WEBVTT - Aviation Security Innovations Since 9/11 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets podcast 0:00:15.560 --> 0:00:18.439 called Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.919 at Bloomberg dot com slash podcast. Steve Crowley is Executive 0:00:23.079 --> 0:00:26.880 VP of K two Security Screening Group, also a former 0:00:27.200 --> 0:00:30.400 Assistant administrator at the Transportation Security Agency at the t 0:00:30.720 --> 0:00:34.720 s A. And UM, we want to talk about the 0:00:34.800 --> 0:00:38.880 changes that we've seen in aviation security since nine eleven, 0:00:38.960 --> 0:00:43.720 the UH, the improvements really and in in safety and security, 0:00:43.760 --> 0:00:47.520 and then the vulnerabilities that may still exist. So Steve, 0:00:47.520 --> 0:00:50.160 thanks very much for joining us. I guess the changes 0:00:50.200 --> 0:00:53.040 are pretty clear um to anyone over the age of 0:00:53.080 --> 0:00:56.800 like thirty, right, because we we've all lived through it. Um, 0:00:56.840 --> 0:00:59.560 and remember the days before you had to take off 0:00:59.600 --> 0:01:03.040 your shoe is now it's a lot more invasive, but 0:01:03.280 --> 0:01:06.600 it's not really that bad. Um. How how how much 0:01:06.680 --> 0:01:09.280 have we seen in terms of improvements in in UH, 0:01:09.319 --> 0:01:13.000 in safety and security. Well, first, Paul, Matt, thank you 0:01:13.080 --> 0:01:16.199 for having me on your show. Um, the Aviation Security 0:01:16.640 --> 0:01:19.840 Enterprise has come a long way since non eleven. Um. 0:01:19.880 --> 0:01:22.600 Not only do we have better technology to look for 0:01:22.720 --> 0:01:25.720 and identify the explosives and weapons, but we also have 0:01:25.760 --> 0:01:30.080 better security tactics, techniques and procedures. I mean, both of 0:01:30.120 --> 0:01:32.760 these things enhance our security posture. Let me give you 0:01:32.800 --> 0:01:36.560 some specific examples. UM. You know, as you mentioned back then, 0:01:36.600 --> 0:01:40.160 we walked through simple melo detector. UM. Now we have 0:01:40.560 --> 0:01:45.360 UM checkpoint X rays. UH, we have checkpoint on person 0:01:45.440 --> 0:01:49.120 body scanners. We have increased well, we went from actually 0:01:49.200 --> 0:01:52.600 a contracted security team twenty years ago to a professional 0:01:52.600 --> 0:01:57.960 t S A officer cadre of fifty thou strong people. UM. 0:01:58.040 --> 0:02:00.600 And now we have more law enforcement presence in UH. 0:02:00.720 --> 0:02:03.200 In the airports were hard in flight that doors, we 0:02:03.240 --> 0:02:05.320 have air marshals. Kind of what I'm getting at bottom 0:02:05.360 --> 0:02:09.079 line is the Avia Security Enterprise has implemented a multi tiered, 0:02:09.160 --> 0:02:12.240 multi layered approach to security. We didn't have this twenty 0:02:12.280 --> 0:02:17.440 years ago. Steve, with twenty years of hindsight, you guys 0:02:17.440 --> 0:02:23.040 in a security screening business, was it almost I mean, 0:02:23.280 --> 0:02:25.000 how did it happen? I guess? I mean, is it 0:02:25.080 --> 0:02:26.919 just that it was a different time and place, and 0:02:27.720 --> 0:02:29.880 we didn't think about strengthening the doors and all that 0:02:29.960 --> 0:02:32.960 kind of stuff. Well back then, if you remember, you know, 0:02:33.280 --> 0:02:36.080 anything that happened pretty much, anything that happened with an 0:02:36.120 --> 0:02:40.520 airline UM had to do with taking over the airline 0:02:40.600 --> 0:02:42.400 to get to you know, hijacking one like to get 0:02:42.400 --> 0:02:45.280 to another place. It was never really used never not really, 0:02:45.320 --> 0:02:47.480 it was never used as a weapon. So it's twenty 0:02:47.560 --> 0:02:49.720 years ago it's used that it was used as a weapon. 