The Credit Edge by Bloomberg Intelligence

The podcast discusses the potential in collateralized loan obligations, robust growth in India and Australia, and private credit for buyouts. Analysis of WeightWatchers' struggling bonds and hopes for survival despite challenges in the market.

 The US economy is at risk of tipping into recession in the second half of this year, putting pressure on corporate debt markets, says Chris Alwine, global head of credit at Vanguard. “What would precipitate that shallow recession is that corporations are just not hiring, with a modest increase in layoffs,” said Alwine. Vanguard, one of the biggest money managers in the world, with $8.6 trillion in assets, is cautious on junk-rated debt, Alwine tells Bloomberg News’ Lisa Lee and James Crombie and Bloomberg Intelligence’s Stephen Flynn in the latest Credit Edge podcast. He meanwhile sees opportunity in the bonds of large financial institutions. Also in this episode, BI’s Flynn analyzes the debt troubles at Dish Network Corp. and what it means for the rest of the sector. See omnystudio.com/listener for privacy information.

Goldman Sachs aims to double its private credit business by demystifying direct lending. Business development companies (BDCs) are going public as valuations soar. Growth opportunities in Asia and leveraged finance are highlighted, along with the evolution of the corporate credit market.

Marc Chowrimootoo, portfolio manager at Hayfin Capital Management, discusses the consolidation of private-debt firms, debt refinancing as a big opportunity for private lenders in 2024, Hayfin's focus on the health-care and software sectors, and the impact of weight-loss drugs like Ozempic on food and drink companies.

Commercial real estate faces challenges as debt comes due, offices in financial centers under pressure. Delayed and cancelled projects, short selling of real estate companies signal distress. Leisure-sector bonds outlook slower, some junk cruise operators heading for investment grade. Business travel boosts hotels, car rental firms more challenged.

New entrants to the rapidly-growing private credit market, scrambling to deploy capital as demand exceeds supply, risk making loans that don’t perform well, according to Alan Schrager, senior partner and portfolio manager at Oak Hill Advisors. “You sort of love private credit tourists who potentially do bad deals, because bad deals that ultimately you don’t own make you look good on a relative basis,” Schrager says. “Even though we do think private credit is really cheap, we are trying to stay high quality,” Schrager tells Bloomberg News senior reporter Lisa Lee senior editor James Crombie in the latest episode of the Credit Edge podcast. Also in this episode, Bloomberg Intelligence senior credit analyst Arnold Kakuda weighs the outlook for banks heading into a tougher macro environment next year. Large financial institutions are well prepared for credit risk after withdrawing from some markets that private lenders stepped into fill, and they will be big bond issuers in January, according to Kakuda. Regional banks are more exposed to commercial real estate stress, he adds.See omnystudio.com/listener for privacy information.

Private credit dominates 2024 with growing deals amid risks. Regulators eye transparency; Asean banks face risks with Chinese slowdown. Watch for more private credit activity next year in the region.

More companies will default on their debt next year because of higher rates and slower earnings, but there won’t be a widespread crisis, says Christopher Sheldon, co-head of credit and markets at KKR. “We don’t think it’s Armageddon,” he tells Bloomberg News senior reporter Lisa Lee and senior editor James Crombie in this episode of the Credit Edge podcast. He expects continued stress in the retail and health-care sectors — and also sees big opportunity in asset-based finance. In addition, Bloomberg Intelligence credit analyst Sharon Chen weighs the outlook for Indian utilities, including relative value in the bonds of Adani. Companies borrowing more cheaply in local markets reduced the need to raise debt abroad. Investors are meanwhile shifting into Indian credit and out of China, which is suffering real estate distress, Chen says.See omnystudio.com/listener for privacy information.

Private credit offers double-digit returns with structures that can reduce risk, just as increased competition boosts secondary trading options, says Mark Attanasio, co-founder of Crescent Capital. “We don’t see a bubble yet,” he tells Bloomberg News senior reporter Lisa Lee and senior editor James Crombie in this episode of the Credit Edge podcast. He avoids transport and energy, but is looking to participate in private loans in other sectors across the US and Europe. Attanasio also discusses the performance of his Milwaukee Brewers baseball business after rule changes shortened the game, and takes questions on his growing stake in Norwich City football club. In addition, Bloomberg Intelligence senior credit analyst Stephen Flynn weighs the outlook for companies in the communications sector, which is lagging a high-yield bond rally amid distress at some of the biggest borrowers. Dish, Altice and Lumen have significant leverage and maturity wall challenges, while cashflow-rich companies like Charter Communications are in good shape for 2024, he says.See omnystudio.com/listener for privacy information.

When fast-food chain Raising Cane’s tapped the US capital market this month, it revealed a $7.6 billion fortune held by CEO Todd Graves. Strong demand for the chicken-finger maker’s bonds highlights growing investor appetite for risky debt as the US economy appears headed for a soft landing, Bloomberg News reporter Michael Tobin tells Bloomberg senior editor James Crombie in this episode of the Credit Edge podcast. And it shows consumer spending holding up despite inflationary pressures, Tobin says. Also in this episode, Bloomberg Intelligence senior analyst Mike Holland weighs the outlook for US health care. Some highly-indebted companies like Community Health Systems and Bausch Health are hitting a wall as liquidity dries up, while others like HCA Healthcare are thriving, Holland says.See omnystudio.com/listener for privacy information.