> 00:24:07,080 Speaker 4: demand and there's a lot of new deal activity, let's 441 00:24:07,119 --> 00:24:10,879 Speaker 4: say in the pipe, right, So we know that M 442 00:24:10,920 --> 00:24:14,960 Speaker 4: and A advisors due diligence advisors have published reports. There 443 00:24:15,000 --> 00:24:18,080 Speaker 4: is a lot of processes ready to go. And yeah, 444 00:24:18,160 --> 00:24:20,440 Speaker 4: the question is who's going to have the confidence to 445 00:24:21,000 --> 00:24:24,800 Speaker 4: press the button? Now? Given the benign macro, Given as 446 00:24:24,800 --> 00:24:27,200 Speaker 4: I say, people have got more visibility on where interest 447 00:24:27,280 --> 00:24:30,520 Speaker 4: rates are going, I suspect people will have the confidence 448 00:24:30,560 --> 00:24:33,400 Speaker 4: to push the button. And again I think I touched 449 00:24:33,400 --> 00:24:37,960 Speaker 4: on it earlier. LPs really want to see distributions. So 450 00:24:38,000 --> 00:24:39,840 Speaker 4: there's certainly a little bit of pressure coming from the 451 00:24:39,960 --> 00:24:43,320 Speaker 4: LP community to these managers saying, you know, we really 452 00:24:43,359 --> 00:24:45,320 Speaker 4: need you to go and realize some assets. You know, 453 00:24:45,640 --> 00:24:47,720 Speaker 4: go and sell, Go and sell some assets, Go and 454 00:24:47,720 --> 00:24:52,399 Speaker 4: create some distabultable proceeds that in itself will drive activity. 455 00:24:52,520 --> 00:24:55,040 Speaker 4: So you know, I am relatively optimistic that the M 456 00:24:55,080 --> 00:24:58,840 Speaker 4: and A markets will come back this year and come 457 00:24:58,880 --> 00:24:59,960 Speaker 4: back pretty pretty strong. 458 00:25:00,480 --> 00:25:03,880 Speaker 1: In terms of the global opportunity. When you look at 459 00:25:03,920 --> 00:25:05,640 Speaker 1: all of the stuff you're looking at all day long, 460 00:25:06,160 --> 00:25:08,439 Speaker 1: what's the best opportunity in terms of relative value? 461 00:25:09,680 --> 00:25:11,480 Speaker 4: Yeah, of course, I mean I could easily just talk 462 00:25:11,520 --> 00:25:13,240 Speaker 4: to my book in Europe, couldn't I James, that would 463 00:25:13,280 --> 00:25:15,680 Speaker 4: be the easiest thing to do. But I think when 464 00:25:15,680 --> 00:25:19,880 Speaker 4: we look at private credit globally, we're seeing obviously elevated 465 00:25:19,920 --> 00:25:23,560 Speaker 4: yields because of base rates. We're seeing risk come down mathematically, 466 00:25:23,560 --> 00:25:26,720 Speaker 4: that has to be the case because of serviceability and 467 00:25:26,760 --> 00:25:30,240 Speaker 4: where interest rates are. So you know, we see in 468 00:25:30,600 --> 00:25:33,960 Speaker 4: most regions of the world attractive risk of just a 469 00:25:34,000 --> 00:25:38,520 Speaker 4: return for direct lending, and the liquidity premium relative to 470 00:25:38,520 --> 00:25:42,800 Speaker 4: the liquid markets is continuing to be consistent. So you know, 471 00:25:42,840 --> 00:25:44,600 Speaker 4: I'm not going to pick one region in the world, James, 472 00:25:44,760 --> 00:25:47,119 Speaker 4: I think, or else i'd be accused of talking my 473 00:25:47,160 --> 00:25:48,080 Speaker 4: own book in Europe. 