WEBVTT - Streaming Could Kill Cable In 4-5 Years: Porter Bibb 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:26.360 at Bloomberg dot com. Well after the close today, the 0:00:26.440 --> 0:00:29.880 Walt Disney Company scheduled to release its first quarterly earning 0:00:29.920 --> 0:00:32.120 since it acquired most of the assets of the twenty 0:00:32.159 --> 0:00:35.720 one century Fox Company for over seventy billion dollars. To 0:00:35.800 --> 0:00:38.240 break down those numbers, we've welcome our good friend Porter 0:00:38.320 --> 0:00:41.559 bib Porters and managing partner at Media Tech Capital Partners. 0:00:41.800 --> 0:00:43.920 He joins us live here on our Bloomberg Interactive Broker 0:00:44.000 --> 0:00:47.559 studio Supporter. I think when these numbers come out, one 0:00:47.560 --> 0:00:49.320 of the things that people are really going to focus 0:00:49.360 --> 0:00:52.959 on is Bob Biker's plan for transforming this company into 0:00:52.960 --> 0:00:56.640 a streaming company. What's your take on their ability to 0:00:56.680 --> 0:00:59.960 do that. Well, they've got the ability, but Bob Bikers 0:01:00.040 --> 0:01:01.680 a little late to the game, so it's going to 0:01:01.800 --> 0:01:03.880 cost him a lot more than it might have if 0:01:03.920 --> 0:01:06.160 he jumped in two or three or four years ago 0:01:06.200 --> 0:01:09.720 when he started talking about streaming. But there's no question 0:01:09.800 --> 0:01:13.000 that Disney has the content and the management and the 0:01:13.080 --> 0:01:17.720 capabilities of of making Disney plus and not not to 0:01:17.760 --> 0:01:22.360 exclude ESPN and ESPN plus absolute winners. It's going to 0:01:22.480 --> 0:01:25.120 cost them a lot more than I've seen the numbers. 0:01:25.240 --> 0:01:27.720 People are talking about hundreds of millions. I think it's 0:01:27.720 --> 0:01:30.759 gonna be if you look at at what what Netflix 0:01:30.880 --> 0:01:35.040 is spending now last year, thirteen billion this year probably 0:01:35.080 --> 0:01:39.000 close to fifteen billion for new content. Disney doesn't have 0:01:39.080 --> 0:01:40.800 to do all of that, but they're gonna have to 0:01:40.840 --> 0:01:44.280 market the hell out of their services, and it's gonna 0:01:44.400 --> 0:01:47.720 be billions of dollars before they start to make profit. 0:01:47.960 --> 0:01:50.000 So that's the big cost is the marketing. It's a 0:01:50.040 --> 0:01:52.800 big cost now, But the marketing is the big marketing 0:01:52.880 --> 0:01:56.280 because they they've announced that they're going to open up 0:01:56.320 --> 0:01:59.960 their entire archive of Disney and Fox. Everything that Fought 0:02:00.120 --> 0:02:03.880 and Disney have ever produced in history is going Instead 0:02:03.880 --> 0:02:06.760 of holding it back for five to seven years for 0:02:06.840 --> 0:02:10.079 each next generation of viewers, they're opening it up now 0:02:10.560 --> 0:02:13.040 on day one and that's going to be a huge 0:02:13.240 --> 0:02:17.320 asset if if you're a parent and you have kids, 0:02:17.760 --> 0:02:23.320 you you cannot survive if you don't subscribe to Disney Plus. 0:02:23.360 --> 0:02:26.360 So the real the bear case for Disney over the 0:02:26.400 --> 0:02:29.160 last several years has just been this court cutting issue 0:02:29.160 --> 0:02:31.840 and the impact that it has on ESPN. Yet, we 0:02:31.919 --> 0:02:35.320 just saw Disney sold some of the regional sports networks 0:02:35.360 --> 0:02:37.640 to Sinclair for what I think the market thought was 0:02:37.639 --> 0:02:41.320 a very low price, half of the estimated value. So 0:02:41.639 --> 0:02:45.679 what is your view of sports? And you know, sports programming, 0:02:45.760 --> 0:02:49.120 sports rights and all that Sports is propping up cable 0:02:49.240 --> 0:02:52.480 right now because so much of live sports is still 0:02:52.560 --> 0:02:55.799 on cable and not streaming. But once those rights run 0:02:55.840 --> 0:02:59.480 out and the streamers start to spend money for sports rights, uh, 0:02:59.639 --> 0:03:02.240 Cable is going to be in a very vulnerable position, 