Podcasts about lbos

What started as a niche alternative could become a nearly $3 trillion juggernaut by 2028. In this conversation, we explore where the money is coming from, how borrowers and lenders are coping with tough conditions, and what lies ahead for the asset class—including possible new regulations. Host: Colin Ellis, Head of Centre for Credit Research, Moody's RatingsGuest: Christina Padgett, Associate Managing Director, Corporate Finance Group, Moody's RatingsRelated Research:• Private Credit – Cross Region – Private market retail to fuel opportunity but intensify liquidity, asset quality risks 10 June 2025• Private Credit Insights – Global – Private credit, a refuge in turbulent times, set to take share again 17 April 2025• Private Credit – Global – 2025 Outlook – Primed for growth as LBOs revive, ABF opportunities accelerate 21 Jan 2025

What drives success in private equity? In this episode of Careers in Finance, we unpack the strategies behind some of the biggest PE deals in history, from Blackstone's transformation of Hilton Hotels to the Dell Technologies buyout. But it's not just about big names and bold moves. We explore how private equity firms approach value creation, from operational restructuring and industry positioning to long-term exit planning.This episode demystifies leveraged buyouts (LBOs), explains why debt is both a tool and a risk, and gives a clear view into the strategic playbook used by top PE firms. Whether you're working in a PE-backed company, aiming for a role in private equity, or simply want to sharpen your understanding of value creation, this conversation offers clarity, relevance, and actionable insight.We also explore cautionary tales, like the RJR Nabisco and Caesars Entertainment buyouts, to highlight what happens when strategy and timing fall out of sync. Perfect for finance professionals looking to deepen their grasp of PE fundamentals.Subscribe for more expert-led episodes like this one, and stay informed on the real decisions that drive career and company outcomes in finance.#PrivateEquity #LeveragedBuyout #CareersInFinance #LBO #FinanceCareers #ValueCreation #CorporateFinance #CFIMemberSpotlight #FinancialStrategy #InvestmentInsights

Ken Mack doesn't follow the traditional path of entrepreneurship—he skips the startup phase entirely. Instead of building from scratch, he focuses on acquiring and scaling existing businesses, often using little to none of his own capital. In this episode of the Rising Tide Startups podcast, we chat with Ken Mack, an investor, also known as “The Eccentric Entrepreneur” due to his unconventional approach to building wealth. Ken shares his strategy of acquiring established companies, from his beginnings in Glasgow to managing a diverse portfolio of businesses worldwide. Ken dives into the tactics that have helped him scale rapidly, focusing on the power of leveraged buyouts (LBOs) and seller financing to minimize personal financial risk. He emphasizes the importance of tracking key metrics like Customer Acquisition Cost (CAC) and Lifetime Value (LTV) to ensure sustainable growth.  Beyond financial strategies, Ken discusses the mindset shifts required for success—embracing discomfort, thinking long-term, and continuously learning. He also highlights the importance of strategic networking for finding new opportunities. Ken's journey is a powerful reminder that wealth is built by seizing opportunities where others see obstacles and that the right mindset can turn even the most unconventional paths into success stories. Here are the key takeaways from the conversation: Established businesses are safer bets. Proven cash flow and systems reduce the risk compared to starting from scratch. Leverage other people's money (OPM). Using LBOs (leveraging buyouts) and seller financing allows for business acquisitions without tying up personal capital. Target retiring business owners. Baby boomers represent a goldmine of acquisition opportunities. Cash flow is king. Focus on cash flow over profit margins for sustainable growth and debt management. Efficiency and remote management. Building reliable teams and systems enables managing multiple businesses from afar. Mindset is everything. Getting comfortable with risk and embracing the unknown is essential for success. Entrepreneurship is a ‘lifestyle,' not just a career choice. Success comes from discomfort and pushing limits. Buy businesses at 1x free cash flow, and sell at 2–3x EBITDA. This increases valuation before exiting. Start small, gain experience, and build networks.  Listen to the full conversation here: YouTube: https://www.youtube.com/@risingtidestartups Apple Podcast: https://podcasts.apple.com/us/podcast/rising-tide-startups/id1330525474 Spotify: https://open.spotify.com/show/2eq7unl70TRPsBhjLEsNZR Connect with Ken: LinkedIn: https://www.linkedin.com/in/kenmackofficial  Facebook: https://web.facebook.com/KenMack/  Instagram:: https://www.instagram.com/kenmack/  Website:: https://www.kenmack.com/    Closing thought: “You don't need to reinvent the wheel—buy an existing business and scale it.” Please leave us an honest rating on Spotify, YouTube, or Apple Podcasts. Shoutout to our Great Sponsors:  Naviqus Virtual Services - Hassle-free administrative support services that are efficient, affordable, and tailored to your needs. Check out https://naviqus.com now to jumpstart your business for 2025! Have you ever considered starting your own podcast for your company or brand?  Podbrandmedia.com can help.  Affordable and effective in content creation and lead generation!

AI is eating the world, or so the headlines say. But what does this really mean for debt markets? Where does AI truly excel, and what limitations persist? What implications does this technological shift hold for analysts' jobs? And how is 9fin deploying AI to address specific challenges confronting debt market professionals?Sujeet Indap, Wall Street editor at the Financial Times, sat down with Steven Hunter, CEO and co-founder of 9fin, to cut through the hype and dissect the real impact of AI on debt markets. This episode was produced from a recent 9fin webinar. If you'd like to learn more about how 9fin's AI-powered platform can give you a competitive edge in debt markets, we'd love to chat.Schedule a personalised demo→ https://9fin.com/sign-up?utm_source=hubspot&utm_medium=email&utm_campaign=ai_debtmarkets_webinarOr, stay up to date with all the latest for 9fin's insights, news, upcoming events, and new featuresJoin our newsletter→ https://share.hsforms.com/1KaeNlWvzRlqYjJGJjHbZmgby77cFollow us on LinkedIn→ https://www.linkedin.com/company/9finHave any feedback for us? Send us a note at podcast@9fin.com.

No one likes that feeling of being a little too thick in the middle. But finding the right balance of strength and cushion is no easy task. We're talking about the middle office here, of course.The middle office may not always be in the spotlight, but when loan data goes awry it's the team that keeps the gears turning and numbers in check. In this episode, head of podcasts Chase Collum chats with Jared Vest, global co-head of middle office solutions at FIS, to break down the middle office's essential roles, risks, and evolving responsibilities. They explore how accurate data and strong operational support are critical to navigate today's fast-paced loan market.This episode was produced in partnership with FIS as part of a three-part series diving into the challenges facing middle office practitioners and users of global loan data sets.Have any feedback for us? Send us a note at podcast@9fin.com.