0:02:50.200 --> 0:02:52.240 And so if you think about it, just hardening the 0:02:52.280 --> 0:02:54.960 cockpit door, you know, they were able to get into 0:02:55.000 --> 0:02:58.440 the cockpit because they thought it was just a typical hijacking. Hey, 0:02:58.480 --> 0:03:00.160 I have a knife, I'm not gonna hurt anybody. Just 0:03:00.240 --> 0:03:03.320 let me, you know, talk to the pilot and and 0:03:03.320 --> 0:03:06.440 and that. You know, that changed obviously now we don't 0:03:06.480 --> 0:03:10.360 view it as hijacking anymore. It's terrorism, and it's uh, 0:03:10.400 --> 0:03:13.160 you know, we will always think of it as airplane 0:03:13.200 --> 0:03:16.080 as a weapon and never allow this to happen. You 0:03:16.080 --> 0:03:23.160 know again, well, we haven't seen anything even remotely like 0:03:23.280 --> 0:03:26.519 that since um September eleven, have we? I mean, I 0:03:26.760 --> 0:03:30.000 I don't recall any reports of plane being hijacked and 0:03:30.000 --> 0:03:32.800 then used as a weapon in the last twenty years. 0:03:32.639 --> 0:03:35.120 That is correct, and that is it is because of 0:03:35.120 --> 0:03:38.640 the aviation security enhancements that we have made. I said 0:03:38.640 --> 0:03:42.360 that the multi layered and multi tiered approach UM because 0:03:42.560 --> 0:03:45.160 there were there there's not even attempts. There's there's there 0:03:45.200 --> 0:03:49.200 were several attempts, uh probably any less than five UM 0:03:49.480 --> 0:03:53.119 to bring on an explosive UM, but that was all 0:03:53.160 --> 0:03:56.560 failed and since then we have not had not even 0:03:56.600 --> 0:03:59.760 an attempt And again that's because of whipped in place today. 0:04:00.920 --> 0:04:06.360 How can technology steve make you know, this even safer? Again, 0:04:06.440 --> 0:04:09.480 it seems a little low tech to have to send 0:04:09.600 --> 0:04:11.880 you know, get in line, take shoes off if you're 0:04:11.920 --> 0:04:14.560 not t s a pre approved It seems like there 0:04:14.600 --> 0:04:18.799 should just be some technology solution that would maybe speed 0:04:18.839 --> 0:04:22.520 up the process, make it less invasive. Yes, so there 0:04:22.520 --> 0:04:25.320 are some changes that are happening again behind the scenes. 0:04:25.320 --> 0:04:28.479 You don't you don't necessarily some of them. But UM, 0:04:28.520 --> 0:04:31.440 for one, even you know about what ten years ago 0:04:31.480 --> 0:04:34.360 when they came out with pre check UM being able 0:04:34.400 --> 0:04:37.159 to look at at folks and put put folks that 0:04:37.200 --> 0:04:39.719 you're comfortable with a side so that you can actually 0:04:39.720 --> 0:04:42.520 focus on those folks that you don't know about the unknowns. 0:04:43.279 --> 0:04:45.200 That actually helps the process and go a little the 0:04:46.080 --> 0:04:48.400 process to go a little faster efficient. But there are 0:04:48.440 --> 0:04:51.239 technologies that are that they're putting in place today, actually 0:04:51.279 --> 0:04:56.000 computed tomography system called CT at the checkpoint. It's kind 0:04:56.000 --> 0:05:00.200 of similar to the medical technology UM. It's a red 0:05:00.279 --> 0:05:02.960 image technology that will allow you to kind of manipulate 0:05:03.000 --> 0:05:05.279 the bag as your bag, your carry on bagg is 0:05:05.279 --> 0:05:08.360 going through victory or CT system that you don't actually 0:05:08.360 --> 0:05:11.120 have to have someone to take out things and move 0:05:11.160 --> 0:05:13.520 things around. You can actually digitally do that, so that 0:05:13.600 --> 0:05:17.039 becomes a more efficient process as well as these uh 0:05:17.200 --> 0:05:21.320 what they're deploying is automated automated screening lanes which are 0:05:22.080 --> 0:05:26.520 uh uh state of the art UM conveyance systems will 0:05:26.520 --> 0:05:30.000 call it, and that allows basically the bags to automatically 0:05:30.000 --> 0:05:32.960 be put into the X ray system or the CT system, 0:05:33.200 --> 0:05:36.680 the bins automatically come back. You can more than one 0:05:36.720 --> 0:05:39.160 person can divest their stuff at at the same time, 0:05:39.200 --> 0:05:41.040 so thus you don't have to wait for that person 0:05:41.080 --> 0:05:43.080 in front of you to finish. So it's things like 0:05:43.160 --> 0:05:46.200 that that do help the process along and they aren't 0:05:46.200 --> 0:05:48.960 looking at other things to even become more and more efficient. 