0:03:03.040 --> 0:03:06.360 maybe not even survive more than four or five years. Okay, 0:03:06.400 --> 0:03:10.080 So if Cable doesn't survive four or five years, who 0:03:10.160 --> 0:03:13.839 gets destroyed and who gets to win the game? Here? 0:03:14.040 --> 0:03:18.240 The big question that that all the content producers are 0:03:18.240 --> 0:03:20.840 facing right now when they look at that the opportunities 0:03:20.840 --> 0:03:24.320 and streaming is how are they going to make the 0:03:24.400 --> 0:03:26.639 same kind of money they were getting from the cable 0:03:26.680 --> 0:03:30.600 companies who pay them billions of dollars in transmission fees 0:03:30.760 --> 0:03:34.280 for the content that they were giving to the cable distributors. 0:03:34.680 --> 0:03:37.200 They don't get that from anybody when they're streaming their 0:03:37.200 --> 0:03:40.000 own content. And the only two revenue streams they have 0:03:40.040 --> 0:03:44.640 are subscriptions and advertising. Disney has said initially no advertising 0:03:44.680 --> 0:03:48.440 on Disney plus the sports channels probably are going to 0:03:48.520 --> 0:03:53.440 have to have sponsorship and significant rights payments and advertising 0:03:53.480 --> 0:03:57.000 to make a profit, but they're they're going to be Uh, 0:03:57.040 --> 0:04:01.640 there's a serious shortfall in revenue generation from streaming versus 0:04:01.680 --> 0:04:03.960 cable in the near term. Well, I think you know, 0:04:03.960 --> 0:04:05.960 on the earnings called tonight for the for Disney, they 0:04:05.960 --> 0:04:09.320 can certainly take a well deserved victory lab for Avengers 0:04:09.320 --> 0:04:11.400 any game. I mean, I think over two billion dollars 0:04:11.400 --> 0:04:13.400 in global box office. There's a lot of folks out 0:04:13.400 --> 0:04:16.559 there saying it will be come the number one film, 0:04:16.600 --> 0:04:19.279 passing Avatar, which was at two point seven billion dollar 0:04:19.360 --> 0:04:21.760 global box office. What how does your view or what 0:04:21.880 --> 0:04:24.440 is your view of the Disney theatrical business over the 0:04:24.440 --> 0:04:29.120 next several years, Disney owned over sixty of the box 0:04:29.160 --> 0:04:33.400 office revenues from from eighteen when they add Fox on 0:04:33.480 --> 0:04:35.880 top of it, they've got nearly eight percent of the 0:04:35.920 --> 0:04:41.760 box office. They announced yesterday they they release dates theatrically 0:04:41.839 --> 0:04:46.800 of all of their blockbusters through seven and they are 0:04:46.839 --> 0:04:50.480 going to own the theatrical box office. Right. They pushed 0:04:50.480 --> 0:04:52.680 Avatar out a year was gonna be I guess in 0:04:55.279 --> 0:04:57.560 one right. Yeah, So for the Avatar fans at least 0:04:57.560 --> 0:04:59.320 I know you're diehard Avatar fan, you have to wait 0:04:59.360 --> 0:05:01.960 another year. Okay, thank you very much. And you probably 0:05:02.000 --> 0:05:05.040 know that you've seen Endgame about fifteen times, so you've 0:05:05.040 --> 0:05:09.680 added to the real unspoken potential for Disney. Though. Is 0:05:09.760 --> 0:05:15.760 China in streaming? Um? It's remarkable that Avengers Endgame generated 0:05:15.800 --> 0:05:18.880 three hundred and fifty million dollars at the box office 0:05:18.920 --> 0:05:22.960 in China, the biggest box office score that any American 0:05:23.000 --> 0:05:27.360 film has ever created in China. And there are legal 0:05:27.440 --> 0:05:31.279 and regulatory problems, but China is gonna I mean, Disney 0:05:31.320 --> 0:05:33.560 is going to solve those uh and partner with ten 0:05:33.680 --> 0:05:38.839 Center or uh e. She she the big streaming dominant 0:05:39.000 --> 0:05:42.599 factor in China, and that's a market that will generate 0:05:42.680 --> 0:05:45.360 billions of dollars of new revenue for Disney. What's Funny 0:05:45.360 --> 0:05:47.320 you mentioned China because Lisa and I all day and 0:05:47.440 --> 0:05:49.720 you know, all across the Bloomberg media obviously talking about 0:05:49.720 --> 0:05:51.600 the trade talks and the US and China, and one 