474 00:25:48,760 --> 00:25:50,520 Speaker 1: So you're not then worried. I mean, we've talked a 475 00:25:50,520 --> 00:25:52,240 Speaker 1: little bit around this, but you're not worried about the 476 00:25:52,960 --> 00:25:56,280 Speaker 1: comeback of the public markets sort of taking away returns 477 00:25:56,440 --> 00:25:59,439 Speaker 1: or taking away the advantage from direct lending. 478 00:26:00,040 --> 00:26:02,520 Speaker 4: Look, as I think i'd touched on a few minutes ago. 479 00:26:02,800 --> 00:26:05,800 Speaker 4: You know, direct lending is really founded on and the 480 00:26:05,840 --> 00:26:08,440 Speaker 4: heritage of that business is in the middle market where 481 00:26:08,480 --> 00:26:11,680 Speaker 4: banks you know, are not underwriting, right, I mean, as 482 00:26:11,680 --> 00:26:14,879 Speaker 4: I say, I think the underwriting market is still relatively fragile. Today, 483 00:26:14,880 --> 00:26:19,280 Speaker 4: we're seeing flex in those in those banking deals, you know, 484 00:26:19,480 --> 00:26:21,920 Speaker 4: and that that flex can be punitive, which is why 485 00:26:21,960 --> 00:26:24,120 Speaker 4: some of these deals are not getting done. To Lisa's point, 486 00:26:24,680 --> 00:26:28,640 Speaker 4: so look, even if the public credit markets came back 487 00:26:28,680 --> 00:26:31,520 Speaker 4: strongly this year, that does not impact on the bread 488 00:26:31,560 --> 00:26:33,520 Speaker 4: and butter, if you like, of direct lenders, which is 489 00:26:33,560 --> 00:26:37,360 Speaker 4: that core middle market we've we are seeing that convergence though. 490 00:26:37,440 --> 00:26:40,159 Speaker 4: I mean, you know, I think now borrowers have have 491 00:26:40,400 --> 00:26:43,600 Speaker 4: tasted what it's like to have direct lending or private 492 00:26:43,640 --> 00:26:47,120 Speaker 4: credit providers in their capital structures. I think we are 493 00:26:47,119 --> 00:26:50,040 Speaker 4: going to coexist. I think we're pretty well entrenched in 494 00:26:50,119 --> 00:26:53,200 Speaker 4: some of these larger cap type financings. So I don't 495 00:26:53,240 --> 00:26:55,760 Speaker 4: think I don't think, you know, we kind of totally 496 00:26:55,840 --> 00:26:58,200 Speaker 4: disappear from that end of the market. But as I said, 497 00:26:58,200 --> 00:27:01,719 Speaker 4: you know, we've treated that market as opportunistic. It doesn't 498 00:27:01,760 --> 00:27:04,800 Speaker 4: really dictate our value proposition, which is more, you know, 499 00:27:04,960 --> 00:27:06,320 Speaker 4: more in that middle market space. 500 00:27:06,800 --> 00:27:08,119 Speaker 1: And just to give you a chance to talk your 501 00:27:08,240 --> 00:27:11,359 Speaker 1: ine book in terms of Europe. When you meet someone, 502 00:27:11,640 --> 00:27:14,800 Speaker 1: you know, let's say in Abudabi or Toronto or wherever, 503 00:27:15,119 --> 00:27:18,360 Speaker 1: a talk about private credit and they say, why Europe, 504 00:27:18,480 --> 00:27:21,040 Speaker 1: what's the response, Why Europe? At this point. 505 00:27:21,440 --> 00:27:23,680 Speaker 4: Yeah, look to your point James earlier, I think it's 506 00:27:23,680 --> 00:27:30,119 Speaker 4: a really good diversifier to people's global global portfolios. Europe 507 00:27:30,240 --> 00:27:33,439 Speaker 4: is in a different stage of its life cycle relative 508 00:27:33,480 --> 00:27:35,600 Speaker 4: to the US. Right. The US, we all acknowledge, is 509 00:27:35,640 --> 00:27:40,080 Speaker 4: a pretty mature private credit market. Europe really, you know, 510 00:27:40,240 --> 00:27:42,399 Speaker 4: only got going in twenty eleven twelve. I know we 511 00:27:42,440 --> 00:27:44,560 Speaker 4: set our business up in two thousand and seven, but 512 00:27:44,640 --> 00:27:47,520 Speaker 4: it was really only twenty eleven twelve where direct lending 513 00:27:47,600 --> 00:27:51,040 Speaker 4: really became in and of itself an asset class in Europe. 