In this episode, we dive into the four key areas of investment banking technical interviews—financial statements, valuation, M&A, and LBOs. We'll walk you through each topic, explaining how they build off one another and why mastering them in this order is crucial. Want help securing an offer from a top tier firm on Wall Street? Apply here: wallstmastermind.com/applyutm_source=podcastep336

Randy Schwimmer is Vice Chairman of Churchill, where he oversees the Investor Solutions Group. Previously, he served as Co-Head of Senior Lending, responsible for senior lending origination and capital markets. Randy also serves on the firm's Executive Committee and Senior Lending Investment Committee. Randy is also the Founder and Publisher of The Lead Left, Churchill's weekly newsletter reviewing deals and trends in the capital markets. He also produces Private Capital Call, a monthly podcast. Prior to Churchill, Randy held senior roles at BNP Paribas and JP Morgan Chase. In this podcast, we discuss how macro is affecting private credit, what companies make good private credit candidates, deal activity, M&A and LBOs, and much more.    Follow us here for more amazing insights: https://macrohive.com/home-prime/ https://twitter.com/Macro_Hive https://www.linkedin.com/company/macro-hive

In the credit markets, it's important practitioners get their fax straight. No, you didn't read that wrong — even in 2025, people still use fax machines to transmit some loans data.In our latest Cloud 9fin episode, Chase Collum, head of podcasts, and private credit analyst Devin McGinley, sit down with John Smullen, product manager at FIS. They chat about how global data trends are shaping strategies in the leveraged finance world as private credit CLOs and direct lending gain ground.This episode is part of a three-part series we'll publish in partnership with FIS on Cloud 9fin, so look out for our next episode, coming next Thursday! Have any feedback for us? Send us a note at podcast@9fin.com.

In this episode of Jane's LME Addiction, our head of LME coverage Jane Komsky brings in global chair of Gibson Dunn's restructuring group, Scott Greenberg, to discuss the evolution of cooperation agreements within liability management exercises. They discuss the different types of co-ops, why co-ops have become expected in US deals, their spread to the EU, and the validity of antitrust arguments.Find all our coverage on co-ops at 9fin.com.Have any feedback on the podcast? Send us a note at podcast@9fin.com — thanks for listening!

Three media companies, in vaguely the same vicinity, in fair debt markets where we lay our scene — where ancient business models encounter new scrutiny, and AI generates images you can't unsee…Valentine's Day has been and gone, so why on earth are we besmirching Romeo and Juliet with terrible puns? You should listen to the episode for the full picture, but basically we're discussing three recent debt transactions from X/Twitter, Snap, and Getty Images.These deals might not seem immediately connected, but there's a thread running through all three. In an age of political upheaval and rapid technological advancement, what do they tell us about the future of media? William Hoffman, David Bell and Will Caiger-Smith are here to discuss, and to crowdsource ideas for sponsored 9fin Snapchat filters.Want to share feedback on this episode? Send us a note at podcast@9fin.com.

In the private equity world, continuation vehicles have been a bit of a blockbuster, so can the structure's success transfer to private credit?We have already seen BlackRock's $1.3bn continuation vehicle last year, and some market participants are expecting to see even more in 2025. On the other side however, this might not be as straight forward as in the PE world, and there is a growing pool of skeptics.In this episode of Cloud 9fin, senior private credit reporter Synne Johnsson sits down with private credit reporter Jemima Denham, to discuss all things private credit continuation vehicles -- Why are they the current talk of the town? What are the challenges? And will they eventually take off?Have a listen to hear this discussion on continuation vehicles in the private credit market. If you have any feedback for us, send us a note at podcast@9fin.com. Thanks for listening.

We talk a lot about leverage at the 9fin office (it's kind of the story behind our company name, in case you were wondering) so it should come as no surprise that we think it's interesting. But in the world of Significant Risk Transfer, it's especially fascinating — and controversial.You may have caught the story that Celeste Tamers, part of our growing asset-based finance team, broke last week about Deutsche Bank pulling back from offering repo financing on SRT trades.In this episode of Cloud 9fin, Celeste and our asset-based finance editor Owen Sanderson pick that story apart and use it to explore the history of SRT, to help listeners understand why regulators are raising their eyebrows at the recent growth of this important market.Any feedback on this episode? Email us at podcast@9fin.com.

Long live liability management.In this episode of our new show Jane's LME Addiction, our head of LME coverage Jane Komsky brings in Latham & Watkins partner George Klidonas and C Street founder and CEO Jon Henes, to discuss the Better Health transaction and its implications for future LMEs.Also under discussion: how liability management has taken off as an industry, how law firms and advisors are adapting to this boom in business, and the creative moves market participants are making to ensure the LME space lives a lengthy and healthy life.Listeners might notice a bit of background noise because this episode is also recorded in video format! Find it on YouTube here! Have any feedback on the podcast? Send us a note at podcast@9fin.com — thanks for listening!

Moody's first Private Credit Outlook predicts that this market will double by 2028 to more than $3 trillion of assets under management. Private credit should benefit from more volatile market conditions and from innovation which is attracting new kinds of customer but also generating new risks.Later in the episode, we look in depth at the surge in retail investor involvement in private credit.Guests: Marc Pinto, Managing Director, Corporate Finance Group, Moody's Ratings; Christina Padgett, Associate Managing Director, Corporate Finance Group, Moody's Ratings; and Alexandra Aspioti, Senior Analyst, Corporate Finance Group, Moody's RatingsHost: Tania Hall, Senior Research Writer, Moody's RatingsTo read more on this topic, visit Behind The Bonds page on Moodys.com (some content only available to registered users or subscribers).Related research:Private Credit — Global: 2025 Outlook – Primed for growth as LBOs revive, ABF opportunities accelerateFinancial Institutions – Europe: Revamped ELTIF legislation unlocks growth for the European private credit marketBusiness Development Companies – US: Q3 2024 Update: Rate cuts will further erode net investment income; rise in nonaccruals pausesFinancial Institutions – North America: Private credit ETFs will use public credit for liquidity, a potential performance challenge

Publicly traded leveraged debt issuers are facing a collective maturity wall of $219 billion in the coming years. But unlike the Chiefs' offensive line in the Super Bowl, credit market watchers aren't expecting that wall to collapse.In this episode of Cloud 9fin, US managing editor Bill Weisbrod sits down with credit analyst Ben Dickerman and leveraged finance reporter Dan Mika about their recent piece looking at how the 2026-27 maturity wall in the US is shaping up.Among the highlights: how issuers are hanging on to cheap debt costs, how a leveraged finance market starved for new-money deals is giving BB-rated companies plenty of time to refinance, the uncertainties surrounding Trump administration's economic policies, and how this story was powered by Dan's love of drum and bass music.As always, if you have any feedback for us, send us a note at podcast@9fin.com

With Super Bowl Sunday upon us, much like over a third of the US, we thought we'd focus on sports.Private credit has been circling sports for some time as an investment opportunity. Many regulatory changes in the past year and an increasing number of emerging sports leagues have brought it back into view to begin this year.In this episode of Cloud 9fin, senior reporter Peter Benson sits down with Aaron Kless, managing partner and CIO at Andalusian Credit Partners, to discuss all things private credit and sports.The discussion topics include the institutionalization of the sports market, how credit works with sports franchises and other areas of the sporting world that are ripe for credit investment.As always, if you have any feedback for us, send us a note at podcast@9fin.com

People love to talk about the battle between banks and private credit firms in leveraged debt markets. And at a high level, it's true that the dealflow has bounced back and forth between the two over recent years — but markets are a lot more complex than a game of table tennis.In this episode of Cloud 9fin, Synne Johnsson sits down with Soren Christensen, partner and head of capital markets at Cinven, and Amit Bahri, co-head of European direct lending at Goldman Sachs, to break down how private credit's role has evolved over the years.Among the highlights: how sponsors have adapted to embrace private credit, what the return of the BSL market means for direct lender strategies, the attraction of junior PIKs, and predictions for 2025.As always, if you have any feedback for us, send us a note at podcast@9fin.com.