0:05:49.240 --> 0:05:51.600 You know the old Total Recall of someone going through 0:05:52.320 --> 0:05:54.800 a Total Recall movie where you sup fall sports that 0:05:54.880 --> 0:05:57.320 you're going through. Well, we're not gonna get down to 0:05:57.320 --> 0:05:59.039 the point of looking at you know, bones and stuff 0:05:59.040 --> 0:06:02.360 like that. The ideas that have the passenger continuously walk 0:06:02.440 --> 0:06:06.040 down this this UH pathway where sensors are they are 0:06:06.120 --> 0:06:08.640 looking at the individual, so we are moving in that 0:06:08.680 --> 0:06:11.000 direction and that will happen in the in the future. 0:06:11.400 --> 0:06:13.719 So at first, I want to say, there's a remake 0:06:13.760 --> 0:06:17.000 of Total Recall with Colin Ferrell that got really bad reviews, 0:06:17.040 --> 0:06:20.120 but I thought it was amazing, So I highly recommend 0:06:20.400 --> 0:06:22.520 checking out the remake. And then I want to ask, 0:06:22.839 --> 0:06:27.040 are these technologies going to lead to um an easier 0:06:27.440 --> 0:06:30.760 airport security? I mean, are we gonna eventually leave our 0:06:30.760 --> 0:06:35.080 shoes on and maybe even carry liquids through? Yes, So 0:06:35.200 --> 0:06:37.320 the carrying liquid through, let me get that one first. 0:06:37.320 --> 0:06:40.240 So the compute demography system that's being deployed today and 0:06:40.240 --> 0:06:42.920 that UH started we'll say a year and a half 0:06:42.920 --> 0:06:45.600 ago for deployments, you can actually leave the liquids in 0:06:45.640 --> 0:06:49.200 because those those systems can see that. So yes, that 0:06:49.240 --> 0:06:52.240 will help with that leading laptops in the bag. The 0:06:52.279 --> 0:06:55.720 CT system will help with that leaving shoes on. They 0:06:55.760 --> 0:06:59.640 are integrating uh, some sensors within those walk walk through 0:06:59.680 --> 0:07:02.560 metal detectors as well as the omboy scanners to actually 0:07:02.560 --> 0:07:05.760 be able to leave shoes on. UM. Will they always 0:07:05.800 --> 0:07:08.640 be that way? Where? Yeah? Yeah, like for the entire 0:07:08.880 --> 0:07:11.600 um you know, traveling public. No, my guess is you 0:07:11.600 --> 0:07:13.600 will still have to do some of those for those 0:07:13.720 --> 0:07:18.840 unknown high UM, the folks that need to be looked 0:07:18.840 --> 0:07:22.080 at more more carefully than others. UM, you always have 0:07:22.160 --> 0:07:25.160 that kind of capability of those technologies. UM, we'll be 0:07:25.200 --> 0:07:27.760 able to support that. UM one way that they can 0:07:27.960 --> 0:07:29.320 will be able to do it with shoes on wor 0:07:29.400 --> 0:07:31.920 shoes off as an example. Uh, but it won't have 0:07:31.960 --> 0:07:34.440 to be two separate technologies. Steve, where do you think 0:07:34.440 --> 0:07:40.200 they're still risk in the system vulnerabilities in the system? Well, UM, 0:07:40.320 --> 0:07:45.560 Airports continuously conduct res assessments and security vulnerability assessments to 0:07:45.600 --> 0:07:49.800 identify prioritizes and actually mitigate what they find. We know 0:07:49.920 --> 0:07:53.920 that the US aviation system is a high value, high 0:07:53.920 --> 0:07:57.320 priority target for bad actors. UM, and I like to 0:07:57.320 --> 0:08:00.679 say the bad actor only has to get it right once, 0:08:01.200 --> 0:08:03.560 while t s A and the Aviation Security Enterprise that 0:08:03.680 --> 0:08:05.320 you know has to be able to get it right 0:08:05.360 --> 0:08:10.000 every time. So everybody still needs to remain vigilant. But today, 0:08:10.520 --> 0:08:12.280 not only do we have uh we have to be 0:08:12.320 --> 0:08:15.400 bilion against that that conventional bad actor you know who 0:08:15.440 --> 0:08:18.520 carries the explosive or a weapon on board, but we 0:08:18.560 --> 0:08:21.080 have to also look at those asymmetric bad actors that 0:08:21.080 --> 0:08:24.600 are going