WEBVTT - Perhaps a Ballroom 0:00:02.720 --> 0:00:07.200 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.039 --> 0:00:10.399 I feel like we should address why we were off 0:00:10.480 --> 0:00:12.360 air for three weeks. People asked me about it. 0:00:12.600 --> 0:00:15.319 Really, no one asked me about it. Well, no one 0:00:15.360 --> 0:00:16.079 asked me about it. 0:00:16.880 --> 0:00:19.159 I got questions, Well, you had a vacation, then I 0:00:19.200 --> 0:00:22.920 had a vacation. Then we actually had an episode. 0:00:23.239 --> 0:00:26.040 I think I think everyone in this room would agree 0:00:26.120 --> 0:00:28.840 the greatest episode of the Money Stuff podcast in its history. 0:00:29.600 --> 0:00:32.440 Except when I say we recorded it, I mean we performed. 0:00:32.760 --> 0:00:34.440 We accidentally did not record. 0:00:34.920 --> 0:00:37.919 Yeah, so it will never see the light of day. 0:00:38.360 --> 0:00:40.120 We do, I believe have your side of the audio. 0:00:40.120 --> 0:00:42.519 Where's like I was joking, we should do like a 0:00:42.560 --> 0:00:45.160 space coast coast to coast thing, where like we play 0:00:45.200 --> 0:00:48.480 your audio and I just say non secretaris that set 0:00:48.520 --> 0:00:51.000 you up to say something weird in between your audio. 0:00:51.400 --> 0:00:54.160 But I was a sign that I was also thinking 0:00:54.200 --> 0:00:56.760 like Mystery Science Theater, where like I say something and 0:00:56.760 --> 0:00:59.080 then you, like you offer a snippy little comment, and 0:00:59.120 --> 0:01:02.000 then I say something else and you just respond. 0:01:02.040 --> 0:01:03.320 There are a lot of ways we could go with 0:01:03.360 --> 0:01:03.800 that audio. 0:01:03.920 --> 0:01:04.680 Who has the time. 0:01:05.000 --> 0:01:05.679 Who has the time? 0:01:05.840 --> 0:01:09.400 Not us? No, so we apologize to your listeners. 0:01:09.640 --> 0:01:11.480 You're fine, I'm sure it was. 0:01:11.560 --> 0:01:13.559 I'm sure we all had a great couple of weeks. 0:01:14.680 --> 0:01:16.440 We got a vacation from this. They got a vacation 0:01:16.560 --> 0:01:20.119 from us. Fine. I'm going away on a couple of weeks. 0:01:20.160 --> 0:01:21.840 So I'm going to a conference, and you're going to 0:01:21.840 --> 0:01:22.920 do an I want to say this. 0:01:23.240 --> 0:01:25.240 I'm going to the Tulane m and A conference, which 0:01:25.240 --> 0:01:26.960 is like the Big M and A conference for like 0:01:27.640 --> 0:01:30.319 M and A bankers. The Song Exempt put lawyers to 0:01:30.360 --> 0:01:32.680 a very logic extent. So if you're there, say hi 0:01:33.120 --> 0:01:35.040 and uh, I've never been to this conference everyone, So 0:01:35.160 --> 0:01:36.160 that's fun because it's a New. 0:01:36.120 --> 0:01:40.160 Orleans that does sound really and the weather should be 0:01:40.959 --> 0:01:44.399 nice but not horrible. In March in New Orleans. I'm 0:01:44.440 --> 0:01:48.360 going to Vegas for an ETF conference. I hate Vegas, 0:01:48.840 --> 0:01:52.400 but I'll be there. So if you're there, shout out 0:01:52.440 --> 0:01:53.080 the pod. 0:01:53.840 --> 0:01:56.440 Hello, and welcome to the Money Stuff Podcast. You're a 0:01:56.480 --> 0:01:59.760 weekly podcast, your occasional podcast where we talk about stuff. 0:02:00.040 --> 0:02:03.640 It into money. I'm that Levine and I read the 0:02:03.680 --> 0:02:05.360 Money Stuff column from Bloomberg Opinion. 0:02:05.760 --> 0:02:08.320 And I'm Katie Greifeld, a reporter for Bloomberg News and 0:02:08.360 --> 0:02:09.959 an anchor for Bloomberg Television. 0:02:19.520 --> 0:02:20.960 Where should we start, Katie. 0:02:21.000 --> 0:02:25.480 We could start with Warner Brothers. That happens last week. 0:02:26.080 --> 0:02:27.160 I was still happening. 