0:05:51.640 --> 0:05:54.200 of the big parts of those trade talks. It's not 0:05:54.279 --> 0:05:58.320 just you know, soybeans and microchips, it's also movies and TV. 0:05:58.440 --> 0:06:01.279 That's right. So what do you expect to happen in 0:06:01.279 --> 0:06:03.360 these trade talks as it relates to some of those 0:06:03.560 --> 0:06:08.360 restrictions on Western As far as I've been able to discern, Uh, 0:06:08.800 --> 0:06:11.800 creative content is not even on the table in these 0:06:12.040 --> 0:06:15.240 trade talks. And to me this we're going to have 0:06:15.240 --> 0:06:18.760 an agreement because both the President g and President Trump 0:06:18.960 --> 0:06:21.760 need a success and need need a deal. But it's 0:06:21.800 --> 0:06:25.680 going to be a sham because they're they're staying way 0:06:25.720 --> 0:06:29.080 away from any of the technology transfer issues. They're staying 0:06:29.120 --> 0:06:33.400 way away from currency and currency manipulation. UM will buy 0:06:34.400 --> 0:06:37.440 some Chinese products, they will buy billions of dollars worth 0:06:37.480 --> 0:06:41.080 of soy and pork because they have a crisis in 0:06:40.640 --> 0:06:43.760 in pork in China right now with with swine disease. 0:06:43.800 --> 0:06:49.960 So uh, everybody wins, but nothing really changes. So just 0:06:49.960 --> 0:06:52.880 just to sort of pit Disney versus Netflix, because as 0:06:52.920 --> 0:06:54.760 he is going to give some guidance I'm sure from 0:06:54.760 --> 0:06:57.520 their streaming service. Looking at Netflix right now, shares up 0:06:57.560 --> 0:07:00.839 about thirty six percent so far year today. Eat, what 0:07:00.960 --> 0:07:03.320 will it take for Disney service to really be a 0:07:03.400 --> 0:07:06.360 Netflix killer? As you have said in the past, it's 0:07:06.560 --> 0:07:10.080 in my perspective, it's not a Disney is not a 0:07:10.080 --> 0:07:14.720 Netflix killer. What is a Netflix killer is the failure 0:07:15.200 --> 0:07:21.760 of individuals to bundle Netflix, Disney, maybe two or three 0:07:21.760 --> 0:07:28.960 other HBO maybe UH Comcasts, NBC universal streaming service that's 0:07:28.960 --> 0:07:32.360 going to launch this autumn. Uh. My sense is that 0:07:32.400 --> 0:07:35.120 people are gonna gonna put five or six of these 0:07:35.160 --> 0:07:39.280 streaming services together. That'll raise the cost to them the 0:07:39.320 --> 0:07:44.360 subscription cost of maybe seventy five dollars. It's still almost 0:07:44.360 --> 0:07:47.360 half of what you're paying cable. But if Netflix is 0:07:47.400 --> 0:07:49.960 not a part of that, they're they're gonna lose. And 0:07:50.280 --> 0:07:53.560 the big problem Netflix is facing right now is when 0:07:53.760 --> 0:07:57.280 can that company actually make a profit. That is a 0:07:57.360 --> 0:07:59.680 key question, especially given how much debt they currently have. 0:07:59.760 --> 0:08:01.960 Por Bib thank you so much for being with us 0:08:01.960 --> 0:08:05.080 here in our Bloomberg Actor Brokers Studios. Portabib Managing partner 0:08:05.120 --> 0:08:25.000 for Media Tech Capital Partners talking about all things Disney. Well, 0:08:25.000 --> 0:08:27.680 it's not just equity markets that have put in stellar 0:08:27.720 --> 0:08:30.920 performance this year. The credit markets have also performed exceptionally well. 0:08:31.360 --> 0:08:34.319 And also the FED appears to I guess, remain content 0:08:34.480 --> 0:08:36.800 to remain on the sidelines. So to get a sense 0:08:36.800 --> 0:08:39.280 of what that all means for the fixing can market, 0:08:39.280 --> 0:08:42.120 we talked to Randy Brown. Randy as a chief investment 0:08:42.160 --> 0:08:45.800 officer for sun Life Financial. Randy, thanks so much for 0:08:46.040 --> 0:08:49.240 joining us. Just want to get your sense where you 0:08:49.360 --> 0:08:53.280 might see value in the corporate bond market today. Um, yeah, 0:08:53.280 --> 0:08:56.760 so good morning. Um we see value in the corporate 0:08:56.760 --> 0:09:00.280 bond market today really in the private corporate market, its 0:09:00.360 --> 0:09:05.280 public