after um the threat factors such as cyber 0:08:24.600 --> 0:08:27.440 threats or even the use of drones as weapons. So 0:08:27.840 --> 0:08:30.720 those things exist, and so the bottom line is we 0:08:30.760 --> 0:08:33.000 need to be five steps ahead of those bad actors 0:08:33.240 --> 0:08:37.680 if we want to security that aviation enterprise. All right, Steve, 0:08:37.720 --> 0:08:39.800 thanks very much for joining us. Steve Curly there is 0:08:40.240 --> 0:08:44.280 executive VP the k TO Security Screening Group. Of course, 0:08:44.600 --> 0:08:47.400 as we mentioned, he's a former assistant administrator at the 0:08:47.480 --> 0:08:51.600 t s A as well, and m really has done 0:08:51.679 --> 0:08:55.840 so much in security and in leadership, so really appreciate 0:08:56.240 --> 0:08:58.600 the time with you. Steve, Thanks very much for your 0:08:58.640 --> 0:09:02.200 insights on this UM. Well tomorrow, I guess the twenty 0:09:02.280 --> 0:09:06.559 year anniversary of nine eleven. Travel as we knew it 0:09:06.960 --> 0:09:12.120 changed almost overnight and has become safer and more secure, 0:09:12.160 --> 0:09:18.599 so we appreciate it. This is Bloomberg. Let's talk a 0:09:18.640 --> 0:09:23.720 little bit about the crypto space, Michael Cameron, CEO of Skilling, 0:09:24.040 --> 0:09:28.400 and let's let's start with El Salvador and and what 0:09:28.559 --> 0:09:31.600 happened the other day. You know, we saw UM the 0:09:31.640 --> 0:09:35.720 country adopt bitcoin as I guess legal tender. And on 0:09:35.760 --> 0:09:38.000 the same day we had a big drop in the price. 0:09:38.000 --> 0:09:42.000 So the two things related. Michael, Hi, Matt, thanks for 0:09:42.040 --> 0:09:44.559 having me. I do think they are related. I think 0:09:44.600 --> 0:09:47.880 it's a good old fashioned by the rumor, sell the news. 0:09:48.080 --> 0:09:52.000 I think some of the people looking for UM, there's 0:09:52.000 --> 0:09:53.360 a lot of people that like the link. You know, 0:09:53.559 --> 0:09:55.960 this drop must equate to something that happened. I think 0:09:56.040 --> 0:09:58.360 if you're looking for that, it's by the room, sell 0:09:58.400 --> 0:09:59.960 the news. But also it was a bit of a 0:10:00.000 --> 0:10:02.439 stumbled rollout, and so I think some people thought it 0:10:02.559 --> 0:10:06.120 made cloud the it make cloud the future for other 0:10:06.160 --> 0:10:09.640 countries to follow suit. What does it mean, Michael, for 0:10:09.679 --> 0:10:13.160 a company to adopt it and for a country, I'm sorry, 0:10:13.160 --> 0:10:15.720 to adopt bitcoin as legal tenor, what does that really 0:10:15.760 --> 0:10:21.000 mean to you? I think it means that, I mean 0:10:21.000 --> 0:10:23.000 the obvious cases that it means that they have to 0:10:23.240 --> 0:10:28.040 that vendors and providers have to accept bitcoin as a 0:10:28.040 --> 0:10:31.920 as a an asset that they'll accept. And so that's 0:10:32.200 --> 0:10:34.800 that comes with a lot of operational hurdles that they 0:10:34.840 --> 0:10:37.200 have to get over, and uh that that you know, 0:10:37.240 --> 0:10:39.439 it's citizens have to adopt this and understand how to 0:10:39.559 --> 0:10:42.000 how to use it now to convert from dollars over 0:10:42.040 --> 0:10:44.240 to BTC and and so on and so forth. So 0:10:44.400 --> 0:10:46.600 at a very basic level, it just means that every 0:10:46.679 --> 0:10:50.840 vendor from a little kiosk selling phone top ups to uh, 0:10:50.880 --> 0:10:53.199 you know, a large purchase of a furniture or a 0:10:53.280 --> 0:10:58.000 car has to accept bitcoin. What about um skilling, You're 0:10:59.280 --> 0:11:04.280 a trading form um that tries to make trading I 0:11:04.280 --> 0:11:08.040 guess transparent and secure and you deal in over eight 0:11:08.320 --> 0:11:12.760 d f x um Uh well pair currency pairs? Does 0:11:12.800 --> 0:11:18.200 that include crypto? Yeah? So Skilling is a is a 0:11:18.480 --> 0:11:21.360 ex and CFD broker. We deal, We do deal in crypto. 