Cloud 9fin

Batten down the hatches, because the cost of environmental damage continues to rise.Hurricanes and natural disasters pose a threat to leveraged credits. This year’s Atlantic hurricane season, which runs from June to November, has caused significant physical and financial damage to borrowers and civilians located mainly in the southeastern part of the US. Damages from hurricanes Helene and Milton, specifically, are estimated by published reports to be around $50bn each, ranking them among the costliest disasters in recent history.In this week’s episode of Cloud 9fin hosted by leveraged finance editor David Bell, senior reporter Sasha Padbidri talks to Karen Clark, a Nobel Prize-winning pioneer in the catastrophe modeling space. Clark was also the subject of Michael Lewis’ 2007 article In Nature’s Casino for The New York Times Magazine, which examines the topic of catastrophe modeling in great detail.Together, they discuss how the technology of catastrophe modeling has advanced since the 1980s and why understanding these risks are critical for company executives and insurers as natural disasters continue to reshape the financial landscape.

Bill Ammons, founding partner and portfolio manager at AlbaCore Capital, dives into the evolving landscape of direct lending and leveraged finance. He highlights the importance of flexibility and credit selection in navigating a competitive market. Bill shares insights on strategic partnerships meant to enhance growth and discusses how firms can adapt their credit strategies to better serve investor needs. He also reflects on the resilience of direct lending during economic uncertainties, emphasizing the significance of strong documentation and insightful relationships.

Swapnil Sawant, a credit analyst at 9Fin specializing in distressed debt and restructuring, shares insights into the complexities surrounding System1's financial maneuvers. They discuss the impact of Bank of America's strategic loan arrangement and the firm's dramatic rise in leverage. The conversation highlights System1's unique liability management strategies, the challenges following its merger with a SPAC, and the shifting landscape of private credit amidst economic fluctuations. Swapnil’s expertise sheds light on key financial implications for AI sector firms.

Jamil Nathoo from MidOcean Partners, an expert in CLO business development, shares intriguing insights into the world of Collateralized Loan Obligation fundraising. He discusses the emergence of CLO captive equity funds and their impact on issuance control. Dive into the growing CLO appetite in the Middle East and South America, along with the unique challenges these regions present. Nathoo also elaborates on the importance of local partnerships, investor trust, and the evolving dynamics of fundraising in Asia, particularly among family offices.

Kartik Dar, a credit analyst specializing in distressed debt, and Daniel Stone, focused on leveraged finance and merger regulations, dive into the tumultuous world of DISH and DIRECTV. They dissect the complex merger plans, exploring the financial strategies involved and the antitrust hurdles they face. Their insights reveal how shifting competition in the satellite TV sector impacts investors and the broader media landscape, while also discussing the role of regulators in this high-stakes financial game.

Elijah Jackson, a U.S. private credit data analyst at 9fin with a background in M&A transactions, dives into the opaque world of private credit. He highlights the challenges of data collection that hinder transparency. The conversation focuses on how improved data insights can transform investment strategies and promote better deal-making in this complex market. Jackson also shares competitive dynamics between direct lenders and banks, along with future reporting plans aimed at enhancing market clarity.

Jane Komsky, a distressed legal analyst, discusses the rising trend of cooperation agreements among creditors with Max Frumes, head of distressed and restructuring. They tackle the fine line between collaboration and anti-competition. The duo draws parallels to the American Needle case against the NFL, questioning if these agreements violate the Sherman Act. Their conversation dives deep into the power dynamics, legal challenges, and implications for distressed companies in the face of these evolving strategies.

This discussion features Shubham Saharan, a senior reporter focused on private credit, and David Brooke, the US private credit editor with extensive expertise in the field. They delve into the rising prominence of synthetic PIKs in a high-interest-rate environment. The duo unpacks the flexibility and unique risks of these financial tools, their implications for borrowers and lenders, and the importance of clear reporting standards. Listeners will gain insights on whether synthetic PIKs are fleeting trends or here to stay in private credit markets.

Dr. Edward Altman, a renowned financial metrics researcher and creator of the Altman Z-Score, dives into the intriguing world of zombie companies—organizations that persist despite financial distress. He discusses how these firms misallocate resources, impede competition, and contribute to economic stagnation. With examples like Alitalia, Altman highlights the impact of government policies and interest rate subsidies that keep these non-viable entities afloat. The emergence of zombie companies in countries like Australia and Canada further emphasizes the global reach of this troubling trend.

The podcast dives into Paramount Global's staggering $13 billion debt and its potential downgrade to junk status. With the streaming wars heating up, experts discuss Paramount's liquidity position and possible acquisition by Skydance. They explore the media landscape's evolving financial strategies, cost-cutting measures, and the tension between traditional TV and streaming profitability. The conversation also touches on potential mergers that could reshape the industry, inviting listeners to consider the future of media.