markets, and um really I put that on a 0:09:05.320 --> 0:09:07.920 couple of different reasons. One is, at this point in 0:09:08.000 --> 0:09:11.079 the cycle, which we think we're sort of late stages 0:09:11.120 --> 0:09:13.920 of the cycle. Everyone loves to ask what inning, we 0:09:14.360 --> 0:09:16.280 would say, seventh inning. We just don't know how many 0:09:16.280 --> 0:09:19.440 innings in the game anymore, so late late stages in 0:09:19.480 --> 0:09:24.040 the cycle. Certainly the runway has been extended. But um, 0:09:24.080 --> 0:09:27.000 we're seeing a lot of a lot of corporations that 0:09:27.080 --> 0:09:30.600 we believe are a bit over levered in the market 0:09:30.640 --> 0:09:32.720 in the public market. So we've moved a bit to 0:09:32.760 --> 0:09:36.160 the private markets where we're able to pick up spread, 0:09:36.240 --> 0:09:40.600 pick up um covenant protection, pick up collateral behind us 0:09:41.160 --> 0:09:44.400 UM as opposed to an unsecured credit, and so we've 0:09:44.520 --> 0:09:47.840 we've found value there. Okay, So this is actually really 0:09:47.880 --> 0:09:51.000 interesting because, uh, perhaps you give up a little bit 0:09:51.000 --> 0:09:53.040 of liquidity, but you get the extra spread and the 0:09:53.040 --> 0:09:56.439 extra protection on the covenants. And I'm just wondering how 0:09:56.520 --> 0:10:00.280 much access you're starting to see baked into private debt kets. 0:10:00.280 --> 0:10:03.720 I'm thinking, for example, Black Rocks CEO Larry Fink said 0:10:03.800 --> 0:10:08.160 yesterday at the n EPC Investment Conference in Boston, UH 0:10:08.200 --> 0:10:11.720 that perhaps investors are now overallocating to alternatives, and he 0:10:11.800 --> 0:10:15.240 was including private debt in that. What's your take on it, um, 0:10:15.280 --> 0:10:18.160 So I do agree with Larry, but we're talking about 0:10:18.160 --> 0:10:20.319 two different parts in the market. So I believe what 0:10:20.440 --> 0:10:23.920 Larry is speaking to UH in private debt is typically 0:10:23.920 --> 0:10:27.000 in the US, most investors when they speak a private 0:10:27.000 --> 0:10:29.959 debt are talking about middle market loans, and so there 0:10:29.960 --> 0:10:33.720 has been a huge amount of capital raised in that sector. UM. 0:10:33.840 --> 0:10:37.000 So those look more like the syndicated loan market, just 0:10:37.120 --> 0:10:40.520 in private space where we've been focusing as a life 0:10:40.559 --> 0:10:45.839 insurance company with UM capital, UM capital constraints, etcetera. We 0:10:45.920 --> 0:10:48.240 look at the at the investment grade part of the 0:10:48.240 --> 0:10:53.040 private debt market and there that's really typically the purview 0:10:53.200 --> 0:10:57.599 of the life insurance companies. A little bit in the 0:10:57.800 --> 0:11:02.760 in pension funds, that is not a particularly overcrowded space. 0:11:02.800 --> 0:11:05.440 It's really the middle market space. I believe that Larry 0:11:05.480 --> 0:11:07.439 refers to so many give us a sense of kind 0:11:07.440 --> 0:11:09.920 of you know, what are the sectors that you are 0:11:09.960 --> 0:11:13.400 attracted to the private equity or the private bond market, 0:11:13.440 --> 0:11:15.880 other sectors or types of issuers that are most attracted 0:11:15.920 --> 0:11:20.240 to that market. UM, It's really a broad swath. I 0:11:20.679 --> 0:11:23.200 think what I'd say is is UM it's a very 0:11:23.240 --> 0:11:27.800 diverse market. Anything from some corporates, some of the smaller 0:11:28.480 --> 0:11:31.720 UM corporates that don't feel that they want to take 0:11:32.320 --> 0:11:36.480 the UM operational overhead to go to the public market UM, 0:11:36.559 --> 0:11:39.480 but they think that they can access capital, which they 0:11:39.520 --> 0:11:43.440 can from from private sources with much less reporting burden. 