0:11:21.440 --> 0:11:23.520 In fact, we're a leading provider of crypto. We have 0:11:24.240 --> 0:11:27.840 twenties seven crypto assets right now, which includes the big 0:11:27.880 --> 0:11:30.760 boys like Bitcoin and ether, but also the more nascent 0:11:30.760 --> 0:11:34.800 cryptos like dog coin, shiba Inu and more. Well, how's 0:11:34.840 --> 0:11:37.160 it going? How's that going right now? I mean, is 0:11:37.160 --> 0:11:42.280 it still um an incredibly hot sector? Bitcoin is trading 0:11:42.280 --> 0:11:46.680 for over forty dollars right now. It's still incredibly hot. 0:11:46.800 --> 0:11:49.240 It is. It is the product that that that customers 0:11:49.280 --> 0:11:52.120 want to trade, you know, where we we find that 0:11:52.559 --> 0:11:56.719 UM more and more customers are just exclusively trading cryptocurrencies 0:11:56.760 --> 0:12:00.000 now Skilling it does attract. Skilling is a really relatively 0:12:00.080 --> 0:12:02.439 new fintech on the scene. Were only a few years old, 0:12:03.040 --> 0:12:06.360 and uh, we primarily attract a younger audience, but they 0:12:06.400 --> 0:12:09.640 and they almost exclusively dip their toe into crypto. Some 0:12:09.720 --> 0:12:11.959 of the older brokers still rely on a lot of 0:12:12.040 --> 0:12:15.040 customers that trade the kind of the traditional assets, you know, 0:12:15.120 --> 0:12:19.640 the TAO and the SMP and gold and the Fiat currencies. UM. 0:12:19.679 --> 0:12:21.560 But we are trying to push the envelope and just 0:12:21.679 --> 0:12:24.920 offer all the cryptocurrencies that that are making the news, 0:12:25.040 --> 0:12:28.640 making the headlines, and and it's still on fire. It's 0:12:28.679 --> 0:12:32.080 still all that people want to trade right now, you know, Uh, Michael, 0:12:32.120 --> 0:12:35.760 there's still a lot of skepticism out there about bitcoin 0:12:35.800 --> 0:12:38.120 and crypto in general. In fact, the Sweetish central banker 0:12:38.240 --> 0:12:42.400 warned that bitcoin could eventually collapse. How do you kind 0:12:42.400 --> 0:12:46.040 of frame that type of thinking as this market continues 0:12:46.080 --> 0:12:51.920 to develop. I think that that skepticism is is a 0:12:51.920 --> 0:12:56.280 little unfair. I think a better I think that these 0:12:56.360 --> 0:12:58.560 the way comments like that I think are are are 0:12:58.600 --> 0:13:00.320 going to be judged to be on the wrong side 0:13:00.320 --> 0:13:05.320 of history. So this cryptocurrencies have with every passing year, 0:13:05.360 --> 0:13:08.840 there's more and more use cases for both blockchain but 0:13:08.840 --> 0:13:13.520 also cryptocurrencies, and so I feel like when there's comments 0:13:13.559 --> 0:13:17.720 like that denigratee cryptocurrencies and the use of blockchain, it's 0:13:17.800 --> 0:13:22.160 very shortsighted. Fiat currencies like the Prono, like the Swiss 0:13:22.160 --> 0:13:26.520 frank are not um. They're not without volatility. I mean, 0:13:26.559 --> 0:13:30.000 just a few, just a few januaries back, m a 0:13:30.120 --> 0:13:35.000 currency here in Europe, dropped well appreciated. UM. So for 0:13:35.040 --> 0:13:38.400 all the naysayers that say crypto is a scam or 0:13:38.559 --> 0:13:41.960 it's too volatile, UM, fiat currencies are not above that. 0:13:42.080 --> 0:13:44.800 European fiot currencies are not above that. And so I 0:13:44.840 --> 0:13:47.280 think I think it's here to stay. I think UM, 0:13:47.360 --> 0:13:49.160 and I think comments like that aren't aren't gonna help 0:13:49.200 --> 0:13:51.040 and are going to be judged to be on the 0:13:51.040 --> 0:13:54.000 wrong side of history. But We're gonna clearly need more regulation, 0:13:54.280 --> 0:13:56.080 aren't we. I mean, you look at all the rip 0:13:56.080 --> 0:14:00.079 offs going on and defy and um, the fact that 0:14:00.240 --> 0:14:03.640 it's almost expected by investors. Not that you trade those 0:14:03.720 --> 0:14:08.840 defy tokens also, but you see them. Yeah. Yeah, there's 0:14:08.880 --> 0:14:11.000 more regulation coming, and I think that's that's a good 0:14:11.000 --> 0:14:12.839 thing for companies like Skilling. It's a very good thing. 