514 00:27:51,119 --> 00:27:53,200 Speaker 4: So you know, we're a kind of decade in James. 515 00:27:53,280 --> 00:27:56,359 Speaker 4: So you know, we're still really growing quite quickly as 516 00:27:56,680 --> 00:27:59,359 Speaker 4: the asset class matures, and with that growth becomes obviously 517 00:27:59,480 --> 00:28:03,040 Speaker 4: depoylant deployment opportunity, et cetera. And as I said before, 518 00:28:03,119 --> 00:28:06,520 Speaker 4: from a competitive dynamic perspective, you know, it is just 519 00:28:06,600 --> 00:28:09,240 Speaker 4: less complex, it's more simple in Europe. You know, we've 520 00:28:09,240 --> 00:28:11,880 Speaker 4: got the banks and the derel ending funds. We really 521 00:28:11,920 --> 00:28:14,000 Speaker 4: don't have a lot of the other forms of capital, 522 00:28:14,040 --> 00:28:16,520 Speaker 4: the BDC's extracta, the et cetera that you have in 523 00:28:16,560 --> 00:28:19,280 Speaker 4: the US. So I would, you know, if I had 524 00:28:19,320 --> 00:28:20,960 Speaker 4: to talk my boy, You've just forced me to do it. 525 00:28:21,480 --> 00:28:23,320 Speaker 4: I would still argue that Europe is a is a 526 00:28:23,640 --> 00:28:24,520 Speaker 4: good place to invest. 527 00:28:24,800 --> 00:28:27,080 Speaker 1: So we're going to dig in to the shipping side 528 00:28:27,119 --> 00:28:30,760 Speaker 1: with Stefan Kovichev over at Bloomberg Intelligence in a little bit. 529 00:28:30,760 --> 00:28:32,560 Speaker 1: But before we do, Mike, I just wanted to ask 530 00:28:32,600 --> 00:28:35,600 Speaker 1: you about the risk because I keep banging on about it. 531 00:28:35,640 --> 00:28:38,400 Speaker 1: But what is the thing that keeps you up worrying 532 00:28:38,440 --> 00:28:41,120 Speaker 1: at night. What is the most concerning thing on your 533 00:28:41,240 --> 00:28:42,000 Speaker 1: radar right now? 534 00:28:42,280 --> 00:28:44,480 Speaker 4: Yeah, Look, of course we have to keep up our 535 00:28:44,800 --> 00:28:49,520 Speaker 4: underwriting standards. You know that selectivity. I think the big 536 00:28:49,600 --> 00:28:53,560 Speaker 4: the big issue for everybody is human capital, actually more 537 00:28:53,600 --> 00:28:56,640 Speaker 4: than financial capital, i e. You know, having the talent 538 00:28:56,800 --> 00:29:02,160 Speaker 4: to execute on the strategy. Talent is pretty scarce in 539 00:29:02,240 --> 00:29:04,600 Speaker 4: most of the markets we operate in. Good talent is 540 00:29:04,880 --> 00:29:07,760 Speaker 4: it's hard to come by. So it's really keeping the 541 00:29:07,800 --> 00:29:10,000 Speaker 4: talent in the team that we've got. That's what I 542 00:29:10,240 --> 00:29:13,040 Speaker 4: spend a bit of time, you know, kind of worried about. 543 00:29:13,320 --> 00:29:15,880 Speaker 1: Great stuff. Mike Dennis, Co, head of Emia Credit at 544 00:29:15,920 --> 00:29:18,640 Speaker 1: Aries Management. Many thanks for coming on the Credit Edge. Cheers. 545 00:29:18,840 --> 00:29:19,520 Speaker 4: Thanks, James. 546 00:29:19,640 --> 00:29:21,160 Speaker 1: Also want to say a big thanks to Lisa Leeve 547 00:29:21,160 --> 00:29:23,080 Speaker 1: with Bloomberg News in London. Brilliant to see you again. 