Our Head of Corporate Credit Research and Head of Retail Consumer Credit discuss what choppy demand and tariff risk could mean for sectors that depend on consumer spending.----- Transcript -----Andrew Sheets: Welcome to Thoughts on the Market. I'm Andrew Sheets, Head of Corporate Credit Research at Morgan Stanley.Jenna Gianelli: I'm Jenna Gianelli, Head of Retail Consumer Credit, here at Morgan Stanley.Andrew Sheets: And today on this episode, we're going to discuss the outlook for the retail and consumer sectors.It's Wednesday, Jan 29th at 9 am in New York.So, Jenna, it's great to talk with you, and it's really great to talk about the retail and consumer sectors heading into 2025, because it's such an important part of the investor debate. On the one hand, a lot of economic data in the U.S. seems strong, including a very low unemployment rate. And yet, we're also hearing a lot about cost-of-living pressures on consumers, lower consumer confidence, and investor concern that the consumer is just not going to be able to hold up in this higher rate environment. And then you can layer on uncertainty from the new administration. Will we see tariffs? How large will they be? And how will retailers, which often import a lot of their goods, handle those changes?So, maybe just kind of starting off at a 40, 000-foot view, how are you thinking about consumer dynamics going into 2025?Jenna Gianelli: Of course. So, I think that that choppy consumer demand environment is actually one of the strongest pillars of our more cautious view, going into next year. How the sector, performed last year was not in tandem with kind of what the macro headlines suggested. The macro headlines were quite positive, and the consumer was, you know, seemingly strong. But there was a lot going on under the hood when you looked at different dichotomies, right? So, if you looked at the high-end versus the low-end, if you looked at goods versus services. And then within, you know, certain categories, there were categories that were, you know, really quite strong based on what the consumer was prioritizing – goods, essentials, personal care, beauty, right? And then there were others that they really shied away from.So, I think what we're going to see in 2025 is quite a bit more of that. When we think that the high-end will continue to be resilient, that pressure on the low-income consumer will continue. But actually moderate potentially as into [20]25, as we think about lower interest rates, potentially, you know, lesser immigration and so less competition for jobs at the lower income level. So maybe even some tailwinds, but it's really an alleviation of pressure and easier compares. But we do expect overall some deceleration, right? Because we had a lot of pent-up demand, especially on the high-end.So, we are expecting services, demand to slow, in 2025 and goods actually to hold up relatively well. So, we really are focused on what's going on at the individual category level and the different types of consumers that we're looking at.Andrew Sheets: And as you think about some of those, you know, subcategories that you, you cover, maybe just a minute on a couple that you think will perform the best over this year and some that you think might face the biggest challenges.Jenna Gianelli: There are some that have been under relative pressure, in [20]23 and [20]24 where we might actually see some, you know, relief. Now, depending on the direction of rates in the housing market, we could see and expect to see an uptick in bigger ticket spending, durables, home related, that have been under, you know, some pressure.And also, you know, categories where, you know, the consumer, they're arguably discretionary. But maybe they pulled back because there was a big surge in demand just post-COVID. Pet in our universe is actually one example of those, where it's been a bit depressed and we actually expect to see, you know, some recovery into next year; also tied to housing right as new house formation starts.So, but again, a lot of that is predicated on the, you know, housing direction of rates and some of these other macro factors. I'd say, irrespective of the more macro influences, we do still expect that essentials – grocery, and certain categories like a beauty, pockets of apparel and brands, right? It really comes down to the brands, the brand heat, the brand relevance. If it's relevant to the consumer, they're going to spend on it. And so, that's where we really focus on the micro level; our picks of which brands are resonating, which categories are resonating. Which is, those are some of the, you know, the few that we're expecting, either a recovery in or still, you know, relative, outperformance.I'd say on the laggard side, which is probably the next piece of that question. I mean, look, there's still a lot of secular headwinds at play. And so, you know, from a department store perspective outside of event risk or idiosyncratic risk, we're still generally expecting department stores and kind of traditional specialty apparel, mall-based, with not a lot of channel diversification to still generally underperform and see similar trends they've seen the last few years.Andrew Sheets: So, Jenna, your sector is sitting at the center of this kind of very interesting economic debate over how healthy the consumer really is. And, you know, it's also sitting at the center of the policy debate because tariffs are a dynamic that could dramatically affect retailers depending on how large they are and how they're implemented.So how do you think about tariff risk? And can you give some sense of how you think about exposure of your sector to those dynamics?Jenna Gianelli: So, tariffs and policy risk and the uncertainty, is one of the big reasons. And when we think about, you know, retail – and particularly discretionary retail – why we're more cautious on the space into [20]25. Tariffs is the biggest piece of that. The degrees of exposure across our universe, varying degrees to a very wide range, right? So, we have some that are minimal, you know, let's say 5 per cent out of, you know, China sourcing some up to 70 per cent out of China sourcing. And then you layer in, well, what about goods from Canada and Mexico and what if there's a universal tariff?And so, the range of outcomes, is, you know, so significant. And so, what we are advocating to investors is that we go in with the expectation that tariffs are a – an uncertain, but certain threat, right? And not completely minimizing them within a portfolio but reducing the ones that do tend to have those higher, you know, exposures.I'd say the range from when we stress tested the earnings headwinds potential. I mean, it was anything from call it down 10 per cent EBITDA to down 60-70 per cent EBITDA in the most draconian scenarios. And so, I think taking a very prudent approach, assuming that there will be some level of tariffs phased in, you know; if we look back to the 2018 timeframe – different sets of goods, different times, different rates and go from there.Andrew Sheets: So, Jenna, we've talked about the economy. We've talked about some of the policy and tariff risk potentially impacting consumer and retail. You know, a third really key strategic theme for us is more corporate activity, more M&A. And again, I think this is where your sector is so interesting because you were already kind of in the center of some of these debates, last year with corporate activity.So, can you talk a little bit about how you see that? And again, you also have this interesting dynamic that some of the targets of M&A activity in your sector were some of the businesses that were kind of struggling, that were kind of seen as some of these laggards. And so how does that just represent different investor views of their prospects? How do you think people should think about that going forward?Jenna Gianelli: So, look, I think M&A could have positive risk for 2025 and also negative risk for some of our companies. And it really depends, at least from a credit perspective, how we think about some of their indentures and bond language and likelihood of pro forma capital structures.But I think without getting, you know, too deep into that, our expectation is that M&A will increase. We know that there is private equity capital on the sidelines to the extent that rates, even if we're in a little bit of a higher for longer, if the expectation is that we do on the year [20]25 in a slightly lower regime, at least we have some stability or visibility on the rate front. Which should, you know, spur more corporate activity.And then also, I think, look, just equity valuations, right? I mean, our universe, particularly when you think about – the size of the equity check that you need to come in at and the valuations are a bit cheaper because across our universe, we did see some underperformance last year.So, I think those are the kind of main drivers of why we'll see the activity pick up on the underperforming pieces of the space. There are still pockets of value that I think private equity sponsors are seeing. The ones that have come up most notably are real estate, right? And, you know, we saw…Andrew Sheets: Because these retailers often own a large…Jenna Gianelli: Many of the department stores own a significant amount of their real estate. 20, 20, 40, 50 per cent depending on your, you know, assumptions and how you value this real estate. But even with conservative LTV assumptions, there is lending capability here. And I think so that's, you know, one piece of it, those that have multi-banner assets that appeal to different consumer cohorts, that have maybe a solid private label portfolio.When you think about intellectual property, there are real assets, for certain retailers. And so, I think that's what, you know, private equity historically has seen as the play. Now, how that manifests throughout the space? You know, from an LBO perspective; I do still think that getting a really large LBO for a traditional, you know, mature type of retailer could be challenging, but there are creative ways to get these deals done.And again, I think because of what we have is some legacy indentures, traditional, more investment grade style capital structures, there might be flexibility to approach, you know, LBOs in a more creative way – without having to access the capital markets in such a big way as maybe you would traditionally think.Andrew Sheets: And so, this would be examples of private equity firms coming in, doing an LBO or a leveraged buyout where you can actually almost take advantage of the borrowing that company has already done in the market…Jenna Gianelli: Yes. Keep the debt outstanding.Andrew Sheets: ... at attractive levels.Jenna Gianelli: Exactly. Exactly.Andrew Sheets: So, Jenna, it's so great to talk to you. Well, it's always great to talk to you, but it's so great to talk to you now because I do think, you know, as we, we look into 2025, I think there's always a lot of focus on, you know, the direction of markets, you know. Will rates go up or down? Will equities go up or down? But I think what's so clear talking to you about your sector is that there are all these themes that are really about dispersion. That we see, you know, really different trends by the type of consumer segment and sub segment; that we see very different trends by how exposed companies are to tariffs, right? You mentioned anything from, your earnings could be down 10 per cent to 60 per cent. And, you know, very different dynamics, you know, winners and losers from M&A.And so, I do think it just highlights that this is a year where, from the strategy side, we think spreads are kind of more range bound. But there does seem to be a lot of dispersion within the sector. And there seems like, well, there's going to be plenty that's going to keep you busy.Jenna Gianelli: I hope so.Andrew Sheets: Great. Jenna, thanks for taking the time to talk.Jena Gianelli: Thank you, Andrew.Andrew Sheets: Great. And thanks for listening. If you enjoyed the show, leave us a review wherever you listen, and share Thoughts on the Market with a friend or colleague today.

