The Credit Edge by Bloomberg Intelligence

Companies need to move fast to refinance leveraged-buyout debt coming due over the next few years, according to ICG. “Folks should start getting ahead of it because the traffic jam may be more the issue than anything,” David Saitowitz, the $126 billion global alternative asset manager’s head of US liquid credit, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Mike Holland in the latest Credit Edge podcast. “That could be the kind of risk event that may push the market wider for a period of time,” he says, referring to credit spreads. They also discuss the AI funding bubble, collateralized loan obligation performance and fallen-angel risk.
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Investors are increasingly wary of lenders who dish out so-called bad PIK, or payment-in-kind interest, to help struggling portfolio companies avoid default, according to Anant Kumar, global investment strategist at Benefit Street Partners, the private credit arm of $1.7 trillion asset manager Franklin Templeton. “If you’re a manager who wants to mask stress in the portfolio by doing that, you can probably fool some of the people some of the time,” he tells Bloomberg News’ Sinead Cruise and Bloomberg Intelligence’s Tolu Alamutu in the latest Credit Edge podcast. “I do think investors will catch on if you see a widespread use of PIK in the portfolio without any resolution.” Those managers will likely undershoot expectations when their next fundraising rolls around, Kumar says. The trio also discuss the resilience of private credit illiquidity premia, the specter of inflation and how an industry transparency push is forcing firms to address dubious marks faster than ever before.
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Data-center debt returns are falling, risk is rising and there’s uncertainty over what the properties may be worth in the long run, Wellington Management says. “We think a lot about that replacement value when evaluating data centers,” Sonali Wilson, the $1.3 trillion manager’s lead investment director for private credit, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s David Havens in the latest Credit Edge podcast. “Today, I’ll say — not every situation — but, by and large, it’s a pass,” she says. They also discuss commercial real estate investment strategies, how to position for AI disruption and why Wellington is building out a private-debt platform now.
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Collateralized loan obligations face a second straight year of equity losses, according to Eagle Point Credit Management, a major buyer. “Where we stand right now, it’s certainly possible,” Tom Majewski, the $14 billion private-credit manager’s founder and managing partner, says in this episode of the Credit Edge podcast, when asked about the chance of negative returns. “While there were some credit problems, oddly the bigger issue was the bull market and repricing of loans,” Majewski tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Reto Bachmann. They also discuss software-loan stress, business-development-company turmoil, lower returns in significant risk transfers and how Eagle Point is diversifying into hard assets like midmarket infrastructure lending.
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Sona Asset Management is looking to expand its business in asset-based finance and significant risk transfers as public and private debt markets converge. “The thing that excites us the most is the scope for growth in ABF markets here in Europe,” Henrik Johnsson, the London-based hedge fund’s chief executive officer, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Aidan Cheslin in the latest Credit Edge podcast. “We really like SRTs, although spreads have obviously come in a lot over the last couple of years,” Johnsson adds. They also discuss how to short corporate debt, software-loan distress, secondary sales of private credit assets and investing in the AI boom.
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