Debtwired!

In this episode of Debtwired, SMBC Americas’ Ben Millard joins Debtwire’s reporter Melina Chalkia to break down how the aviation debt markets have evolved post-COVID, from loyalty-backed financings to the emergence of aircraft CLOs. With airlines still focused on deleveraging and preserving credit ratings, Millard explains why non-traditional collateral like frequent flyer programs has become a mainstay in new deals and how investor appetite remains strong despite recent turbulence in the sector.Millard also explores the rise of aviation ABS and CLO issuance, highlighting SMBC’s role in several landmark transactions, including the American Airlines mileage-backed TLB and Carlyle’s aircraft ABS. He touches on restructuring dynamics in the sector, as well as what geopolitical risks like tariffs could mean for aircraft financing.Millard is a Director in the Transportation Department at SMBC Americas. SMBC has been a key player in aviation lending for a long time. SMBC is one of the largest financers of the new economy, from data centers to real estate, offering a debt-focused franchise with a global lens, according to Millard. SMBC Americas has evolved into a corporate and investment bank, while maintaining its efficiency in commercial banking and continuing to diversify its business model to best suit clients.

In this engaging discussion, Chris Hall, Managing Director at Interpath, shares his extensive debt advisory experience. He examines the increasing distress in European private credit and how rising interest rates are pressuring sectors like automotive and manufacturing. Hall highlights concerns over default rates and the complex dynamics of debt-to-equity swaps. The conversation also delves into the resilience of private credit, particularly in tech, while addressing the unique challenges faced by lenders in distinguishing between distressed debt funds and traditional banks.

Dive into the European automotive sector's transformation as experts analyze the shift towards electric vehicles and the impactful regulatory pressures on manufacturers. Discover the supply chain challenges that complicate investments and learn which sub-sectors offer promising opportunities. The conversation also highlights specific high-yield credits, including Adler Pelzer and Jaguar Land Rover, providing insights into potential investment strategies amid cyclical volatility.

Dan Dooley, CEO of MorrisAnderson and an expert in crisis management, shares insights on the tough landscape faced by restaurant franchisees post-COVID. He discusses the pressures of restructuring within beloved burger and pizza brands. Listeners learn about the intricate dynamics of lease negotiations and the challenges in closing underperforming locations. Dooley highlights the mounting financial pressures from rising costs and shifting consumer behavior, providing a candid look at distress signals in the industry.

Horst Fuerpass, a partner at Falkensteg and debt advisory expert, joins Johannes Koch to delve into the critical yet often overlooked role of trade credit insurers. They discuss how these insurers support financial stability in the automotive sector and the risks involved in engaging them at the wrong time. Key insights reveal that miscommunication can lead to liquidity crises or even bankruptcy, emphasizing the need for timely collaboration. Fuerpass shares case studies that underscore the importance of trust and effective dialogue with these crucial stakeholders.

In this discussion, Clark Nicholls, CIO of Aucit Investment Management, shares insights into the European high yield market. He highlights current trends, including tightening spreads, and emphasizes the importance of risk management strategies. Nicholls delves into the potential of both high-rated credits and riskier CCCs for savvy investors. Additionally, he discusses the value analysis of key sectors, suggesting contrarian investment strategies that could yield significant returns despite market volatility.

Brian Resnick, a partner at Davis Polk, brings a unique perspective as a former Juilliard-trained musician turned legal expert in restructuring. He dives into the evolution of liability management strategies and the impact of recent market volatility. Brian also shares insights on current and future trends in financial restructuring, while reminiscing about co-producing a Tony Award-winning musical. His journey from the stage to the courtroom is as captivating as his innovative approaches to navigating complex legal landscapes.

Justin Lee, a partner at Weil, Gotshal & Manges and expert in banking and finance, shares insights on the rapidly evolving landscape of liability management exercises. He discusses how tariff-driven market fluctuations are reshaping company strategies and the increasing creativity sponsors are showcasing. Lee also explores trends in deal terms and the changing dynamics between borrowers and lenders, alongside the rise of cooperative groups. His take on what the future holds for LMEs is both informative and thought-provoking.

Scott Greenberg, global chair of Gibson Dunn’s restructuring practice, shares his extensive knowledge on liability management exercises and group formation. He discusses how market dynamics are reshaping deal activity and highlights trends in multi-tier LMEs and carve-out premiums. Greenberg delves into the significance of cooperation agreements and their influence on investment outcomes, particularly in cross-border scenarios. He also reflects on the cultural disparities between European and U.S. investment practices, emphasizing the necessity of understanding these differences.

In this engaging discussion, Brook Hinchman, Managing Director at Oaktree, and Jared Parker, co-head of the team, delve into credit strategies during market volatility. They highlight Oaktree's impressive $16 billion fund aimed at opportunistic investments in liquid credits and rescue financings. The duo explores sectors facing pressure versus those with resilience, like healthcare and telecom. They emphasize the importance of diversification and strategic investment covenants while sharing insights on navigating the evolving credit landscape for higher returns amid uncertainty.