0:02:27.160 --> 0:02:29.240 But yes, it's still happening. But I was on vacation, 0:02:29.919 --> 0:02:33.000 and I left for vacation thinking that, Okay, Netflix has 0:02:33.240 --> 0:02:35.079 kind of got this in the bag, like they've kind 0:02:35.120 --> 0:02:38.160 of had this in the bag, and they did not 0:02:38.760 --> 0:02:40.640 have it in the bag. They ended up walking away. 0:02:40.840 --> 0:02:44.280 Yeah, it's fascinating, right, Like Paramount had bid thirty dollars 0:02:44.320 --> 0:02:48.119 to buy Warner Brothers. Warner Brothers had said, we'd rather 0:02:48.240 --> 0:02:53.640 take this Netflix bid. It was something more complicated, but whatever, 0:02:53.720 --> 0:02:56.640 it was like worth more than thirty dollars, right to Warner, 0:02:56.840 --> 0:03:00.840 they thought. And then Paramount kept past them. And then 0:03:00.840 --> 0:03:03.239 they eventually raised their bed from thirty to thirty one, 0:03:03.880 --> 0:03:06.520 and Warner was like, well, thirty one is better than 0:03:06.520 --> 0:03:09.400 Netflix's bed, although thirty was not. So they went back 0:03:09.440 --> 0:03:12.680 to Netflix and they said, you have matching rights, would 0:03:12.680 --> 0:03:15.000 you like to raise your bed above thirty one? And 0:03:15.080 --> 0:03:17.440 Netflix said no, thank you, see you later. 0:03:17.800 --> 0:03:19.440 Yeah, And so Netflix. 0:03:19.040 --> 0:03:22.320 Just dropped out and Paramount is buying Warner for a 0:03:22.360 --> 0:03:22.799 thirty one. 0:03:22.800 --> 0:03:26.880 Dollars I could see world in which Paramount does go 0:03:26.960 --> 0:03:30.559 after Netflix next, because this was pretty audacious. 0:03:30.720 --> 0:03:33.519 So you have this dynamic where Paramount thinks that it 0:03:33.520 --> 0:03:35.720 should be combined with Warner Brothers and Warner Brothers kind 0:03:35.760 --> 0:03:37.880 of things. It should be combined with someone like Warner Brothers. 0:03:39.600 --> 0:03:44.920 And so Paramount, which has a young, ambitious, arguably NEPO 0:03:44.920 --> 0:03:45.560 baby ceo. 0:03:45.720 --> 0:03:47.520 I was going to say, a CEO with a well 0:03:47.640 --> 0:03:48.560 deep pocketed file. 0:03:48.680 --> 0:03:51.840 Yeah, a CEO with let's say, something to prove. He's like, 0:03:51.880 --> 0:03:55.520 I want to buy Warner, and Warner has a CEO 0:03:55.560 --> 0:03:57.640 who has kind of proven itself and you know, wants 0:03:57.720 --> 0:04:01.040 to sell, right, And so it makes sense to combine 0:04:01.080 --> 0:04:02.920 these two companies. I mean, it probably makes sense. They 0:04:02.920 --> 0:04:05.520 think it makes sense. There's there's some synergies, whatever makes 0:04:05.560 --> 0:04:07.920 sense to combine the companies, and it makes sense for 0:04:08.600 --> 0:04:13.680 Paramount's executive team to control the combined company, let's say, right, 0:04:14.480 --> 0:04:17.600 But what doesn't make sense from a corporate finance perspective 0:04:17.680 --> 0:04:21.200 is Paramount, which is teeny, buying Warner, which is big. Yes, 0:04:21.720 --> 0:04:23.880 it sort of straightforward world. You'd be like, well, Warner 0:04:23.880 --> 0:04:26.320 will buy Paramount and then they'll combine them and then yah. Yeah, 0:04:26.480 --> 0:04:28.240 But It just didn't work out that way because of 0:04:28.480 --> 0:04:32.120 the dynamics of how Warner is trying to sell itself 0:04:32.160 --> 0:04:35.960 and bidding against Netflix, and Paramount had offered an all 0:04:35.960 --> 0:04:38.400 stock deal, like, it would not have worked, right, Yeah, 0:04:38.440 --> 0:04:41.440 So they offered it all cash deal, which meant borrowing yeah, 0:04:41.680 --> 0:04:42.120 jillions of. 0:04:42.120 --> 0:04:46.800 Dollars more than twice their market capitalization. Actually, it's pretty fantastic. 