The full extent of the damage from this season's California wildfires is yet to be determined, but one thing that is certain is that some leveraged credits are starting to feel the heat.In this week's episode of Cloud 9fin, US managing editor Bill Weisbrod and deputy leveraged finance editor Sasha Padbidri survey the extent of the damage and discuss which industries are among the most impacted.Find Sasha's latest report about the wildfires' impact on leveraged credits here. If you have any feedback or want to get in touch, send us a note at podcast@9fin.com. Thanks for listening!

In this episode, we break down the different types of debt used to finance an LBO deal. We touch on the key differences between bank debt and high-yield debt, including interest rates, repayment terms and covenants. Tune in to understand how these debt options and considerations help structure successful LBOs. Want help securing an offer from a top tier firm on Wall Street? Apply here: wallstmastermind.com/applyutm_source=podcastep319

After years of growth and positive sentiment, 2024 saw private credit's smallest fundraising haul since 2019. But the year-on-year drop in capital raised was far less significant than the drop in the number of funds that were closed.In this week's episode of Cloud 9fin, US private credit editor David Brooke and reporter Anna Russi discuss the latest results in private credit fundraising and how LPs are consolidating around their favorite firms. The conversation walks through how investors are feeling about the asset class and whether the incoming Trump administration can help or hinder funds on the road next year. Read Anna and David's article diving into these trends here.Have any questions or feedback for us? Want to join us on the podcast? Send a note to podcast@9fin.com to get in touch. Thanks for listening!

Donald Chew discusses the evolution of corporate finance, emphasizing the shift from old-fashioned corporate finance, which focused on steady earnings growth, to modern corporate finance, which aims for high returns on capital. He highlights the decline of conglomerates in the 1970s and the rise of private equity. Despite criticism, Chew argues that modern corporate finance has been a success story, citing the doubling of U.S. public company market capitalization in the 1980s and the significant correlation of R&D and selling, general and administrative expenses (SG&A) expenses with corporate value. He also addresses the financial crisis, arguing it was due to mispriced mortgages and government policies, not market inefficiencies.  Donald Chew is the founding editor of the Journal of Applied Corporate Finance, and joins show host Gene Tunny to discuss his latest book, The Making of Modern Corporate Finance, published by Columbia University Press.If you have any questions, comments, or suggestions for Gene, please email him at contact@economicsexplored.com.About this episode's guest: Donald ChewDon Chew is the founding editor and Editor-in-Chief of the Journal of Applied Corporate Finance (JACF), a publication he started almost 30 years ago. He has published over ten books on corporate finance, including The New Corporate Finance: Where Theory Meets Practice and The Revolution in Corporate Finance (with Joel Stern), which are both widely used in business schools throughout the United States and Europe. Don has both a Ph.D. in English and an MBA in finance from the University of Rochester.Timestamps for EP270Introduction (0:00)The Decline of Conglomerates and the Rise of Modern Corporate Finance (5:58)The Role of Private Equity and Corporate Governance (14:25)The Impact of Modern Corporate Finance on Corporate Value (15:03)The Future of Corporate Finance and Productivity Measurement (16:37)The Role of Corporate Finance in Economic Growth (19:27)The Critique of Modern Corporate Finance and Corporate Social Responsibility (27:26)The Financial Crisis and the Role of Government Policy (35:40)The Future of Corporate Finance and the Role of Private Equity (43:21)TakeawaysModern Corporate Finance Principles: The shift from prioritizing steady earnings growth to maximizing long-term firm value has reshaped corporate strategies globally.The Importance of R&D: Increases in R&D and SG&A spending are now critical indicators of corporate value and long-term success, according to Don Chew.Private Equity's Role: Private equity has transformed underperforming companies, streamlining operations and reallocating capital for growth.The Evolution of Corporate Governance: Shareholder activism has replaced hostile takeovers as the primary tool for enforcing corporate accountability.ESG and Value Creation: Enlightened value maximization is the idea that corporations can address societal concerns while enhancing long-term profitability.Links relevant to the conversationDon Chew's new book The Making of Modern Corporate Finance:https://www.amazon.com.au/Making-Modern-Corporate-Finance-History/dp/0231211104Econometric study of benefits to consumers of Wal-Mart:https://onlinelibrary.wiley.com/doi/abs/10.1002/jae.994Lumo Coffee promotion10% of Lumo Coffee's Seriously Healthy Organic Coffee.Website: https://www.lumocoffee.com/10EXPLOREDPromo code: 10EXPLORED Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.