0:11:43.760 --> 0:11:45.920 So you see it there. You've seen some sort of 0:11:45.960 --> 0:11:49.559 innovative structures where people need as an issuer, we need 0:11:49.600 --> 0:11:54.800 flexibility so flexibility in terms of terms, in terms of 0:11:55.120 --> 0:11:58.800 um of tenor um those sorts of things. So the 0:11:58.880 --> 0:12:03.080 private market gives the issuer a lot more flexibility as 0:12:03.120 --> 0:12:06.280 opposed to typically issuing five years, seven year, ten year, 0:12:06.360 --> 0:12:10.480 thirty year debt. Randy, I assume that you it's in life, 0:12:11.440 --> 0:12:15.080 You're not alone among insurers and going into this area. Correct, 0:12:15.559 --> 0:12:17.560 that's correct. Yeah, I've heard of this is sort of 0:12:17.559 --> 0:12:20.760 being an increasingly popular area over the past bunch of years, 0:12:20.760 --> 0:12:23.840 and I'm just wondering, what's the risk on the liquidity 0:12:23.880 --> 0:12:27.040 side if there was some sort of need to either 0:12:27.280 --> 0:12:31.360 read you your portfolio or for whatever reasons, sell these bonds, 0:12:31.920 --> 0:12:35.600 how much of an audience would there be for them? Um? Well, 0:12:35.679 --> 0:12:38.640 I I'd separate a good question, and it's one certainly 0:12:38.640 --> 0:12:42.160 I get internally and externally quite a bit. So I 0:12:42.200 --> 0:12:45.400 would say, first of all, we um we run a 0:12:45.400 --> 0:12:49.120 lot of liquidity stress tests, so we're not going into 0:12:49.120 --> 0:12:51.720 this sector with the idea that in a in a 0:12:51.760 --> 0:12:54.199 crisis we're going to need to sell it, because it 0:12:54.280 --> 0:12:56.720 really is pretty much a buy and whole type of product. 0:12:57.080 --> 0:12:59.200 That being said, in two thousand and eight, we as 0:12:59.240 --> 0:13:02.680 a company were able to sell quite a bit um, 0:13:02.720 --> 0:13:08.560 particularly in the one part of the market. Um, you know, 0:13:08.600 --> 0:13:12.520 the beauty of of of the life insurance model versus 0:13:12.600 --> 0:13:14.600 let's say the bank model is it's very hard to 0:13:14.600 --> 0:13:17.080 have a run quote run on the bank on a 0:13:17.120 --> 0:13:20.360 life insurance company. So we are we in pension funds 0:13:20.400 --> 0:13:25.439 really can take a very long perspective on our investments 0:13:25.480 --> 0:13:28.640 because we don't have those, um, those heightened liquidity and 0:13:28.720 --> 0:13:32.280 leverage constraints the banks have. So really just real quick here, 0:13:32.360 --> 0:13:34.520 how much have you increased your allocation to the private 0:13:34.520 --> 0:13:39.040 debt market. We've increased it about three percent of our 0:13:39.080 --> 0:13:43.520 assets over the last several years. It doesn't sound like 0:13:44.120 --> 0:13:46.280 a big move, but actually for for a life crow, 0:13:46.360 --> 0:13:51.200 that's actually a fairly big move from from zero percent allocation. No, no, 0:13:51.320 --> 0:13:53.880 we we've been in these markets for you know, over 0:13:53.960 --> 0:14:00.040 fifty years, so we're currently at about asset allocation in 0:14:00.040 --> 0:14:02.640 in just a private death space. Randy Brown, thank you 0:14:02.679 --> 0:14:05.040 so much for taking the time. Really interesting area and 0:14:05.160 --> 0:14:07.480 one that I hope we have you back to talk about. 0:14:07.559 --> 0:14:10.199 Randy Brown, Chief Investment Officer of sun Life and head 0:14:10.200 --> 0:14:30.680 of Investments for sun Life Investment Management. Well, I ran 0:14:30.760 --> 0:14:34.040 it is threatening to abandon limits on uranium enrichment unless 0:14:34.040 --> 0:14:38.560 Europe throws it an economic lifeline within sixty days, basically 0:14:39.280 --> 0:14:44.200 putting in peril potentially the Nuclear Accord joining US now 0:14:44.240 --> 0:14:46.680 to talk about this aerial coh and senior fellow at 0:14:46.680 --> 0:14:50.440 the Atlantic Council in Washington, D c Ariel. How scary 0:14:50.600 --> 0:14:52.600 is this? I mean, are we looking at what is 0:14:52.720 --> 0:14:59.480 ultimately a likely devolution of this nuclear treaty? Indeed, and 0:15:00.040 --> 0:15:03.560 I am wondering if this is walking into a mind 0:15:03.640 --> 0:15:08.040 filled without a map. Um, we have not just Iran 0:15:08.120 --> 0:15:14.400 being extremely aggressive. Uh. The more we push