548 00:29:23,080 --> 00:29:25,440 Speaker 1: Thank you read all of Lisa's great scoops on the 549 00:29:25,440 --> 00:29:28,920 Speaker 1: Bloomberg terminal and of course at Bloomberg dot Com. So 550 00:29:29,280 --> 00:29:32,760 Speaker 1: Stephankovichev at Bloomberg Intelligence, thank you so much for coming 551 00:29:32,800 --> 00:29:35,440 Speaker 1: on the Credit edge. Looks like supply chains are being 552 00:29:35,440 --> 00:29:37,640 Speaker 1: disrupted again. A couple of years ago it was due 553 00:29:37,640 --> 00:29:39,680 Speaker 1: to COVID. Now it's due to the situation in the 554 00:29:39,680 --> 00:29:41,920 Speaker 1: Red Sea. What's the latest in that sector. 555 00:29:42,480 --> 00:29:47,040 Speaker 3: Indeed, supply chains are being disrupted again, this time due 556 00:29:47,080 --> 00:29:50,000 Speaker 3: to the Hooty rebel attacks on ships in the Gulf 557 00:29:50,040 --> 00:29:53,240 Speaker 3: of Ymen and also in the Red Sea. So if 558 00:29:53,280 --> 00:29:55,960 Speaker 3: we just zoom out for a second and look at 559 00:29:56,000 --> 00:30:00,640 Speaker 3: the shipping companies moving goods. If you are to move 560 00:30:00,640 --> 00:30:04,440 Speaker 3: a container from Asia to Europe, the quickest route is 561 00:30:04,560 --> 00:30:08,040 Speaker 3: via the Red Sea and the Suez Canal. Yet now 562 00:30:08,080 --> 00:30:11,320 Speaker 3: traveling in the region is not safe anymore as Hooti 563 00:30:11,360 --> 00:30:14,080 Speaker 3: rebels are firing rockets and trying to board on ships. 564 00:30:14,120 --> 00:30:18,480 Speaker 3: So containing container shipping companies are choosing to avoid the 565 00:30:18,520 --> 00:30:22,400 Speaker 3: Red Sea altogether and saale around Africa. So this adds 566 00:30:22,440 --> 00:30:25,040 Speaker 3: about ten days to the voyage and has a negative 567 00:30:25,160 --> 00:30:27,800 Speaker 3: knock on effect on a lot of things, such as 568 00:30:28,080 --> 00:30:32,800 Speaker 3: the delivery schedules, the availability of the actual shipping capacity, 569 00:30:33,120 --> 00:30:37,080 Speaker 3: and ultimately on the prices and freight rates have risen 570 00:30:37,160 --> 00:30:40,479 Speaker 3: about three hundred percent on some routes in the last 571 00:30:40,720 --> 00:30:44,840 Speaker 3: six weeks. So yes, a very interesting and volatile industry. 572 00:30:44,880 --> 00:30:49,080 Speaker 1: Indeed, three increase in freight rates sounds like a hard 573 00:30:49,800 --> 00:30:52,040 Speaker 1: load to lift for those shipping companies, but also quite 574 00:30:52,040 --> 00:30:54,880 Speaker 1: inflationary at a time we're worried about inflation. Can you 575 00:30:54,960 --> 00:30:57,040 Speaker 1: elaborate a bit on you know, why it's gone up 576 00:30:57,080 --> 00:30:58,600 Speaker 1: so much and where do we go from here? 577 00:30:59,000 --> 00:30:59,280 Speaker 4: Sure? 578 00:31:00,400 --> 00:31:03,800 Speaker 3: So we're talking about the price of shipping a forty 579 00:31:03,800 --> 00:31:07,640 Speaker 3: foot container from Asia to Europe or from Asia to 580 00:31:07,680 --> 00:31:11,160 Speaker 3: the US. And the forty foot container is pretty big, actually, 581 00:31:11,160 --> 00:31:15,360 Speaker 3: you can fit about four cars or ten thousand jackets 582 00:31:15,400 --> 00:31:18,960 Speaker 3: in it. So that the price of transporting