For this week's Cloud 9fin episode, we're launching a new monthly recurring series: Jane's LME Addiction, in which distressed legal analyst Jane Komsky dives into the latest news in liability management. Joined by 9fin global head of distressed and restructuring Max Frumes and 9fin head of legal James Wallick, Jane walks through the landmark decision out of the Fifth Circuit Court of Appeals in the Serta Simmons case and what it means for LMEs going forward.Find all our coverage on Serta at 9fin.com, including our latest stories on the contours of potential uptiering transactions in 2025 and the evolution from Serta blockers to “Fifth Circuit blockers.”If you have any feedback for us, send us a note at podcast@9fin.com. Thanks for listening.

In this episode, we break down how Leveraged Buyouts (LBOs) work. By comparing LBOs to real estate, we'll show how both involve leveraging debt to increase the potential upside—but with different risks and nuances. We'll also discuss key factors that make LBOs successful, like cash flow generation and exit strategies. Tune in for a clearer picture of how these deals function and how investors strategies to get the best ROI. Want help securing an offer from a top tier firm on Wall Street? Apply here: wallstmastermind.com/applyutm_source=podcastep313

A record breaking year comes to an end. What could possibly come next? How about another?In this week's episode of Cloud 9fin, Tanvi Gupta, global head of CLOs at 9fin, talks with Pratik Gupta, head of CLO and RMBS research at Bank of America, to discuss the outlook for 2025. They talk about ETFs, performance across the CLO capital structure, LMEs, co-op agreements, HY bond buckets and why 2025 might match the record breaking levels of issuance we've seen in 2024.Have any feedback on the episode? Send us a note at podcast@9fin.com. Thanks for listening.

Who is more invested in a breakfast of eggs and bacon — a chicken or a pig? And what does this have to do with leveraged finance?Find out in this week's episode of Cloud 9fin as global head of distressed debt and restructuring Max Frumes talks with Mike Harmon about his forthcoming book The Financial Restructuring Tool Set: How to Fix Your Broken Balance Sheet. They talk about the various ways that a company can restructure in and out of court, the evolution of the distressed debt playbook, and what restructuring has in common with Lewis Carroll's Alice in Wonderland.Mike Harmon is a lecturer in management at the Stanford Graduate School of Business, managing partner of Gaviota Advisors, LLC who spent 21 years in the special situations and global principal groups at Oaktree Capital Management.Have any feedback for us? Send us a note at podcast@9fin.com. Thanks for listening.

Our Chief Fixed Income Strategist Vishy Tirupattur and Leveraged Finance Strategist Joyce Jiang discuss how the dynamic between private and public credit markets will evolve in 2025, and how each can find their own niches for success.----- Transcript -----Vishy Tirupattur: Welcome to Thoughts on the Market. I am Vishy Tirupattur, Morgan Stanley's Chief Fixed Income Strategist. Today we'll be talking about how private credit has evolved over 2024 and the outlook for 2025. I'm joined by my colleague, Joyce Jiang, from our Leveraged Finance Strategy team.It's Tuesday, December 3rd at 10am in New York.A lot has happened over 2024 in private credit. We are credit people. Let's talk about defaults and returns. How has 2024 been thus far for private credit in terms of defaults and returns?Joyce Jiang: It's always tricky to talk about defaults in private credit because the reported measures tend to vary a lot depending on how defaults are defined and calculated. Using S&P's credit estimate defaults as a proxy for the overall private credit defaults, we see that defaults appear to have peaked, and the peak level was significantly lower than during the COVID cycle.Since then, defaults have declined and converged to levels seen in public loans. In this cycle, the elevated policy rates have clearly weighed on the credit fundamentals, but direct lenders and sponsors have worked proactively to help companies extending maturities and converting debt into PIK loans. Also, the high level of dry powder enabled both private credit and PE funds to provide liquidity support, keeping default rates relatively contained.From a returns perspective for credit investors, the appeal of private credit comes from the potential for higher and more stable returns, and also its role as a portfolio diversifier. Data from Lincoln International shows that over the past seven years, direct lending loans have outperformed single B public loans in total return terms by approximately 2.3 percentage point annually, largely driven by the better carry profile. And this year, although the spread premium has narrowed, private credit continues to generate higher returns.So, Vishy, credit spreads are close to historical tights. And the market conditions have clearly improved compared to last year. With that, the competition between the public and private credit has intensified. How do you see this dynamic playing out between these two markets?Vishy Tirupattur: The competition between public and private credit has indeed intensified, especially as the broadly syndicated market reopened with some vigor this year.While the public market has regained some share it lost to private credit, I think it is important to note that the activity has been, especially the financing activity, has been really more two-way. Improved market conditions have lured some of the borrowers back to the public markets from private credit markets due to cheaper funding costs.At the same time, borrowers with lower rating or complex capital structure seem to continue to favor private credit markets. So, there is really a lot of give and take between the two markets. Also, traditionally, private credit markets have played a major role in financing LBOs or leveraged buyouts. Its importance has really grown during the last Fed's hiking cycle when elevated policy rates and bouts of market turmoil weaken banks' risk appetite and tighten the public-funding access to many leveraged borrowers.Then, as the Fed's policy tightening ended, and uncertainty about the future direction of policy rates began to fade, deal activity rebounded in both markets, and more materially in public markets. This really led to a decline in the share of LBOs financed by private credit. Of course, the two markets tend to cater for deals of different sizes. Private credit is playing a bigger role in smaller size deals and a broadly syndicated loan market is relatively much more active in larger sized LBOs. So, overall, public credit is both a complement and competitor to private credit markets.Joyce Jiang: The decline in spread basis is evident in larger companies, but more recently, the spread basis have even compressed within smaller-sized deals, although they don't have the access to public credit. This is likely due to some private credit funds shifting their focuses to deals down in the site spectrum. So, the growing competition got spilled over to the lower middle-market segment as well. In addition to pricing conversions, we've also seen a gradual erosion in covenant quality in private credit deals. Some data sources noted that covenant packages have increasingly favored borrowers, a reflection of the heightened competition between these two markets.So Vishy, looking ahead, how do you see this competition between public and private credit evolving in 2025, and what implications might this have for returns?Vishy Tirupattur:, The competition, I think, will persist in [the ]next year. We have seen strong demand from hold to maturity investors, such as insurance companies and pension funds; and this demand, we think, will continue to sustain, so the appetite for private credit from these investors would be there.On the supply side, the deal volume has been light over the last couple of years. Next year, acquisition LBO activity, likely to pick up more materially given the solid macro backdrop, lower rates that we expect, and sponsor pressure to return capital to investors. So, in 2025, we could see greater specialization in terms of deal financing. Instead of competing directly for deals, public and private credit markets can find their own niches. For example, public credit might dominate larger deals, while private credit could further strengthen its competitive advantage within smaller size deals or with companies that value its unique advantages, such as the flexible terms and speed of execution.Regarding returns, while spread premium in private credit has indeed come down, a pickup in deal activity could to some extent be a release valve. But sustained competition may keep the spreads tight. Overall, private credit should continue to offer attractive returns, although with tighter margins compared to historical levels.Joyce, it was great speaking with you on today's podcast.Joyce Jiang: Thank you, Vishy, for having me.Vishy Tirupattur: Thank you all for listening. If you enjoy today's podcast, leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