0:04:46.880 --> 0:04:49.200 It depends on account, like their market cap right now, 0:04:49.360 --> 0:04:53.120 Paramount's market gap is like thirteen fourteen billion dollars their 0:04:53.120 --> 0:04:56.880 equity market cap and the debt for this deal I think, 0:04:56.920 --> 0:05:01.240 including like everything is like seventy nine billion dollars, so 0:05:01.279 --> 0:05:05.760 it's like six times in their market cap. But that 0:05:05.800 --> 0:05:08.200 math is not quite right because like their market cap 0:05:08.240 --> 0:05:10.240 today is like thirteen billion dollars, but they're getting like 0:05:10.279 --> 0:05:14.440 a forty something billion dollar equity check from Larry Allison Fair. 0:05:14.680 --> 0:05:17.360 They're also doing a rights offering, which I love. 0:05:17.680 --> 0:05:19.800 Explain that and why do you love it? Well? 0:05:19.839 --> 0:05:21.760 I love it because just doesn't make sense for like 0:05:21.800 --> 0:05:23.840 this teeny company to borrow so much money to buy 0:05:23.839 --> 0:05:27.400 this bigger company. You do the reverse, right, and the 0:05:27.520 --> 0:05:29.960 rights offering is a way to like very slightly move 0:05:29.960 --> 0:05:32.560 in the correct direction, which is like, we should have 0:05:32.600 --> 0:05:36.000 more stock outstanding if we're going to swallow this giant company. 0:05:36.360 --> 0:05:38.719 And so they're offering to sell about three billion dollars 0:05:38.720 --> 0:05:41.719 of stock to whoever wants at public investors on the 0:05:41.760 --> 0:05:44.760 same terms that Larry Allison is buying. So Paramount is 0:05:44.839 --> 0:05:48.400 essentially a controlled company like in the personal ownership of 0:05:48.440 --> 0:05:50.560 like the Ellison family, but it has public shareolders and 0:05:50.680 --> 0:05:52.160 they can put in some more money. Basically, if you're 0:05:52.160 --> 0:05:54.200 a public sherelder, you have the right to buy some 0:05:54.240 --> 0:05:57.200 stock at the sixteen bucks that Larry Ellison is playing, 0:05:58.080 --> 0:06:00.240 which like you know, it's three billion of stock, which 0:06:01.200 --> 0:06:03.920 it's three billion less of debt load than you'd otherwise need. 0:06:03.960 --> 0:06:05.080 And like they have a lot of debt. 0:06:05.279 --> 0:06:06.919 They do have a lot of debt, to the point 0:06:06.960 --> 0:06:10.560 where they were downgraded to junk by Fitch in the 0:06:10.600 --> 0:06:14.240 aftermath of this, which I guess isn't that surprising when 0:06:14.279 --> 0:06:15.040 we're talking about some. 0:06:15.000 --> 0:06:18.000 Of these levels I was thinking about, like when they 0:06:18.000 --> 0:06:19.400 were trying to get this deal. So there's a long 0:06:19.440 --> 0:06:21.960 time where Paramount was pestering Warner to take their deal 0:06:22.000 --> 0:06:25.280 instead of Netflix and Warner we're saying no, and it 0:06:25.320 --> 0:06:26.560 was hard for them to say no because a lot 0:06:26.560 --> 0:06:30.039 of sharelders wanted the certainty and cash of the Paramount deal, 0:06:30.440 --> 0:06:32.000 and so the board had to defend their deal. And 0:06:32.040 --> 0:06:34.719 one thing the board said was the paramat deal would 0:06:34.760 --> 0:06:37.760 be the largest leveraged buyotever, and we have doubts that 0:06:37.760 --> 0:06:40.159 they can get it done. And like, in some sense, 0:06:40.200 --> 0:06:42.760 that's like a weird thing to say. Because the Warner 0:06:42.839 --> 0:06:46.680 board represents the Warner shareholders. They have a fiduciary duty 0:06:46.680 --> 0:06:48.080 at this point to get the best price for the 0:06:48.080 --> 0:06:51.960 Warner shaholders. And if you say, well, the paramount deal 0:06:52.000 --> 0:06:54.240 involves borrowing a lot of money, it would be hard 0:06:54.279 --> 0:06:56.360 to pay down all that debt, Like that doesn't matter, 0:06:56.400 --> 0:06:58.359 Like that's not your problem, right, the shoulders are cashed 0:06:58.360 --> 0:07:00.240 out at that point. If it runs into trouble after 0:07:00.279 --> 0:07:02.240 the LBO, that's not the sholder's problem. So it's not 0:07:02.240 --> 0:07:04.720 the boards problem. And the board is defending this as saying, well, 0:07:04.880 --> 0:07:06.839 we don't think they could even raise the financing to 0:07:06.880 --> 0:07:08.920 do this albo, which is kind of a weird