the Mulla regime, UH, 0:15:14.520 --> 0:15:19.600 the nasty they become. They funded uh the extremists in 0:15:19.840 --> 0:15:24.320 the Daza strip and organization called Palestine Islamic Jihad to 0:15:24.440 --> 0:15:28.960 shoot rockets in Israel. And then CAMAS, which also received 0:15:29.000 --> 0:15:31.680 support from Iran in the past and possibly is still 0:15:31.720 --> 0:15:36.360 receiving it. Uh. They chimed in shooting over six hundred 0:15:36.800 --> 0:15:41.480 rockets into Israel. Uh. They fund the fully owned subsidiary 0:15:41.480 --> 0:15:45.720 in Lebanon, Colchizbala, which our government, the US government said 0:15:45.800 --> 0:15:50.080 that it is um the prime the the a league 0:15:50.240 --> 0:15:56.320 of terrorists organizations around the world, and UH, unfortunately for US, UH, 0:15:56.360 --> 0:15:59.320 the Europeans, the Russians, and the Chinese are on the 0:15:59.360 --> 0:16:03.000 Iranians side and not on the U S side, And UH, 0:16:03.600 --> 0:16:08.920 walking into something like that without allies is really a 0:16:09.080 --> 0:16:13.120 questionable proposition. I would say so, Ariel, the Trump administration 0:16:13.160 --> 0:16:15.960 walked away from this nuclear agreement about a year ago, 0:16:16.520 --> 0:16:19.240 So from you know, given that perspective, how would you 0:16:19.360 --> 0:16:25.400 characterize the US position towards Iran? Now? Uh, the Trump administration, 0:16:25.520 --> 0:16:29.840 correctly in my opinion, disliked and President Trump disliked the 0:16:30.120 --> 0:16:35.120 deal negotiated by the Obama administration. It UH put at 0:16:35.400 --> 0:16:38.680 the clock kicking in terms of Iran being capable of 0:16:38.720 --> 0:16:43.680 developing nuclear weapons and still developing ballistic missiles UM as 0:16:43.720 --> 0:16:47.920 we speak. But at the same time, I think the 0:16:47.960 --> 0:16:53.560 Trump administration wanted to impose sanctions on Iran and bring 0:16:53.720 --> 0:16:58.440 that regime under pressure from its own people. Whether it's 0:16:58.480 --> 0:17:02.120 happening or not, I think is happening somewhat. But at 0:17:02.120 --> 0:17:07.040 the same time, we're targeting the Iranian Revolutionary Guard Core, 0:17:07.400 --> 0:17:11.760 and that is a nasty organization. Think about a combination 0:17:12.000 --> 0:17:16.960 of Buffon Assas and KGB. It has a military component 0:17:17.160 --> 0:17:21.760 and a security police component, and we declared these guy's terrorists. 0:17:21.760 --> 0:17:24.720 They declared us our troops in the Middle East terrorists. 0:17:24.800 --> 0:17:27.439 They said, we're going to they're going to target our 0:17:27.560 --> 0:17:32.320 troops in Iraq and elsewhere. Um Pompeo went to Iraq unannounced. 0:17:32.680 --> 0:17:36.280 So the things are escalating pretty fast. And again I 0:17:36.359 --> 0:17:41.560 am not sure whether this is the trump um strategy 0:17:41.600 --> 0:17:45.000 of making a lot of noise and scaring the opponent. 0:17:45.040 --> 0:17:47.600 We're trying to do it with the Chinese now with 0:17:47.680 --> 0:17:51.880 a threat of tariffs on Friday or uh this will 0:17:51.920 --> 0:17:55.520 go straight to a military clash and if it happens, 0:17:55.880 --> 0:17:59.200 the Iranians can mind can block the straight off for 0:17:59.440 --> 0:18:04.439 moose through which of exported oil in the world is flowing, right, 0:18:04.560 --> 0:18:07.160 and that will bring the oil prices way a bob 0:18:07.359 --> 0:18:12.000 hundred and twenty into range for a short time, but 0:18:12.359 --> 0:18:15.560 it will be a huge, huge spike in the oil price, 0:18:16.040 --> 0:18:20.600 and that may or may not. Going back to Ran 0:18:20.840 --> 0:18:24.119 and this idea where they're basically saying that Europe needs 0:18:24.160 --> 0:18:27.560 to send it to provide it through an economic lifeline 0:18:27.560 --> 0:18:32.159 within sixty days, This specific request actually is something that 0:18:32.280 --> 0:18:34.600 is written into the agreement, right, I mean, it's not 0:18:34.720 --> 0:18:37.760 that outrageous for you're on to be asking for this 0:18:38.359 --> 0:18:42.159 because the European region has promised to continue trading and 0:18:42.200 --> 0:18:46.679 engaging with with Iran if it did adhere to this agreement. 