The Credit Edge by Bloomberg Intelligence

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.

Aaron Kless, CEO and CIO at Andalusian Credit Partners, specializes in sports, media, and entertainment investment. He reveals that U.S. billionaires are just beginning their global sports invasion, with significant interest from sovereign wealth funds. Kless discusses the implications of high-profile sports deals and the financial dynamics of being a fan. The conversation also delves into growth opportunities in stadium financing and how emerging technologies are reshaping investments in both professional and amateur sports.

Mike Dennis, co-head of European credit at Ares Management, discusses how private lenders are increasingly eyeing funding opportunities in Europe’s defense sector, amid rising geopolitical tensions. He emphasizes the need to align investments with limited partners' ESG concerns while exploring trends in the European middle market and potential expansions into Italy. Dennis highlights the resilience of private credit amidst economic uncertainty and the strategic move towards selective lending, showcasing the evolving landscape of private equity.

Oksana Aronov, Head of Market Strategy for Alternative Fixed Income at J.P. Morgan Asset Management, shares her insights on navigating the turbulent credit markets. She highlights the growing struggles of junk bond firms and the complacency surrounding credit risks. Aronov emphasizes the need for hedges against potential losses and warns about companies increasing debt instead of repaying it. The discussion also covers the importance of cautious investment in these uncertain times and the implications for both high-grade and high-yield debt.

Purnima Puri, Head of Liquid Credit and a founding partner at HPS Investment Partners, dives into the promising landscape of fund finance during this engaging discussion. She highlights the significant opportunity in net-asset-value lending, particularly for private equity sponsors. Puri also addresses the challenges posed by stagflation and the evolving dynamics of private versus public credit markets. Additionally, they explore the complexities of loan modifications and the impact of AI on private credit, showcasing the resilience required in today’s financial environment.

In this discussion, Mike Best, a seasoned portfolio manager at Barings, reveals a growing interest in European corporate debt as investors shift focus from the US. He explains that concerns over US economic policies are driving this trend. The conversation dives into potential risks within European credit markets, the impact on various sectors like retail and communications, and strategies for navigating liability management. Best emphasizes the importance of careful investment amid global economic uncertainty, highlighting the unique opportunities in Europe's landscape.

Michael Gatto, Partner and head of private side businesses at Silverpoint Capital, shares insights on the precarious state of private debt funds in today's market. He warns that when the credit cycle shifts, many funds overly exposed to weak companies could face dire consequences. Gatto discusses Silver Point’s strategies for navigating private credit, emphasizing the importance of due diligence and strong lender-sponsor relationships. The conversation also touches on the evolving landscape of liability management and the complexities of LMA documents in stress investing.

Greg Peters, co-chief investment officer at PGIM Fixed Income, shares insights on the resilience of collateralized loan obligations (CLOs) in the face of rising credit risks. He classifies CLOs as 'bulletproof,' emphasizing their security during economic downturns. Discussion includes strategies for leveraging liability management and the challenges posed by growing default risks in the consumer and hospitality sectors. Peters highlights the importance of a long-term investment focus while navigating the complexities of current credit markets.

Collin Martin, Director and Fixed Income Strategist at the Schwab Center for Financial Research, discusses the paradox of a rallying credit market amidst high default risks. He warns of investor complacency and low interest coverage ratios among vulnerable borrowers. The conversation dives into private credit risks, floating-rate and preferred debt opportunities, and how trade wars impact consumer confidence. Martin emphasizes the need for cautious investment strategies in this complex landscape, where rising defaults could challenge the current calm.

In this enlightening discussion, Savina Rizova, Co-chief Investment Officer at Dimensional Fund Advisors, shares her insights on the current state of credit markets. She argues that private credit often fails to outperform public junk debt, highlighting the importance of liquidity and transparency in public markets. Rizova also touches on Dimensional's move into mortgage-backed securities and the strategic benefits of their active ETF management. Overall, it’s a compelling look at navigating credit investments amidst market uncertainties.