this container 583 00:31:19,480 --> 00:31:23,200 Speaker 3: has gone up from about one thousand, five hundred dollars 584 00:31:23,240 --> 00:31:27,360 Speaker 3: in December to triple that amount and at four thousand, 585 00:31:27,480 --> 00:31:31,280 Speaker 3: five hundred or thereabouts today, And this is largely due 586 00:31:31,320 --> 00:31:34,120 Speaker 3: to the situation in the Red Sea. So why has 587 00:31:34,160 --> 00:31:38,040 Speaker 3: this happened? Well, we estimate that about twenty five percent 588 00:31:38,160 --> 00:31:42,880 Speaker 3: of global containers have been rerooted or delayed because of 589 00:31:42,920 --> 00:31:46,720 Speaker 3: the situation in the Red Sea, and as container ships 590 00:31:46,720 --> 00:31:49,880 Speaker 3: are delayed, there is less available capacity in the market. 591 00:31:50,440 --> 00:31:52,880 Speaker 3: We estimate that there may be a reduction of about 592 00:31:52,960 --> 00:31:57,200 Speaker 3: eight percent of global capacity pretty much overnight due to 593 00:31:57,280 --> 00:32:01,400 Speaker 3: the situation in the Red Sea. Companies such as Nike 594 00:32:01,640 --> 00:32:06,640 Speaker 3: and Ike fight for this reduced space on container ships. 595 00:32:07,000 --> 00:32:10,240 Speaker 3: This has resulted in a pretty steep increase in prices. 596 00:32:10,280 --> 00:32:11,920 Speaker 1: Indeed, do they keep going up from here? 597 00:32:11,960 --> 00:32:15,080 Speaker 3: Do you think we are more on the costs Depending 598 00:32:15,080 --> 00:32:17,200 Speaker 3: on how you look at it, James, So from a 599 00:32:17,240 --> 00:32:20,800 Speaker 3: container shipping company point of view, you want prices to 600 00:32:20,840 --> 00:32:24,680 Speaker 3: be high. From a you know, a regular consumer side, 601 00:32:24,760 --> 00:32:27,920 Speaker 3: you want them to be low. But we expect the 602 00:32:28,040 --> 00:32:33,720 Speaker 3: you know, freight rate to to move lower from here, 603 00:32:34,520 --> 00:32:37,160 Speaker 3: to normalize, so to speak. And we have you know, 604 00:32:37,200 --> 00:32:40,120 Speaker 3: about three maybe three key reasons for that. So number 605 00:32:40,160 --> 00:32:42,800 Speaker 3: one is that if you look at the charts of 606 00:32:42,920 --> 00:32:45,800 Speaker 3: the freight rates, you can see that, you know, there 607 00:32:45,840 --> 00:32:47,920 Speaker 3: is some room for them to increase. If you look 608 00:32:47,920 --> 00:32:51,800 Speaker 3: at pandemic peaks, which were at about fourteen thousand dollars 609 00:32:51,800 --> 00:32:55,200 Speaker 3: to ship a container from Asia to Europe, but the 610 00:32:55,240 --> 00:32:59,160 Speaker 3: situation now is very different. So back then factories were 611 00:32:59,160 --> 00:33:01,720 Speaker 3: closed due to co without breaks and ships were stuck 612 00:33:01,720 --> 00:33:06,360 Speaker 3: outside of boardswo weeks. But currently, you know, ships are 613 00:33:06,360 --> 00:33:09,280 Speaker 3: still sailing. They just go around Africa. It takes them 614 00:33:09,320 --> 00:33:13,040 Speaker 3: an extra ten days, So the supply chain disruption is 615 00:33:13,120 --> 00:33:18,440 Speaker 3: nowhere near the levels of the pandemic. So that's one 616 00:33:18,560 --> 00:33:20,840 Speaker 3: kind of angle that makes us a bit more and 617 00:33:20,880 --> 00:33:23,800 Speaker 3: more positive on the trajectory of freight rates. And the 618 00:33:23,800 --> 