0:18:46.880 --> 0:18:50.119 So how does this how does this work out? Given 0:18:50.359 --> 0:18:53.639 Europe's relationship with the US not wanting to anchor them 0:18:53.680 --> 0:18:58.879 as well as frankly their promise under this pact. Indeed, UH, 0:18:59.359 --> 0:19:03.159 the chief of European the EU foreign Policy, we're not 0:19:03.280 --> 0:19:08.359 talking specific countries, We're talking Brussels. The EU, the chief 0:19:08.480 --> 0:19:11.240 of their foreign policy as a woman, culled Frederica Margarini. 0:19:11.359 --> 0:19:14.560 She was a former Italian foreign minister and she is 0:19:14.600 --> 0:19:17.480 not exactly a friend of the United States. UH. Nor 0:19:17.640 --> 0:19:21.080 by the way, in this position as Germany, Germany wants 0:19:21.119 --> 0:19:24.400 to continue to trade with Iran. There are a lot 0:19:24.440 --> 0:19:27.200 of interest for the German companies, and what the Europeans 0:19:27.240 --> 0:19:31.440 did was to set up this separate facility to trade 0:19:31.640 --> 0:19:36.440 with Iran. UH. The Iranians, in the meantime are reportedly 0:19:36.760 --> 0:19:43.439 setting up new oil prospecting licenses that will favor the Europeans. 0:19:43.680 --> 0:19:46.320 Those The Iranians are playing the oldest game in the book. 0:19:46.320 --> 0:19:50.359 They're trying to split the adversaries, split the EU from 0:19:50.400 --> 0:19:53.440 the United States, and the EU is planning right into 0:19:53.480 --> 0:19:56.760 the Iranian sands. Hary o' cohen, thank you so much. Ariels, 0:19:56.760 --> 0:19:58.800 a senior fellow the Atlantic Council, joining us on the 0:19:58.800 --> 0:20:16.840 phone from Washington, d C. As I mentioned earlier, IBM 0:20:16.920 --> 0:20:18.840 is in the market as we speak, with a twenty 0:20:19.000 --> 0:20:23.240 billion dollar corporate bond deal that marks, uh, you know, 0:20:23.520 --> 0:20:26.160 a very busy We've got Bristol Myers earlier this week, 0:20:26.200 --> 0:20:28.480 so shaping up to be a very busy week in 0:20:28.520 --> 0:20:30.760 the corporate bond new issue market. To dive a little 0:20:30.800 --> 0:20:32.520 bit deeper into what's going on in that market, we 0:20:32.560 --> 0:20:35.400 turned to Molly Smith. Molly's a corporate finance reporter for 0:20:35.480 --> 0:20:38.200 Bloomberg News. She joins us on the phone. Molly, thanks 0:20:38.200 --> 0:20:40.119 so much for joining us. So just give us the 0:20:40.640 --> 0:20:44.800 details here on this IBM deal. Thanks Ball. So, yeah, 0:20:44.800 --> 0:20:47.560 this was pretty well forecast. We all knew that UM 0:20:48.080 --> 0:20:50.760 IBM was going to be in the cards sometime this week, 0:20:50.800 --> 0:20:53.600 and they were really UM proactive in reaching out to 0:20:53.760 --> 0:20:57.520 make calls to investors yesterday while Bristol Myers was unfolding. 0:20:57.720 --> 0:20:59.880 UM it's been a very busy week and we've got 0:20:59.880 --> 0:21:02.320 an other busy one coming up next week with a 0:21:02.359 --> 0:21:05.320 lot of other forecast M n A deals, So a 0:21:05.320 --> 0:21:07.480 lot of supplot coming into the market right now, But 0:21:07.800 --> 0:21:09.960 these are all M and A transactions that investors have 0:21:10.040 --> 0:21:12.960 been waiting for and preparing their portfolios for to participate. 0:21:13.200 --> 0:21:15.280 One thing that's sort of interesting, Molly, is that you've 0:21:15.320 --> 0:21:18.400 seen a little bit of tumult in US equity markets, 0:21:18.400 --> 0:21:21.080 and you've seen spreads widen a little bit, and I 0:21:21.119 --> 0:21:25.440 want to emphasize little here, uh in the corporate debt markets. 