0:14:12.840 --> 0:14:15.520 We don't we're highly regulated as it is. You know, 0:14:15.559 --> 0:14:17.959 we have a significant amount of you know, a m 0:14:18.080 --> 0:14:20.000 L and k y C checks we put customers through. 0:14:20.480 --> 0:14:24.160 We don't accept cryptocurrencies right now as uh for deposits, 0:14:24.200 --> 0:14:27.720 But um, it's something we're we're obviously we're eyeing, and 0:14:27.760 --> 0:14:30.400 we know that all of our competitors and most brokerages 0:14:30.440 --> 0:14:33.320 are looking into this. And there are leading companies out 0:14:33.360 --> 0:14:36.960 there that do what they call KYT tracking, so that 0:14:37.160 --> 0:14:41.720 you can track the genesis of a cryptocurrency transaction. You 0:14:41.720 --> 0:14:43.800 can track it very far back and you can see 0:14:44.240 --> 0:14:46.840 you know where where it's been used. So, um, I 0:14:46.840 --> 0:14:49.600 think the regulation is building and I and companies like 0:14:49.640 --> 0:14:52.360 ours welcoming. Hey, Michael, thanks so much for joining us. 0:14:52.360 --> 0:14:56.560 Really appreciate it. Fascinating store here developing so just we 0:14:56.600 --> 0:14:59.600 will obviously keep you on the loopas as we need 0:14:59.680 --> 0:15:06.280 more discussion going forward. Michael Camerman, CEO of Skilling. I'm 0:15:06.320 --> 0:15:10.000 a credit investor. Where do I go for yield? A 0:15:10.000 --> 0:15:13.160 lot of folks are looking at the private credit market 0:15:13.200 --> 0:15:15.680 and we've got an expert in that market. John Klient, 0:15:16.000 --> 0:15:19.880 President and Chief operating Officer of New Mountain Finance Corporation. John, 0:15:19.920 --> 0:15:22.320 thanks so much for joining us here. Just give us, 0:15:22.680 --> 0:15:26.440 you know, for those folks that that aren't that you know, um, 0:15:26.480 --> 0:15:29.760 you know, knowledgeable about the private credit market, just framed 0:15:29.760 --> 0:15:32.240 for us. What is the private credit market that you 0:15:32.240 --> 0:15:35.760 guys playing well? Thanks for having me on the show. 0:15:35.800 --> 0:15:39.160 I really appreciate it. The private credit market, at least 0:15:39.160 --> 0:15:41.600 the way we think about it, is a market that 0:15:41.640 --> 0:15:46.920 finances leverage buyouts for um uh for for financial sponsors 0:15:47.520 --> 0:15:51.480 across a big continuum of size. So we're providing capital 0:15:51.720 --> 0:15:56.920 to effectuate leverage buyouts, and historically we've done so in 0:15:56.960 --> 0:15:59.520 the middle market, but more and more private credit is 0:15:59.560 --> 0:16:03.720 moving up market and and executing billion dollar tranches to 0:16:03.800 --> 0:16:07.200 effectuate these larger buyouts. So what kind of return are 0:16:07.240 --> 0:16:11.680 we talking about? So private credit the pitch across the 0:16:11.720 --> 0:16:15.200 industry to investors is essentially in private credit you can 0:16:15.240 --> 0:16:21.720 get consistent seven to ten percent returns essentially with floating 0:16:21.800 --> 0:16:25.800 rate tranches so you can protect against inflation and changes 0:16:25.840 --> 0:16:30.440 in the general macro environment. And across the industry, we've 0:16:30.480 --> 0:16:33.680 we've done a good job achieving returns that are better 0:16:33.720 --> 0:16:36.800 than the high yield market and the syndicated market, and 0:16:37.120 --> 0:16:40.560 that continues today. So it's interesting, John, I mean, you know, 0:16:40.600 --> 0:16:42.200 Matt and I we we talked a lot of folks 0:16:42.200 --> 0:16:45.160 who in the private equity space and we're just amazed 0:16:45.200 --> 0:16:48.760 by how much capital and is in the private equity 0:16:48.840 --> 0:16:51.960 space looking for deals. Give us a sense of kind 0:16:51.960 --> 0:16:55.360 of the deal flow that you guys are seeing right now. 0:16:56.800 --> 0:16:59.280 Right now, We've never seen deal flow as high as 0:16:59.280 --> 0:17:02.360 we see it see it today. Uh. Here at New Mountain, 0:17:02.400 --> 0:17:04.280 we have a private equity business and we also have 0:17:04.400 --> 0:17:07.000 the credit business which I'm in charge of. We manage 0:17:07.000 --> 0:17:10.760 about over twenty billion in private equity, seven billion in credit. 