thing 0:07:08.920 --> 0:07:11.880 to think because it's like Larry Ellison, It's like it's 0:07:11.880 --> 0:07:14.720 people who can raise the financing yeah, but now that 0:07:14.800 --> 0:07:17.800 they've signed the Paramount deal, I'm like, oh, yeah, this 0:07:17.920 --> 0:07:20.760 is the largest LBO ever And like I can see 0:07:20.800 --> 0:07:24.160 why someone with ties to Warner Brothers would be nervous 0:07:24.160 --> 0:07:26.400 about that. There's going to be a lot of job cuts. 0:07:26.400 --> 0:07:29.240 There's going to be probably a lot of cuts in production, 0:07:29.320 --> 0:07:32.080 although there's debate about that. But like, to service all 0:07:32.120 --> 0:07:34.400 of this debt, it's going to be difficult and it's 0:07:34.400 --> 0:07:36.640 going to lead to like hard business treses at Paramount 0:07:36.720 --> 0:07:40.520 Warner And if you sold to Netflix, which has plenty 0:07:40.560 --> 0:07:42.600 of money, you wouldn't have those pressures made a lot 0:07:42.640 --> 0:07:46.280 of pressures, right, Like Netflix is not not necessarily a 0:07:46.360 --> 0:07:50.280 lavish benign over alert for movie companies, but like having 0:07:50.280 --> 0:07:52.600 that much debt like makes it harder to run the business. 0:07:52.760 --> 0:07:56.000 Yeah, I mean there were questions about theatrical releases, et cetera. 0:07:56.080 --> 0:07:57.400 When it came to the Netflix bid. 0:07:57.560 --> 0:07:59.560 Netflix is like, you can have your theory of mind 0:07:59.560 --> 0:08:00.920 of Netflix, but they have plenty of money. 0:08:01.000 --> 0:08:03.640 Yeah. Yeah, it's funny. I mean, taking a look at 0:08:03.640 --> 0:08:08.280 our reporting, both Ted Sarandos and David Ellison had spent 0:08:08.320 --> 0:08:11.560 a lot of time in DC sort of pitching for 0:08:11.600 --> 0:08:14.920 this deal. And it seems like one of the factors though, 0:08:15.120 --> 0:08:17.720 was the idea that when it came to the regulatory 0:08:17.800 --> 0:08:20.360 side of things, that it would be a quicker experience 0:08:20.440 --> 0:08:23.960 going with the Paramount bid than with Netflix that probably 0:08:23.960 --> 0:08:25.920 would have lasted well into twenty twenty seven. 0:08:26.160 --> 0:08:29.000 A lot of people think that, Yeah, Paramount definitely pushed 0:08:29.000 --> 0:08:31.920 that narrative. Ted Sarandas is going around saying no, no, it's fine, 0:08:31.960 --> 0:08:34.200 we have no problem. We would have got improved quickly. 0:08:34.360 --> 0:08:36.640 So I don't know the answer, but like, yes, certainly 0:08:36.960 --> 0:08:39.839 people were nervous about the Netflix regulatory approval process, and 0:08:40.559 --> 0:08:43.120 you know, this is on the backdrop of everything is 0:08:43.960 --> 0:08:49.160 about Donald Trump's personal whim but anyway, so there's a 0:08:49.200 --> 0:08:51.760 sense that like Netflix is politically on the outs and 0:08:51.960 --> 0:08:55.320 Paramount is politically on the end. But like the Netflix 0:08:55.559 --> 0:08:57.760 very consistently said no, no, it's no problem, more fine, 0:08:57.760 --> 0:08:58.720 We're doing great. 0:08:58.880 --> 0:09:01.439 So I don't know, Yeah, I mean, Netflix, in walking 0:09:01.440 --> 0:09:03.640 away said that this was solely about price, that they 0:09:03.640 --> 0:09:04.800 were confident they would get it. 0:09:04.880 --> 0:09:08.880 Fascinating, Yeah, you've come this far, You've had this much 0:09:08.920 --> 0:09:12.800 time and money on this deal, and they're like, could 0:09:12.800 --> 0:09:15.880 you pay one more dollar and you're like, no, it's amazing. 0:09:16.120 --> 0:09:17.920 It's an amazing display of disciplined No, by the way, 0:09:17.960 --> 0:09:19.160 it's one more dollar. But it's also they get a 0:09:19.200 --> 0:09:20.920 big breakup fee for walking away. 0:09:21.240 --> 0:09:22.560 Yay, Paramount is paying. 