The Credit Edge by Bloomberg Intelligence

Carlyle Group's Mark Jenkins discusses the surge in opportunities from banks shedding loans, noting credit cards, student loans, and housing loans being repackaged as securities. He talks about high returns in private credit, risks in direct loans, and the use of AI for investment decisions. Jenkins emphasizes the infrastructure of AI over direct AI investments for now.

Fortress Investment Group predicts a trillion-dollar opportunity in distressed real estate debt, foreseeing sector restructuring and long-lasting impacts on banks. Bloomberg Intelligence analyzes real estate stress in Europe, highlighting concerns in Germany, Sweden, and Austria. The podcast explores challenges in commercial real estate, diverse investment strategies for optimal returns, contrarian views on the market, and navigating the real estate debt crisis.

US-style creditor-on-creditor violence spreading to Europe is a worry for loan investors, according to Camille McLeod-Salmon, portfolio manager at Fidelity International. “What we are focused on is this move that’s in the US towards creditor-on-creditor violence — and the shift that you’ve had there — and that translating into Europe,” she said. London-based McLeod-Salmon talks to Bloomberg News’ Lisa Lee and James Crombie and Bloomberg Intelligence’s Aidan Cheslin in the latest Credit Edge podcast. There are opportunities for investors in the technology and chemical sectors, she adds, predicting high-single-digit returns in European leveraged loans. Also in this episode, BI’s Cheslin weighs the outlook for Altice, which is shedding assets in a bid to reduce debt. The company has had to pay up to extend maturities and there’s a risk of divesting crown jewels in pursuit of fresh cash, Cheslin says. See omnystudio.com/listener for privacy information.

Geopolitics are a potential menace to public debt markets that could present opportunities for private lenders, according to Mike Dennis, co-head of European credit at Ares Management. “The capital markets in general are still pretty fragile,” Dennis tells Bloomberg News’ Lisa Lee and James Crombie in the latest Credit Edge podcast. “It wouldn’t take much for that liquidity to reverse out of the system,” he said. Volatility may open the door for private credit firms to participate more in larger corporate loan deals, Dennis says, adding that there’s more demand for European transactions than supply. Also in this episode, Bloomberg Intelligence’s Stephane Kovatchev analyzes the shipping sector after a 300% increase in freight rates. Greater supply of ships coupled with fading demand are expected to relieve some of the price pressure, Kovatchev says.See omnystudio.com/listener for privacy information.

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.