0:17:11.200 --> 0:17:14.040 And uh, I'll tell you, the zoom environment that we 0:17:14.080 --> 0:17:18.920 have today has has really created tremendous deal velocity, tremendous 0:17:18.960 --> 0:17:22.359 efficiencies and uh, there are tremendous amount of players with 0:17:22.400 --> 0:17:25.359 a lot of capital to put to work, and essentially 0:17:25.680 --> 0:17:29.240 there's a major competition to to buy all the best assets, 0:17:29.600 --> 0:17:32.280 and so we've never seen anything like it, and I 0:17:32.320 --> 0:17:35.160 think that is driven by the large amount of fundraising 0:17:35.160 --> 0:17:38.280 that we've seen in private equity. And from my seat, 0:17:38.280 --> 0:17:40.359 we're just trying to keep up with our clients to 0:17:40.480 --> 0:17:43.840 raise money fast enough to to suit their needs and 0:17:43.880 --> 0:17:46.720 to be a little finance the bigger and bigger buyouts 0:17:46.760 --> 0:17:50.400 that that our clients are pursuing. So if I'm high 0:17:50.480 --> 0:17:53.760 networth individual or family office, how long do I have 0:17:53.840 --> 0:17:56.280 to commit funds and and what kind of risk am 0:17:56.320 --> 0:18:00.679 I taking? Well? Across UH, I have a credit There 0:18:00.680 --> 0:18:02.520 are a lot of different structures here at New Mountain. 0:18:02.560 --> 0:18:05.480 We do manage a public BDC, so you can buy 0:18:05.480 --> 0:18:09.080 our stock, buy and sell our stock on a daily 0:18:09.119 --> 0:18:12.520 basis very easily. So you've got that daily liquidity and 0:18:12.520 --> 0:18:16.080 you kind of access to a diversified group of of 0:18:15.920 --> 0:18:19.119 of of private loans that we make to our sponsored clients. 0:18:19.160 --> 0:18:22.160 There are some structures um that are out there where 0:18:22.200 --> 0:18:24.880 as a high net worth individual or an institutional investor, 0:18:25.240 --> 0:18:27.240 you have to commit to the fund of the asset 0:18:27.280 --> 0:18:31.960 class over many years. So UH big picture, I'd say 0:18:32.440 --> 0:18:35.200 there are different structures for different time horizons, and it's 0:18:35.240 --> 0:18:37.480 possible to get access to private credit in a lot 0:18:37.480 --> 0:18:40.800 of different ways with a lot of different time horizons. John, 0:18:40.840 --> 0:18:42.600 earlier in my career, I was at the Chase Manhattan 0:18:42.600 --> 0:18:44.800 Bank and the corporate finance team, and we were lending 0:18:44.800 --> 0:18:47.560 money to the media sector, which is a great cash 0:18:47.600 --> 0:18:52.240 flowing industry and supportive of, you know, a good level 0:18:52.359 --> 0:18:54.280 of debt. What are some of the sectors that you 0:18:54.320 --> 0:18:59.000 guys like from a private credit perspective. Here at New Mountain, 0:18:59.160 --> 0:19:01.600 we're really focused on what we refer to as defensive 0:19:01.600 --> 0:19:04.240 growth industries, So we're trying to lend to businesses that 0:19:04.280 --> 0:19:06.520 we think are going going to do well no matter 0:19:06.560 --> 0:19:09.520 what the economic environment looks like. Uh and I think 0:19:09.520 --> 0:19:12.600 our sponsor clients are are geared the same way. So 0:19:12.640 --> 0:19:17.800 we're looking at software, technology, enabled business services, subscription data companies, 0:19:18.400 --> 0:19:23.320 life sciences, especially materials, healthcare. I could go on and on, 0:19:23.400 --> 0:19:26.440 but it's a lot of niches that have really predictable, 0:19:26.960 --> 0:19:30.320 recurring revenue models that that we can take comfort in 0:19:30.359 --> 0:19:33.679 as a lender. What are some of the biggest deals 0:19:33.680 --> 0:19:35.919 you've been involved in. Can you tell us any of 0:19:35.920 --> 0:19:39.320 the deal details. Well, I can give you a bunch 0:19:39.359 --> 0:19:42.880 of deals. It's pretty amazing. Before before COVID, I'd say 0:19:42.920 --> 0:19:45.520 the biggest deals would barely touch a billion dollars in 0:19:45.560 --> 0:19:49.200 the private credit market. And today we're we're we're financing 0:19:49.240 --> 0:19:51.440 deals as small as a hundred million and as big 0:19:51.480 --> 0:19:53.800 as three billion, where where we'd be a member of 0:19:53.840 --> 0:19:56.919 a of a club of lenders that financed those bigger deals. 