0:09:22.840 --> 0:09:25.160 There's been a lot of talk about paramount of grain 0:09:25.240 --> 0:09:28.040 to pay that breakup fee, and like, I've always found 0:09:28.080 --> 0:09:32.040 that talk very perplexing because obviously, if you've been thirty 0:09:32.080 --> 0:09:34.800 one dollars per share in cash to buy a company, 0:09:35.040 --> 0:09:38.000 the incidence of the breakup fee is on you, Like 0:09:38.320 --> 0:09:40.679 nobody could possibly pay it other than paramount, and it's 0:09:40.720 --> 0:09:43.079 just like sort of smoking mirrors that. Wheer was like, oh, 0:09:43.080 --> 0:09:44.679 they have to pay the breakup fee anyway, Yeah, they're 0:09:44.679 --> 0:09:45.040 paying it far. 0:09:45.200 --> 0:09:48.920 Yeah. Well. Also, just to the point on the DC relationship, 0:09:48.960 --> 0:09:53.560 apparently President Trump told Sorrando's at some visit not to 0:09:53.640 --> 0:09:57.480 overpay for the company. So apparently he took his advice. 0:09:57.720 --> 0:10:00.400 I don't know, No, he was he was going to overpay. 0:10:00.240 --> 0:10:02.160 The Trump gave him some business advices. 0:10:02.200 --> 0:10:05.640 I've never mind if the President tells you that, I 0:10:05.679 --> 0:10:08.680 mean kind of feels like the writing's on the wall, 0:10:08.880 --> 0:10:09.800 like this is all okay. 0:10:09.960 --> 0:10:11.920 I don't think that's Like if you overpay, we'll want 0:10:11.920 --> 0:10:14.240 to approved. I think that's just used to be in business. 0:10:14.320 --> 0:10:17.400 Yeah, yeah, yeah, I mean I wasn't actually in the room, 0:10:17.600 --> 0:10:19.400 So yeah. 0:10:19.520 --> 0:10:22.960 We're speculating a little bit about what that conversation. 0:10:23.200 --> 0:10:25.800 I don't know what room it was. Wasn't the Oval office, 0:10:25.840 --> 0:10:29.680 It could be any room, yeah, perhaps a ballroom. Just 0:10:29.720 --> 0:10:33.400 from a human level, I mean, just reading this, I 0:10:33.440 --> 0:10:35.240 feel like I was getting my feelings hurt, like the 0:10:35.280 --> 0:10:38.960 fact that it took so many months, Paramount was rebuffed 0:10:38.960 --> 0:10:42.280 at so many turns. It feels like Warner Brothers the 0:10:42.360 --> 0:10:45.000 board really didn't want to do this and then found 0:10:45.040 --> 0:10:47.559 themselves in a position where they sort of couldn't say no. 0:10:47.720 --> 0:10:50.120 I feel like if I was in Paramount shoes, I 0:10:50.120 --> 0:10:52.920 would just feel really bad all the time. 0:10:53.200 --> 0:10:55.000 But interesting, I don't know. 0:10:55.080 --> 0:10:57.679 I mean, maybe I just don't have the bullheaded confidence. 0:10:57.760 --> 0:10:59.600 You know, Warner would never say we really don't want 0:10:59.600 --> 0:11:03.079 to sell the I mean, they're a boardive competent directers 0:11:03.080 --> 0:11:05.480 that have a fiducial duty to get the best price 0:11:05.520 --> 0:11:10.319 for their shareholders. I think that they liked the Netflix deal. 0:11:10.440 --> 0:11:12.400 For whatever reason, they liked the Netflix deal. You know, 0:11:12.440 --> 0:11:15.760 they'll tell you deal certainty and the value of the 0:11:15.800 --> 0:11:20.920 cable stub and whatever. But there was always some price. 0:11:22.200 --> 0:11:24.160 I mean, there had to have always been some price 0:11:24.679 --> 0:11:26.600 that paramount could pay that would be enough for them, 0:11:27.000 --> 0:11:30.280 And it turned that price was one dollar more, which 0:11:30.320 --> 0:11:32.360 is funny. The other thing that happened that it's so 0:11:32.440 --> 0:11:35.200 strange is that Netflix, you know, was like, we'll pay 0:11:35.840 --> 0:11:37.600 the complicated package they would pay, and this is our 0:11:37.640 --> 0:11:40.839 best and final offer. And Paamans said, we offer thirty 0:11:40.880 --> 0:11:43.160 dollars and it is not our best and final offer. 