The Credit Edge by Bloomberg Intelligence

Jim Schaeffer, Global Head of Leveraged Finance at Aegon Asset Management, discusses the looming distress in highly indebted companies as the economy slows. He shares insights on third-quarter earnings, the implications of lower interest rates, and the distinct stress patterns across sectors like chemicals and food. Schaeffer also emphasizes the importance of understanding consumer behavior and the risks associated with public versus private credit markets, all while urging caution around late-cycle investment trends.

John Fekete, head of tradable credit at Crescent Capital Group, shares insights from his extensive experience in corporate credit. He discusses the resilience of collateralized loan obligations (CLOs), especially those backed by middle-market borrowers, and why they're tough to disrupt. John highlights the current climate of manageable leverage, the growth of private credit, and emerging opportunities in healthcare and services sectors. He also explores the impact of recent interest rate cuts on borrowers, emphasizing the importance of smart manager selection in preserving CLO value.

James Turner, co-head of European Fundamental Fixed Income at BlackRock, shares insights from his extensive background in leveraged finance and CLO strategies. He emphasizes that collateralized loan obligations present one of the best relative value picks in the credit markets. The discussion explores sector opportunities in autos, healthcare, and chemicals, along with the outlook for defaults and recoveries in leveraged finance. Turner also highlights the importance of nimble credit strategies and the impact of rising defense spending on market dynamics.

Michael Zawadzki, Chief Investment Officer of Blackstone Credit & Insurance, shares insights on the allure of private credit, highlighting its 150-200 basis points premium over traditional debt markets. He explains why speed and value are attracting borrowers to direct lenders and the growing interest from insurers in long-duration private investments. The conversation also touches on the potential in data center financing, the competitive landscape of managers, and the anticipated rise in mergers and acquisitions as the market evolves.

In this engaging discussion, Scott Greenberg, the Global Chair of Business Restructuring at Gibson Dunn, shares insights on the burgeoning distress debt market in Europe. He highlights how legal strategies used in the US are being adapted for European clients amidst rising financial challenges, particularly in France. Greenberg explores the complexities of navigating credit markets and the differences in restructuring practices between Europe and the US. Listeners will gain a deeper understanding of how strategic legal advice is essential in these turbulent times.

Join Tom Moulds, Senior Portfolio Manager at RBC BlueBay, as he discusses why public credit trumps private debt. With over a decade managing European corporate strategies, Moulds emphasizes the advantages of liquidity and visibility in public markets. He also touches on the rise of financial stress in real estate and the interplay between defense spending and sustainable investing. With lurking macro risks, Moulds offers insights on navigating today’s turbulent credit landscape and the potential pitfalls of private debt investments.

Christina Padgett, Associate Managing Director at Moody's and credit market expert, discusses the anticipated resurgence of leveraged buyouts (LBOs), particularly in tech and healthcare. She highlights the need for market adjustments due to capital overflow and explores the risks facing lower-rated companies in the current environment of rising interest rates. Tune in to hear about distressed debt exchanges, the forecast for decreasing default rates, and the evolving dynamics of private and public credit markets, all packed with insightful analysis!

Dagmara Michalczuk, co-chief investment officer at Tetragon Credit Partners, specializes in the high-risk CLO market. She discusses expectations for collateralized loan obligation equity to yield up to 15% this year, emphasizing the benefits of diversification and leveraging financial engineering. Dagmara highlights risks related to loan defaults and liability-management exercises, as well as the shifting investment dynamics between U.S. and European CLOs. Her insights underscore the growing interest in this asset class amidst economic uncertainties.

In this discussion, Jason Mudrick, the Chief Investment Officer and founder of Mudrick Capital Management, shares his insights on the anticipated rise in debt defaults over the next seven years due to high funding costs. He highlights that the normalization of interest rates, rather than economic downturns, is driving this trend. Mudrick also dives into notable debt restructurings involving Tropicana and Yellow Pages and discusses emerging investment opportunities in innovative sectors like flying taxis.

Sabrina Fox, founder of Fox Legal Training and former head of the European Leverage Finance Association, shares her insights on rising debt documentation risks in a cash-chasing market. She highlights how current provisions often create a misleading reality, akin to 'La La Land.' The discussion dives into the lack of transparency in high-yield debt, key lessons from the Altice restructuring, and the aggressive spread of liability management from the US to Europe. Fox emphasizes the need for training in legal analysis to better navigate these complexities.