00:33:27,200 Speaker 3: second reason is demand. You know, although everyone is talking 619 00:33:27,240 --> 00:33:31,000 Speaker 3: about the soft landing, you know, the high inflation and 620 00:33:31,080 --> 00:33:36,640 Speaker 3: lower disposable incomes are still very much problems for end consumers, 621 00:33:36,640 --> 00:33:40,320 Speaker 3: so that the demand side of the equation is quite uncertain. Also, 622 00:33:40,400 --> 00:33:43,920 Speaker 3: recession odds, maybe they've reduced in the US, but they've 623 00:33:43,960 --> 00:33:46,680 Speaker 3: actually increased in Europe in the last six months. And 624 00:33:46,760 --> 00:33:50,320 Speaker 3: the last point is the actual supply of new ships. 625 00:33:50,680 --> 00:33:53,880 Speaker 3: So if you look at them, what companies did container 626 00:33:53,920 --> 00:33:56,560 Speaker 3: shipping companies did with all the profits during the pandemic, 627 00:33:56,960 --> 00:34:01,840 Speaker 3: They went and ordered new, bigger and more efficient container 628 00:34:01,880 --> 00:34:05,880 Speaker 3: ships and those take two to three years to be built. 629 00:34:05,960 --> 00:34:09,400 Speaker 3: So now actually a lot of container ships are coming online. 630 00:34:09,840 --> 00:34:14,160 Speaker 3: We estimate of about nine percent nine percent increase in 631 00:34:14,280 --> 00:34:19,080 Speaker 3: net capacity in the sector this year, So more supply 632 00:34:19,160 --> 00:34:22,760 Speaker 3: of ships and an uncertain demand outlook should in theory, 633 00:34:23,080 --> 00:34:26,239 Speaker 3: I mean, keeping all else equal, uh, you know, lead 634 00:34:26,280 --> 00:34:28,560 Speaker 3: to lower freight rates in the coming quarters, which I 635 00:34:28,560 --> 00:34:32,760 Speaker 3: think is very good news for US and consumers hopefully, 636 00:34:32,760 --> 00:34:35,759 Speaker 3: and maybe not so good news for container shipping companies. 637 00:34:35,920 --> 00:34:38,280 Speaker 1: So on the inflation side, I particularly, this is a 638 00:34:38,560 --> 00:34:41,160 Speaker 1: central easing of inflation, which is good for rates, which 639 00:34:41,200 --> 00:34:43,520 Speaker 1: is good for credit markets generally. But in terms of 640 00:34:43,520 --> 00:34:46,080 Speaker 1: the actual issue, as you look at the companies, you 641 00:34:46,120 --> 00:34:48,320 Speaker 1: look at how does it affect them? Who are we 642 00:34:48,400 --> 00:34:50,759 Speaker 1: talking about here? And you know who's who are the 643 00:34:50,800 --> 00:34:51,480 Speaker 1: winners and loses? 644 00:34:51,840 --> 00:34:55,560 Speaker 3: Well, I look at the sector from a credit viewpoint, 645 00:34:55,680 --> 00:34:58,600 Speaker 3: and you know, looking at the bonds of companies such 646 00:34:58,640 --> 00:35:02,759 Speaker 3: as Mersk and hapack Lloyd, I think that what the 647 00:35:02,800 --> 00:35:06,120 Speaker 3: credit markets are telling us is that, you know, the 648 00:35:06,160 --> 00:35:10,800 Speaker 3: investors don't seem too worried about about the trends here. 649 00:35:11,600 --> 00:35:14,760 Speaker 3: You know, MRSK and Hpack Lloyd bonds trade in line 650 00:35:14,920 --> 00:35:19,160 Speaker 3: or even tighter than similarly rated piers, and to be fair, 651 00:35:19,239 --> 00:35:22,040 Speaker 3: companies in the sector do have very strong balance sheets, 652 00:35:23,000 --> 00:35:27,200 Speaker 3: so you know, record profits and record cash generation