0:11:43.400 --> 0:11:46.760 And so it would like Warner could not accept that deal. 0:11:46.840 --> 0:11:49.200 It would be just absolute malpractice to be like, we'll 0:11:49.200 --> 0:11:51.760 take your not best offer. So they had to hold 0:11:51.760 --> 0:11:53.840 out for something more, And everything else is in the 0:11:53.840 --> 0:11:55.720 background of like, oh, we had to hold out for more, 0:11:56.080 --> 0:11:59.640 and like I don't know if they explicitly said thirty 0:11:59.679 --> 0:12:02.480 one best and final effort, but like thirty one was enough. 0:12:02.679 --> 0:12:06.400 Yeah, Well, it'll be interesting to see how long this 0:12:06.440 --> 0:12:08.240 actually does take to get through. 0:12:08.520 --> 0:12:10.640 The Other thing is but I don't think I think 0:12:10.640 --> 0:12:12.920 they've already gotten some of their clarents. There's like European 0:12:13.160 --> 0:12:15.640 there's a locking still happen. But the other interesting thing 0:12:15.679 --> 0:12:18.240 is like if your model of this is they have 0:12:18.320 --> 0:12:20.439 taken on crippling dat and won't be able to service it, 0:12:20.600 --> 0:12:24.760 like you read some people being like Netflix's plan here 0:12:25.280 --> 0:12:27.280 is to buy the whole thing in three years when 0:12:27.280 --> 0:12:30.520 it falls apart, which is one one way to put 0:12:45.880 --> 0:12:47.120 Private credit has been a thing. 0:12:47.240 --> 0:12:52.439 Oh my gosh, GOSHBDC. 0:12:50.760 --> 0:12:51.440 All these things. 0:12:51.520 --> 0:12:59.240 Yeah, b CRED Blackstone stepping up to meet these redemptions personally, right. 0:12:59.240 --> 0:13:05.040 Be cred the Blackstone non traded private credit business development 0:13:05.040 --> 0:13:06.800 company that's not as name, that's just what it is. 0:13:07.320 --> 0:13:09.920 Its name is b Credit. All these non traded BBCs, 0:13:10.840 --> 0:13:14.360 they call them like semi liquid vehicles. Every quarter they 0:13:14.400 --> 0:13:16.880 offered a redeem up to five percent of the stock 0:13:17.240 --> 0:13:19.800 a tender offer. So if you are invested in this fund, 0:13:19.800 --> 0:13:21.440 you can't sell it on the stock exchange. There's no 0:13:21.520 --> 0:13:24.160 way to get liquidity except every quarter they will buy 0:13:24.240 --> 0:13:25.920 back your shares if you want, if you want out, 0:13:26.080 --> 0:13:28.400 but only up to five percent. So last quarter they 0:13:28.480 --> 0:13:32.240 got seven point nine percent of the fund in redemption requests, 0:13:32.400 --> 0:13:35.679 which is a record, as we reported. And so they 0:13:35.720 --> 0:13:40.960 had to scrape to do those redemptions, not because they 0:13:40.960 --> 0:13:43.400 didn't have the money. They have like bank credit facilities. 0:13:43.440 --> 0:13:45.640 They can do the money, but because like the way 0:13:45.679 --> 0:13:47.880 the tender offer works, they can't. It's boring, but like 0:13:48.000 --> 0:13:51.680 they couldn't actually meet all those redemptions. And rather than 0:13:52.200 --> 0:13:55.480 say no, which is not quite the same thing as gating, 0:13:55.520 --> 0:13:58.400 the fund quotes but like yeah, like look like gating, 0:13:58.400 --> 0:14:00.920 and people get mad and upset. So rather than say 0:14:00.920 --> 0:14:02.840 know it anyone right out, they let everyone get out. 0:14:03.120 --> 0:14:06.600 And to do that, they paid about seven percent of 0:14:06.600 --> 0:14:10.079 them out with Pea Creds money and they paid their 0:14:10.080 --> 0:14:14.880 remaining zero point nine percent out with money from Blackstone 0:14:15.040 --> 0:14:20.360 the firm and from the personal accounts of some Blackstone employees. Yeah, here, 0:14:20.400 --> 0:14:22.920 you know, get into the fund. It's like meant to 0:14:22.960 --> 0:14:25.240 be a show of confidence. It's like we will cash 0:14:25.280 --> 0:14:27.600 you out at par and we will pay par with 0:14:27.640 --> 0:14:30.560 our own money because we really believe in these credits. 