After a great run co-founding and helping to build up the European Leveraged Finance Association, Sabrina Fox is putting ELFA on the shelf to focus on her work at Fox Legal Training and Good Girl to Goddess.In this episode of Cloud 9fin, ESG analyst Jennifer Munnings sits down with Sabrina to explore how ELFA has shaped buyside engagement and elevated standards in credit markets. From the rise of J.Crew blockers and their impact on covenant protections to ELFA's efforts to foster transparency and innovation in ESG practices, Sabrina offers a front-row perspective on the evolving landscape of leveraged finance. They also discuss the challenges of balancing incumbent flexibility with investor safeguards and what lies ahead for the industry as Sabrina embarks on her next chapter.Have any feedback on this episode? Send us a note at podcast@9fin.com. Thanks for listening.

Are you a business owner and now looking to retire? Not to worry, because as private equity sponsors fund that move to Florida, their acquisitions are made possible by the private credit firms which have cultivated a lower middle market lending strategy.But lower middle market lending is, of course, not without its challenges. Intensifying competition from firms honing in on the space and a complicated macroeconomic picture have pushed pricing down to levels last seen in the giddy days of 2021.In the latest episode of Cloud 9fin Michelle Handy, chief investment officer of First Eagle Alternative Credit's Direct Lending business, joins 9fin senior reporter Shubham Saharan to talk about that corner of the private credit world.They unpack the opportunities and obstacles in lower middle market lending, the benefits of having a large existing portfolio, while also touching on the growing asset-based lending market (not to be confused with asset-backed lending!).For feedback on the podcast, or to learn how to get involved, send a note to podcast@9fin.com. Thanks for listening!

More and more, the lines are blurring between our private credit and distressed coverage.In this episode of Cloud 9fin, private credit editor David Brooke mines the reportage of Bianca Boorer, senior distressed debt reporter, and Shubham Saharan, senior private credit reporter. They talk about the challenge Lycra's stakeholders face in navigating the company's balance sheet, and why the company is considering a private credit option, even if it wouldn't provide it with all the liquidity — or should we say elasticity — it needs to tackle its entire capital stack. Do listen in to find out why private credit has the leg(ging) up on the competition!Follow all of 9fin's coverage of the Lycra situation here. If you have any feedback for us, send us a note at podcast@9fin.com. Thanks for listening.

Not all that glitters is gold. And not everyone agrees that the recent era for private credit should be called “the golden age.”In this week's episode of Cloud 9fin, produced in partnership with Arena Investors, senior private credit reporter Peter Benson sits down with Arena co-founding CEO and CIO Dan Zwirn to talk through his latest white paper. He takes a contrarian look at the direct lending space, and considers whether this high-rate environment will turn out to be as fruitful for late adopters as the hype would lead one to believe.Have any feedback for us? Please send us a note at podcast@9fin.com. Thanks for listening!

Private credit in both the US and Europe has faced a great deal of pressure from bank lenders in 2024. But despite a slow start, the asset class is holding its ground on a year-to-date basis.In this week's episode of Cloud 9fin, private credit editor David Brooke digs into the data with analysts Devin McGinley and Elijah Jackson. They chat through the trends, diving into their respective Q3 2024 private credit reports. You can read both reports here and here.To learn more about 9fin's private credit reports, send a note to the team at private-credit@9fin.com. For feedback on the podcast, or to learn how to get involved, send a note to podcast@9fin.com.Thanks for listening!

A majority of American voters have embraced Donald Trump's message, and a lot of things are about to change. What does his resounding victory in this week's Presidential election mean for debt capital markets?It's a little early to give a comprehensive answer, but in this special edition of Cloud 9fin we've done our best to touch on some of the big issues. Tune in to hear Will Caiger-Smith and Sasha Padbidri break down the implications in a short but sweet 10 minutes.

All eyes are on the results of the US election results today, and soon, they'll turn back to the Federal Reserve. Hinging on whether the Fed decides to continue rate cutting at its next meeting — and how deeply — a flood of M&A could hit the market. In the meantime, though, funds have been forced to take extraordinary measures to make their way through the muddle in the middle.In this week's episode of Cloud 9fin, private credit editor David Brooke sits down with private credit reporter Peter Benson for a whistle stop tour through NAV — or Net Asset Value — loan structures. Check out Peter's recent article on NAV structures here, and find all of the latest private credit coverage on 9fin.com.Have any feedback for us? Send us a note at podcast@9fin.com.

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.

Even with competition heating up, the direct lending market is ripe with opportunity.In this week's episode of Cloud 9fin, Fin Strathern interviews Bill Ammons, founding partner and portfolio manager at AlbaCore Capital.They discuss the evolution of leveraged finance as direct lending develops, and the importance of providing flexibility and optionality. Bill shares insights from his extensive career, emphasizing the importance of credit selection and AlbaCore's mission to adapt to market demands.Have any feedback for us? Send us an email at podcast@9fin.com. Thanks for listening!

Send us a textWe've talked a lot about how Private Equity Megafunds approach valuation when they purchase companies through LBOs. And we've spoken about their exits, either through IPOs or PE Secondaries.  But we've never really talked about what happens during the YEARS in between!  How do Private Equity companies actually grow their portfolio companies over the life of their investment? Enter: the operations team. This group works closely with executives at the portfolio company itself, along with the valuation and deal teams. This team is generally separate from the deal team within Megafunds, though many roles may have significant overlap at smaller firms. At a Megafund, this role differs considerably in terms of skills set, background, and career path. Instead of a conveyor belt path through Investment Banking, this group looks for for skilled consultants and experienced corporate executives. It can be a fantastic entry point into Private Equity for older candidates with more experience in the workforce.Today, we sit down with Florence Evina-Ze, an SVP at Bain Capital, to discuss the recruiting, career path, skills set, and lifestyle associated with this particular vertical. Florence also shares her perspective as an underrepresented minority in the industry. She discusses specific programs that were instrumental to her success, the critical role of mentors, and her inspiring approach to helping others follow in her footsteps.Florence Evina-Ze joined Bain Capital in 2021. She is a Senior Vice President in the Portfolio Group and a member of the North America Private Equity team. Prior to joining Bain Capital, Florence worked at IPSY. Previously, she was a consultant at McKinsey and Deloitte where she focused on industrials and consumer/retail. Florence earned an MBA from Harvard Business School and SB in mechanical engineering from Harvard College.Check out Public.com at the link http://public.com/wallstreetskinnyJoin the waitlist for our flagship course on IB and PE fundamentals!https://the-wall-street-skinny.mykajabi.com/waitlist-opt-in-IBDPublic Disclosure: All investing involves risk. Brokerage services for US listed securities, options and bonds in a self-directed brokerage account are offered by Public Investing, member FINRA & SIPC. Not investment advice. Public Investing offers a High-Yield Cash Account where funds from this account are automatically deposited into partner banks where they earn interest and are eligible for FDIC insurance; Public Investing is not a bank.Cryptocurrency trading services are offered by Bakkt Crypto Solutions, LLC (NMLS ID 1828849), which is licensed to engage in virtual currency business activity by the NYSDFS. Cryptocurrency is highly speculative, involves a high degree of risk, and has the potential for loss of the entire amount of an investment. Cryptocurrency holdings are not protected by the FDIC or SIPC. Securities investments: Not FDIC Insured; No Bank Guarantee; May Lose Value. See public.com/#disclosures-main for more information.Our content is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice.