during 653 00:35:27,200 --> 00:35:29,640 Speaker 3: the pandemic have you know, left these companies in a 654 00:35:29,800 --> 00:35:34,160 Speaker 3: much better place compared to historical averages. That said, what 655 00:35:34,239 --> 00:35:37,840 Speaker 3: we highlight in our research are the risks ahead, be 656 00:35:37,920 --> 00:35:40,840 Speaker 3: it in terms of supply or demand that we just discussed, 657 00:35:40,960 --> 00:35:43,920 Speaker 3: or even in a scenario where the situation in the 658 00:35:43,920 --> 00:35:48,480 Speaker 3: Middle East were to normalize and freight rates could you know, 659 00:35:48,760 --> 00:35:52,839 Speaker 3: crash back lower quite quite quickly potentially. So I think 660 00:35:52,880 --> 00:35:56,120 Speaker 3: the bottom line is that this is a very low margin, 661 00:35:56,600 --> 00:36:01,160 Speaker 3: competitive and very cyclical shipping industry, and you know, the 662 00:36:01,200 --> 00:36:06,520 Speaker 3: weak fundamentals that resulted in quite low profitability for the 663 00:36:06,600 --> 00:36:10,080 Speaker 3: industry two months ago, so before the Red Sea situation, 664 00:36:10,200 --> 00:36:14,440 Speaker 3: the industry was in a pretty bad space and a 665 00:36:14,440 --> 00:36:18,080 Speaker 3: lot of oversupply, low demand, et cetera. So I think, 666 00:36:18,480 --> 00:36:21,520 Speaker 3: you know, there may be quite volatile times ahead because 667 00:36:21,560 --> 00:36:25,160 Speaker 3: those negatives have not really gone away if we move 668 00:36:25,200 --> 00:36:28,240 Speaker 3: aside the situation in the Middle East. So I think, 669 00:36:28,360 --> 00:36:32,120 Speaker 3: you know, the potential negative catalysts ahead may not be 670 00:36:32,200 --> 00:36:36,080 Speaker 3: fully reflected in bond prices at this stage, at least 671 00:36:36,080 --> 00:36:38,879 Speaker 3: from what you know the credit markets are telling us. 672 00:36:39,080 --> 00:36:41,960 Speaker 1: Stephan Kochev, Bloomberg Intelligence, thank you so much for joining us. 673 00:36:42,120 --> 00:36:42,720 Speaker 3: Thank you, James. 674 00:36:42,880 --> 00:36:45,719 Speaker 1: Really fascinating topic. Check out all the Stepfan's research on 675 00:36:45,760 --> 00:36:48,080 Speaker 1: the Bloomberg Terminal or contact him directly if you need 676 00:36:48,080 --> 00:36:50,120 Speaker 1: more information. I'm actually gonna spell your name Stefan so 677 00:36:50,160 --> 00:36:52,680 Speaker 1: people can find you Stephan with an E on the end, 678 00:36:52,920 --> 00:36:56,480 Speaker 1: and it's COVID chef ko V A T C H 679 00:36:56,600 --> 00:37:00,239 Speaker 1: e V. Do check it out. It's wonderful stuff. Thanks 680 00:37:00,239 --> 00:37:02,200 Speaker 1: again to Mike Dennis at Aries and Lisa Lee from 681 00:37:02,280 --> 00:37:04,719 Speaker 1: Bloomberg News. Read all of Lisa's great scoops on the 682 00:37:04,800 --> 00:37:08,080 Speaker 1: Terminal and at Bloomberg dot com. Please do subscribe wherever 683 00:37:08,120 --> 00:37:10,719 Speaker 1: you get your podcasts. We're on Apple, Google and Spotify. 684 00:37:11,040 --> 00:37:13,400 Speaker 1: Give us a review, tell your friends, or email me 685 00:37:13,480 --> 00:37:18,040 Speaker 1: directly at jcrombeight at Bloomberg dot net. I'm James Crombie. 686 00:37:18,080 --> 00:37:20,040 Speaker 1: It's been a pleasure having you. See you next time 687 00:37:20,160 --> 00:37:22,000 Speaker 1: on the Credit Edge.