0:14:30.680 --> 0:14:33.320 Specifically, it was more than twenty five senior leaders from 0:14:33.560 --> 0:14:37.080 sure across Blackstone. We reported. Yeah, I've heard that too. 0:14:37.200 --> 0:14:39.240 I was talking to someone about this on bloomber TV 0:14:39.400 --> 0:14:41.720 yesterday and they were like, I take this as a 0:14:41.800 --> 0:14:44.360 very bullish sign. It's a kin to share buybacks or 0:14:44.400 --> 0:14:46.160 insider buying or something like that. 0:14:46.640 --> 0:14:48.200 So that is the honestly what it's meant to be. 0:14:48.240 --> 0:14:53.040 That's the optimistic angle. But the headlines keep coming, and I. 0:14:52.960 --> 0:14:55.840 Mean like the angle is like some retail investors in 0:14:55.840 --> 0:14:58.280 this private fund, having read bad headlines, wanted to take 0:14:58.280 --> 0:15:04.480 their money out, and there are offsetting inflows from experienced 0:15:05.120 --> 0:15:08.280 private credit professionals who work at Blackstone and know the portfolio. Right, 0:15:08.440 --> 0:15:11.160 that's a good story. Yeah, you have to like, you know, 0:15:11.200 --> 0:15:13.520 you have to like twist the arms of the employees 0:15:13.560 --> 0:15:14.600 to yeah, how do you say no? 0:15:14.920 --> 0:15:16.760 That's what I would love to know, Like, Okay, more 0:15:16.800 --> 0:15:20.160 than twenty five or about twenty five said yes. Did 0:15:20.160 --> 0:15:23.080 anyone say no? Did anyone feel like they could? I 0:15:23.120 --> 0:15:24.200 want to talk to that person. 0:15:25.040 --> 0:15:26.880 The other thing that bothered me about this is like 0:15:28.240 --> 0:15:30.040 if you came to me and I was like a 0:15:30.080 --> 0:15:31.320 sharp Elbo private. 0:15:31.040 --> 0:15:33.160 Credit professional and you really I can see it. 0:15:33.280 --> 0:15:36.680 You're like all of our retail not all seven of 0:15:36.720 --> 0:15:39.480 our retail investers are panicking in one out of our 0:15:39.520 --> 0:15:41.920 lovely fund, which has great credits, and I live in 0:15:41.920 --> 0:15:45.320 the portfolio. Would you like in? I'd be like, sure, 0:15:45.680 --> 0:15:48.200 that sounds like a firesal. I'd be happy to get 0:15:48.240 --> 0:15:50.880 in when these people are panicking, and then my bosses 0:15:50.880 --> 0:15:52.480 would be like, great, you're buying it one hundred cents 0:15:52.480 --> 0:15:55.880 on the like, no, that's nothing. I don't want to. Like, 0:15:56.200 --> 0:15:57.880 if I think they're worth one hundred cents on the 0:15:57.920 --> 0:15:59.960 dollar and everyone's panicking, I want to buy a ninety. 0:16:00.480 --> 0:16:02.440 They should get a discount. You know, when you think 0:16:02.480 --> 0:16:04.680 about like the professionals at the firm using their own 0:16:04.680 --> 0:16:09.040 money to buy the controversial assets. The classic story is 0:16:09.080 --> 0:16:10.960 in like I don't know, I like twenty eleven or something. 0:16:11.600 --> 0:16:14.720 Sometime shortly after the financial crisis, Credit Sueez had this 0:16:14.800 --> 0:16:18.000 like giant pile of what people call the toxic assets, 0:16:18.000 --> 0:16:20.680 like yeah, the mortgage derivatives and just do your weird 0:16:20.680 --> 0:16:23.720 stuff from the crisis, and they were like, we can't 0:16:23.960 --> 0:16:26.280 sell this. It has a huge capital hit. So we're 0:16:26.320 --> 0:16:29.280 going to package it into a box and give shares 0:16:29.320 --> 0:16:31.760 of the box to our like managing directors. And so 0:16:31.800 --> 0:16:35.720 they've just paid bonuses one year in toxic assets. Love it, 0:16:36.200 --> 0:16:38.600 and like those people all got rich, like they'd like 0:16:38.680 --> 0:16:41.000 immediately recovered, and they did so well because like they 0:16:41.080 --> 0:16:43.520 got these toxic assets at the marks they were at, 0:16:43.560 --> 0:16:48.160 which was a distress mark. But here everything's in par 0:16:48.440 --> 0:16:51.600 you know their distress marks. You're getting a price that 0:16:51.680 --> 0:16:58.680 does not reflect necessarily the level of nervousness that your 0:16:58.840 --> 0:17:01.200 retail investors are showing they try to redeem. 