0:19:57.920 --> 0:20:02.240 But really post COVID, there's been an explosion of larger deals. Uh. 0:20:02.280 --> 0:20:05.159 You can think about stamps dot com, which is a 0:20:05.200 --> 0:20:09.840 software business, Affordable Care which is a dentistry business, Galway 0:20:09.880 --> 0:20:13.359 and insurance broker Um, a novel on Holdings which has 0:20:13.400 --> 0:20:16.240 been announced that to take private lead by Norrik and Insight. 0:20:16.480 --> 0:20:20.520 And these are all multibillion dollar deals, uh that that 0:20:20.520 --> 0:20:22.639 that are that are really popping up every day. So 0:20:22.720 --> 0:20:25.280 I need all my hands and toes to talk about 0:20:25.280 --> 0:20:27.800 the billion dollar deals and the private credit markets that 0:20:27.840 --> 0:20:30.240 have occurred over the last over the last two months, 0:20:30.240 --> 0:20:33.280 even John just about thirty seconds talked to us about 0:20:33.280 --> 0:20:37.359 credit quality out there. So I think credit quality is 0:20:37.400 --> 0:20:39.840 really good as long as you stick to to the 0:20:39.960 --> 0:20:43.560 sectors that have done well through COVID, so um, and 0:20:43.640 --> 0:20:45.199 essentially I think it's a lot of the sectors that 0:20:45.240 --> 0:20:48.000 we focus on. Our book has been very strong through COVID, 0:20:48.480 --> 0:20:52.000 and we were we worry about credit quality is really uh, 0:20:52.119 --> 0:20:56.119 companies that are that are exposed to secular change, supply 0:20:56.280 --> 0:20:58.440 Chaine disruption, which I'm sure you're talking a lot about 0:20:58.440 --> 0:21:01.320 in your show, labor shore is. So we really we 0:21:01.400 --> 0:21:04.159 really stay away from, uh, you know, industries that that 0:21:04.280 --> 0:21:07.600 that could be exposed to those those negative trends. I 0:21:07.600 --> 0:21:12.520 think about automotive, retail, travel and leisure, heavy heavy industrials, uh, 0:21:12.640 --> 0:21:16.480 consumer discretionary of course, you know energy. So I really 0:21:16.480 --> 0:21:19.159 think those are the industries that good, good lenders avoid. 0:21:19.600 --> 0:21:23.960 John Klein, President, chief operating Officer at New Mountain Finance Corporation. 0:21:24.000 --> 0:21:32.200 Appreciate your time today. This is Bloomberg. Now let's get 0:21:32.240 --> 0:21:37.400 over to Don Steinbroger been Uh. We've been anxiously awaiting 0:21:37.400 --> 0:21:40.000 the CEO of Agecroft Partners and he joins us now 0:21:40.040 --> 0:21:42.560 at a Richmond, Virginia. Don great to have you on 0:21:42.600 --> 0:21:45.920 the program. Thanks so much for joining us. You say, um, 0:21:45.960 --> 0:21:49.159 this is the greatest asset raising environment in the history 0:21:49.160 --> 0:21:50.720 of hedge funds. At least you have a paper out 0:21:51.160 --> 0:21:53.679 UM with that title. What do you mean by that? 0:21:53.920 --> 0:21:55.720 In the history of hedge fund industry? This is the 0:21:55.720 --> 0:22:00.600 best well I've been in the institutional investment and business 0:22:00.640 --> 0:22:04.080 for thirty six years. And uh. There are three things 0:22:04.080 --> 0:22:07.040 that drive flows to hedge funds and all of those 0:22:07.280 --> 0:22:11.879 are are pointing to me to be UM very strong 0:22:12.000 --> 0:22:15.919 indicators that two thousand, uh twenty two will be the 0:22:15.960 --> 0:22:19.440 best environment to raise money in the hedge fund industry. 0:22:19.680 --> 0:22:22.760 The first is you're just starting with a large asset bates. 0:22:23.000 --> 0:22:24.800 You know, the hedge fund industry at the end of 0:22:24.800 --> 0:22:27.760 the second quarter was at four point three trillion, up 0:22:27.800 --> 0:22:30.440