Stop me if you've heard this one before but what the heck did DISH (Echostar) and DIRECTV just say they were going to do? And will it actually happen this time?In this week's episode of Cloud 9fin, listen in as senior reporter William Hoffman sits down with 9fin credit analysts Kartik Dar and Daniel Stone to untangle the DISH and DIRECTV transactions and debt exchanges and speculate on the merger's antitrust prospects.Find Dan's latest piece on the path to regulatory approval for the DISH-DIRECTV merger here, and find Kartik's latest analysis on the deal here. Another worthy read is this piece by our distressed team, co-authored by William, Kartik and our deputy distressed editor Rachel Butt.If you have any feedback for the team or would like to learn more about how to get involved, send a note to podcast@9fin.com. Thanks for listening.

By nature, private credit is opaque. At least for now. But 9fin's private credit team is hard at work building a data set that will help shed light on the trends and movements in the direct lending space.In this bonus episode of Cloud 9fin, private credit editor David Brooke invites private credit analyst Elijah Jackson to share his experience in building the inaugural 9fin private credit report.To learn more about our private credit data platform and how to access Elijah's report, email elijah@9fin.com. And as always, if you have any feedback on this episode or any other, send us a note at podcast@9fin.com. Thanks for listening.

Cooperation agreements have taken the LME world by storm, foiling distressed companies' plans to play creditors off of one another to secure a better deal. But are these agreements anti-competitive?In this week's episode of Cloud 9fin, our global head of distressed and restructuring Max Frumes delves into this quandary with distressed legal analyst Jane Komsky. They compare the use of co-op agreements to a US Supreme Court case that pitted an apparel supplier against the NFL, and look into whether co-op agreements could be considered a Sherman Act violation.For more detail on this topic, read Jane's analysis and our follow-up Default Notice newsletter on 9fin.com. If you have any feedback for us about this episode, or requests to get involved in the podcast, email us at podcast@9fin.com. Thanks for listening.

One of the strengths of private credit is its flexibility. And who doesn't love to PIK and choose?In this week's episode of Cloud 9fin, US private credit editor David Brooke asks senior reporter Shubham Saharan to add another contribution to the ever-evolving private credit glossary as they dive into the definition of synthetic PIKs. Listen in to learn about what these instruments are, how they're being used by the industry, and whether they're likely to become a passing trend or an emerging staple.If you have any feedback for us, send us a note at podcast@9fin.com.

Zombie companies are businesses that, despite being insolvent, manage to survive for extended periods. Traditionally, these companies are defined by their inability to cover interest payments, but a more refined definition points to companies with low Z-scores, indicating a high probability of default. Over the past three decades, the prevalence of zombie companies has surged, especially in the US, leading to concerns about their broader impact on the economy.The growing number of zombie companies contributes to the misallocation of resources, disinflation, and reduced productivity. Although zombie companies are inefficient, they continue operating for years due to financial and structural support.In this episode of Cloud 9fin, distressed debt reporter Max Reyes sits down with Dr. Edward Altman, professor emeritus at the NYU Stern School of Business and famous for developing the Altman Z-Score, to talk about what defines zombie companies, their prevalence and the negative effects they have on the economy.

All eyes are on media giant Paramount Global and its $13bn debt stack, amid the threat of a downgrade to junk status. With streaming wars intensifying and cable subscribers slowly converting to Paramount Plus, many are left asking: Is Paramount's debt heading for a rocky road, or is there still a way back to stability?Despite its challenges, Paramount holds a strong liquidity position with $2.3 billion in cash and $3.5 billion in undrawn revolver capacity. However, with debt maturing soon and uncertainty surrounding the Skydance acquisition, the stakes are high as Paramount works to balance leverage and boost cash flow amid a shifting media landscape.For this week's episode of Cloud 9fin, senior reporter William Hoffman and credit analyst Dan Stone explore the drama unfolding at Paramount, the implications of its potential downgrade, and whether other media giants like Warner Bros. Discovery could be next in line.

Private credit funds are venturing back to their roots, embracing a strategy that blends the old with the new as hybrid deals are back in vogue.But is this a nostalgic trip down memory lane, or a calculated move with long-term implications?In this episode of Cloud 9fin, leveraged finance reporter Ryan Daniel and senior private credit reporter Synne Johnsson discuss this trend, the driving forces behind this shift and ponder the future of private credit in this evolving market.

Hedge funds are making a bold push into the private credit arena, lured by the promise of higher returns. However, new territory is not without its hurdles, as these funds navigate a landscape already populated by established players.In this episode of Cloud 9fin private credit reporter Peter Benson and senior private credit reporter Shubham Saharan discuss the complexities of this market shift and the different strategies hedge funds are using to gain a foothold in private credit.

Private credit fundraising has been going through an inflection point in recent years, as high interest rates and geopolitical risk increasingly drive LPs to only the most established fund managers. The market shift has many wondering, is the sector leaving its “Golden Age” and entering its "Silver Fox era”?Despite these challenges, investors are finding new opportunities as they adapt to the changing landscape.For this week's episode of Cloud 9fin, private credit reporters Peter Benson and Fin Strathern discuss the evolving world of private credit fundraising, the rise of more niche strategies, and the use of perpetual capital vehicles.

The Supreme Court in a 5-4 decision on 27 June ruled that a bankruptcy court does not have the statutory authority to provide non-consensual third party releases. Such releases had been a crucial part of the Purdue Pharma Chapter 11 plan, among others, where the bankruptcy system was being employed to shield non-debtors from litigation without full creditor consent.The decision coincided with the timely publication of Unjust Debts by UNC law professor Melissa Jacoby, which provides a critical history of how the use of Chapter 11 has expanded far beyond the initial scope laid out in the Bankruptcy Code enacted in 1978.For this week's episode of Cloud 9fin, global head of distressed and restructuring Max Frumes discusses this refreshing and crucial snapshot of bankruptcy law that is both technical and accessible with Professor Jacoby, and how current events might further shape the bankruptcy courts around the country.

To learn more about Gym Growth Blast Off, DM US. Here are 3 ways to get more BFU in your life: [NEW] Claim your FREE copy of Gym Marketing Secrets HERE Follow BFU on Instagram HERE Subscribe to MF's YouTube Channel HERE Are you a gym owner with 30+ clients per month looking to grow in the next 90 days? Then you might just be a few strategies away from adding $5k-$10k/month or more. Book your FREE Brainstorm Call HERE.