0:21:25.480 --> 0:21:28.919 So it's interesting to see these huge deals coming and 0:21:28.920 --> 0:21:31.760 they're getting done. How well are they getting done? What's 0:21:31.760 --> 0:21:36.560 the pricing like, well, Bristol Paris yesterday? Um, extremely well. 0:21:36.560 --> 0:21:39.200 And again it really speaks to that these are not 0:21:39.320 --> 0:21:41.800 surprises these deals coming forward. When you're going to come 0:21:41.840 --> 0:21:45.080 forward with a top ten largest deal of all time 0:21:45.119 --> 0:21:47.520 in like the Neighborhood of twenty billion dollars, you're going 0:21:47.520 --> 0:21:49.679 to make sure that the demand is there on the 0:21:49.680 --> 0:21:51.960 investor base, so no one is being caught off guard. 0:21:52.240 --> 0:21:55.600 Investors have been preparing to participate in these deals. We 0:21:55.640 --> 0:21:59.160 saw IBM bon selling off yesterday, the people preparing to 0:21:59.200 --> 0:22:02.600 get more exposure or to that name today. Um and yeah. 0:22:02.640 --> 0:22:04.280 It is interesting when you see a little bit of 0:22:04.320 --> 0:22:08.000 that disconnects that equities have been plumping. Volatility is high, 0:22:08.200 --> 0:22:11.159 but when you have deals that people know are coming, 0:22:11.320 --> 0:22:15.159 and it's a bit of a you know, seasonality factor 0:22:15.240 --> 0:22:17.760 to that. We know that May is typically a heavier 0:22:17.840 --> 0:22:20.840 month heading into the summer months really starts to quiet down. 0:22:20.880 --> 0:22:22.760 So if you have these kinds of deals that you 0:22:22.760 --> 0:22:24.879 need to get done, this is the time to go forward. 0:22:24.960 --> 0:22:27.520 Although it is interesting, you know, yes, there have these 0:22:27.560 --> 0:22:29.680 have been well telegraphed deals. These do not come as 0:22:29.680 --> 0:22:32.359 a surprise. The demand has been there, but the question 0:22:32.440 --> 0:22:34.040 is still at what price And the fact that people 0:22:34.040 --> 0:22:36.800 are willing to price these deals a very attractive terms 0:22:36.800 --> 0:22:39.520 still for the issue or is despite some of the uncertainty, 0:22:39.560 --> 0:22:43.160 really sort of underscores the unbelievable demand for this debt 0:22:43.200 --> 0:22:46.400 that we have seen just persistently this year and frankly 0:22:46.800 --> 0:22:50.520 throughout the past decade. You know, it has been incredible. 0:22:50.520 --> 0:22:52.679 And even looking at the Bristol deal yesterday, I mean, 0:22:52.720 --> 0:22:55.280 the book ended up being what I mean more than 0:22:55.320 --> 0:22:59.080 it was three times oversubscribed in that neighborhood, so you 0:22:59.119 --> 0:23:02.240 could have even seen like the deal go bigger understandably 0:23:02.240 --> 0:23:04.480 and even just looking at how much of a bridge 0:23:04.560 --> 0:23:07.280 loan they had taken out that maybe they could have 0:23:07.280 --> 0:23:09.560 borrowed more, but UM speaking to a bit of the 0:23:09.560 --> 0:23:12.000 discipline that borrowers have had to and like staying within 0:23:12.040 --> 0:23:14.960 their lane and not trying to push the leverage too high, 0:23:15.000 --> 0:23:17.800 because obviously that's been a concerned in our market as well, 0:23:17.920 --> 0:23:20.359 especially with those single A names pursuing M and A 0:23:20.480 --> 0:23:23.359 and possibly going down to triple B, which it looks 0:23:23.400 --> 0:23:25.720 like so far Bristol Myers is dick clear of and 0:23:25.880 --> 0:23:29.199 IBM will probably as well. So'm only what are the 0:23:29.280 --> 0:23:31.080 use of proceeds by and large for some of these 0:23:31.119 --> 0:23:34.160 big monster deals? Are these to refinance existing debt? Are 0:23:34.200 --> 0:23:38.119 these for the fund M and A to fund capital spendaitures? 0:23:38.160 --> 0:23:40.639 What's kind of been the use of proceeds? This is 0:23:40.680 --> 0:23:43.720 a largely M and A so bristoally yesterday within the 0:23:43.760 --> 0:23:46.119 market to help fund to the takeover of Celgene there 0:23:46.160 --> 0:23:49.800 was a seventy four billion dollar transaction, the largest merger 0:23:49.800 --> 0:23:52.840 and pharmaceutical history. UM I believe some of the proceeds 0:23:52.840 --> 0:23:55.399 as well could be earbarnes for general corporate purposes and 0:23:55.880 --> 0:23:58.680 UM and also Bristol is pursuing them a five billion 0:23:58.720 --> 0:24:01.480