0:17:01.360 --> 0:17:03.680 Yeah, and that's the thing. I mean, we heard from 0:17:03.960 --> 0:17:07.240 Blackstones Global head of private credit Strategies at Bloomberg and 0:17:07.280 --> 0:17:09.959 Bust this week saying that the noise that you're seeing 0:17:10.119 --> 0:17:13.560 doesn't match the solid credit fundamentals of the fund's assets. 0:17:13.760 --> 0:17:16.359 It almost feels like the conversation has sort of moved 0:17:16.880 --> 0:17:19.800 beyond that when it comes to the redemption request that 0:17:19.800 --> 0:17:24.520 you're seeing. And even if it's not headlines about Blackstone specifically, 0:17:25.080 --> 0:17:27.160 there's a lot of stories. I mean, there was one 0:17:27.280 --> 0:17:30.880 on Thursday about Blackrock what marking a private loan they 0:17:30.960 --> 0:17:32.520 hadn't made to zero. 0:17:32.840 --> 0:17:34.160 Me some markdan on some lens. 0:17:34.320 --> 0:17:34.560 Yeah. 0:17:34.600 --> 0:17:38.040 I don't know that it'll be universal across all these 0:17:38.080 --> 0:17:40.520 these funds, but like all these all these people, all 0:17:40.560 --> 0:17:42.680 the all these like senior private credit people are going 0:17:42.680 --> 0:17:46.359 around expressing conference in their portfolios, which one might be 0:17:46.400 --> 0:17:49.679 true and two they have to say. But then, like 0:17:50.119 --> 0:17:52.840 there's the separate question of if everyone is panicking and 0:17:52.880 --> 0:17:55.240 you are confident in the portfolio, Like, yeah, you should 0:17:55.240 --> 0:17:56.760 step in and buy, but it's weird to have to 0:17:56.760 --> 0:17:59.159 buy out one hundred cents on the dollars. Yeah, and 0:17:59.200 --> 0:18:02.040 this is why I of the trade that Boas Weinstein 0:18:02.119 --> 0:18:05.840 is doing. So we're recording this. On Thursday, he announced 0:18:05.920 --> 0:18:08.800 one I think today or yesterday for the star woud 0:18:08.800 --> 0:18:11.600 A private read Yeah, and two weeks ago he announced 0:18:11.600 --> 0:18:14.680 one for these blue Owl private BDCs, where basically he's 0:18:14.680 --> 0:18:19.439 going around tendering to buy shares of these non traded, 0:18:19.520 --> 0:18:22.360 semi liquid vehicles that people are nervous about, and he's 0:18:22.400 --> 0:18:24.360 offering to buy them, like, you know, he's seventy five 0:18:24.359 --> 0:18:27.879 sons on the dollar. Presumably he's more skeptical than like 0:18:28.040 --> 0:18:31.159 Blackstone is, but like less skeptical than these retail investors. Right, 0:18:31.240 --> 0:18:33.840 he thinks these credits are fine or he's heading the 0:18:33.840 --> 0:18:36.479 credit I don't know, but like he's getting these credits 0:18:36.480 --> 0:18:38.919 at a discount because retail investors are I don't want 0:18:38.920 --> 0:18:40.400 to say panicking, but they're nervous. 0:18:40.520 --> 0:18:43.000 Well, that's what I wanted to ask you, was what 0:18:43.200 --> 0:18:44.679 is the trade here for Boas? 0:18:44.880 --> 0:18:48.200 The trade is like the value of liquidity in these 0:18:48.359 --> 0:18:51.439 vehicles has gone up enormously in the last month. People 0:18:51.520 --> 0:18:54.160 now want this liquidity, and if people really want liquidity, 0:18:54.160 --> 0:18:56.240 they should pay for liquidity, and bo As will be 0:18:56.240 --> 0:18:57.080 the one to get paid. 0:18:57.280 --> 0:18:59.040 Yeah, in theory, I'm wondering. 0:18:59.520 --> 0:19:02.359 Tender like this might just be trolling. Yeah, nothing forces 0:19:02.359 --> 0:19:05.600 anyone to tender, because these vehicles all have mechanisms to 0:19:05.640 --> 0:19:07.600 cash you at a one hundred cents on the dollar. Like, yeah, 0:19:07.600 --> 0:19:10.880 not perfect, there's gates whatever. But because like you sort 0:19:10.880 --> 0:19:12.560 of expect to get cashed out one hundred cents on 0:19:12.600 --> 0:19:14.320 a dollar, you might not want a tender to Boaz 0:19:14.359 --> 0:19:16.240