Our long-awaited third season recap of the hit show "Succession" is HERE!  Even if you watched the show and loved it, you might not have understood all of the finer points when it comes to the scheming and negotiations at WayStar Royco.  We are here to break down the key corporate finance plot points driving the drama. This season has SO many great finance topics to explore, including LBOs, company valuations, termination fees in a merger, EPS juicing, and much more!  We delve a bit into the real deals that inspired and are referenced in the show, and of course get into the drama and humor of our favorite characters.We have so many things to cover that we made this a two-part episode!  Stay tuned for part II next week...Follow us on Instagram and Tik Tok at @thewallstreetskinnyhttps://www.instagram.com/thewallstreetskinny/

In a generally positive environment for corporate credit, the recent performance of high-yield bonds in the telecom, media and technology (TMT) sector offers a market contrast. Our Lead Analyst for High-Yield TMT joins our Head of Corporate Credit Research to explain the divergence.----- Transcript -----Andrew Sheets: Welcome to Thoughts on the Market. I'm Andrew Sheets, Head of Corporate Credit Research for Morgan Stanley.David Hamburger: And I'm David Hamburger, Head of US Sector Corporate Credit Research and Lead Analyst for the high yield telecom, media, and technology sectors.Andrew Sheets: And today on the podcast we'll be discussing the contrast between strong overall markets in credit and a whole lot of volatility in the high yield TMT space.It's Friday, May 31st at 10am in New York.So, David, it's great to talk to you. You know, listeners have probably been hearing about our views on overall markets and credit markets for the 12 months ahead.We have US growth at 2 percent. We have inflation coming down. We had the Fed lowering interest rates. But there's needless to say; there's some pretty notable contrast between that sort of backdrop and the backdrop we've had for credit year to date, which has been pretty calm, pretty strong -- and what's been going on in your sector.So maybe before we get into the why -- let's talk about the what and bring people up to speed on the saga that's been high yield TMT year.David Hamburger: Yeah. I'm here today to disavow you of any notion that everything is fine and dandy in the market today. So, if you look at the high yield communications sector, it's trading about 325 basis points wide of the overall high yield index. And just to give you that magnitude of that -- the high yield index trading around 300 basis points -- we're talking about 625 basis points over. Now, the high yield communication sector as well is trading about 275 basis points, wider than the next widest sector in the index.And so, it's pretty astounding today, given the market backdrop, how much underperformance we've seen in this sector.Andrew Sheets: What's been causing this just large divergence between high yield TMT and what seems like a lot of other things?David Hamburger: Yeah, I think there are two forces at work here. One's kind of a broader set of issues that I can outline for you. Really, I think it's a combination of one, the maturation of the communications marketplace. Coming out of COVID, we certainly had accelerated adoption of broadband and wireless services. That in and of itself has created a lot of intense competition.And as such, we've seen a lot of technological advances that have created some secular pressures on the space. As well, when you pair that up with elevated financial leverage, all coming together at a time when the marginal cost of capital for companies has increased due to higher interest rates. Those are really some of the underlying forces at work that have driven underperformance in this sector.But some companies have managed to navigate this environment. And I would say by and large, it's those with really strong balance sheets. But that has really cast a shadow on this sector -- is the fundamental and financing issues.When you think about the bloated balance sheets that some of the other companies have had, they've been exploring a whole new set of transactions and, evaluating different options for their balance sheets. And that's probably the more sinister thing that we've seen in the market of late.Andrew Sheets: So, so tell me a little bit more about this. You know, what are some of the types of things that companies can do that often leave the bond holder unhappy?David Hamburger: We all became all too aware of what private equity sponsors might do back in the heyday of LBOs, and we still live in that world today, and it's really fairly well known.You know, I've been in the credit markets for more than 20 years, but I can't recall a time we've seen so many management teams and controlling shareholders now that are at odds with their creditors because of elevated leverage and the business risks they face. So really, the prospect of real and expected liability management has created a lot of dislocation across companies' capital structures.So, what have they done? We look and see companies that have been exploring liability manage, taking advantage of weak protections in certain credit documentation in their structure at the expense of other creditors in the same capital structure. So, we have one company where you see this dislocation in their term loans. They have the same pool of collateral between two different term loans with two different maturities. The later dated maturity is trading higher than the nearer dated maturity, strictly or solely because of the better protections in that documentation. And the premise being, you can negotiate with that class of creditors, give them an advantaged position in the capital structure at the expense of other creditors -- in order to somehow manage the balance sheet and manage those liabilities.Andrew Sheets: And David, is it fair to say that this is a direct outcrop of, you know -- a term some people might have heard of -- of covenant light debt, where, you know, usually debt has certain legal protections that mean that the bondholder is more assured of getting paid back or not being made a less well off than other lenders. But you know, we did see some of that change during different, stronger market conditions. Is that a partial explanation of what's going on?David Hamburger: That's exactly right, Andrew. We are seeing the result, if I might say, the hangover from some of these covenant light deals that came to market over the last few years; almost to the point of speak to some clients and they will just want to know what is the vintage of that secured debt issue that you're talking about because there were certain years where they were far more flexible documentation and protections. And now, given where the equity markets are trading and the financing environment, you see a lot of those securities trading at severe discounts to par, which is unusual because, again, in my 20-year career, I've not often seen companies with billion-dollar equity market caps and bonds trading in the 20, 30, or 40 cents on the dollar.You would think that if a company had a substantial market cap, that their bonds would be trading closer to par and would have value. But what really the market's, I think, pricing in is this transference of value from creditors to shareholders; and the opportunity cost associated with these shareholders; or controlling shareholders or management teams looking to capture those discounts that they now see in their bonds; or in their loans to the benefit of equity shareholders -- really puts all constituents in the company's balance sheet, if you will, at odds with one another.Andrew Sheets: So, David, this is so interesting because again, I think, you know, for a lot of listeners, you can read the newspaper, you see the headlines, the market looks very strong and stable. And yet, there's definitely a tempest that's been brewing, you know, in your sector. For people who are investing in high yield TMT, what are you think the most important things that you're looking out for in your credit coverage?David Hamburger: Well, look, we're forced to really dig in and scrutinize these credit docs and really understand what protections are there, understanding how companies might navigate through those protections in order to prolong or preserve their equity value or the equity options in their companies.It's not like we're trying to be alarmists in saying this is a canary in the coal mine, but it is certainly a cautionary tale for any high yield investor to be well versed in those credit documentation, understanding the protections in those debt securities.And we have seen bondholders and creditors, largely even in loans, you know, get together in co-op agreements to push back on some of these aggressive liability management transactions. And that, I think, is really important in an environment where yields have come back in and, you know, where people look at opportunities and maybe we could, once again, see two things. One, a reach for yield, where you're looking at sectors that have underperformed. And secondly, should we get back into an environment of covenant light docks once again? So, I don't want to be talking about this again in a few years' time. And it's not something that the market has helped resolve rather than just perpetuate.Andrew Sheets: David, it's fascinating as always. Thanks for taking the time to talk.David Hamburger: Thank you Andrew. Glad to be here.Andrew Sheets: And thanks for listening. If you enjoy the show, please leave us a review wherever you get your podcast and share Thoughts on the Market with a friend or colleague today.