November 25, 2024 • 43 mins
In the Zirp era of the mid-2010s, credit markets were booming and investors were clamoring for anything that would produce yield. So they were willing to accept fewer legal protections embedded in bond and loan documentation if it meant they could get a slice of a juicy deal. Today, the proliferation of these so-called "cov-lite" deals has been coming back to haunt the market, with investors now fighting each other over how much they can claw back from struggling companies. Some hedge funds have become incredibly creative when it comes to finding loopholes to exploit in deal docs. So what exactly is "creditor-on-creditor violence" and why has it become such a thing? How much is it adding to big investors' legal bills? And what can be done to reduce all the squabbling? We speak with Sujeet Indap, Wall Street Editor at the Financial Times and author of The Caesars Palace Coup: How a Billionaire Brawl Over the Famous Casino Exposed the Corruption of the Private Equity Industry.
Read More: Hedge Funds Smell Blood as Lenders Turn on Each Other
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Episode Transcript
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Speaker 1 (00:03):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:21):
Hello and welcome to another episode of the All Thoughts podcast.
I'm Tracy Alloway.
Speaker 3 (00:25):
And I'm Joe Wisenthal.
Speaker 2 (00:27):
Joe, what do you know about creditor on creditor violence.
I don't know anything other than it's it's a very punch.
Speaker 4 (00:33):
It's a great that's literally it. It's come up a
few times in all Right. It's come up a few
times in episodes we've done about credit, and I get
the impression that, you know, lenders to affirm have different
status and some are higher up in the rank than others,
and that they would like to probably use the technicalities
of the legal code to improve their rank in some
(00:57):
sense when money gets paid out to lenders.
Speaker 2 (01:00):
Yes, so it has come up in a number of well,
some of the fights get pretty nasty. Okay. Well, so
when I think about it, I think back to when
I covered the leverage loan market at the Ft and
this was sort of like twenty thirteen, twenty fourteen, and
I remember writing stories about how leverage loans, more of them,
(01:23):
were becoming covelight, so weaker covenants for lenders or investors.
What that means is companies basically had more leeway to
restructure their assets if they were trying to raise new
capital or stave off bankruptcy or whatever at the expense
of those lenders slash investors. And back in twenty fourteen,
(01:46):
I think the proportion of the leverage loan market that
was cove light was something like thirty percent, and that
was like a big deal that was already higher than
the leverage buyout boom in two thousand and seven. Now,
the vast majority of leverage loans I think something like
ninety percent could be called cove light. So the entire
(02:08):
market is basically cove light at this point, which fits
into the creditor on creditor violence theme. So I feel
like we need to we need to dive into.
Speaker 3 (02:17):
This what it is.
Speaker 4 (02:18):
I just my impression is that if I'm going to
be affirmed that buys leverage loans, I need a good lawyer.
Speaker 3 (02:26):
For the contract.
Speaker 2 (02:27):
Well, I kind of wonder, I guess, I wonder relatively
how important like legal expertise is versus valuation expertise.
Speaker 3 (02:35):
This is what I am wondering as well.
Speaker 2 (02:36):
All right, so let's get into it. I am very
pleased to say we have the perfect guest, we're going
to be speaking with Sujet Endap. He is, of course, uh,
the Wall Street editor over at the FT, my former colleague.
We used to double byline on at least one piece.
I think he is also the author of the excellent
Caesar's Palace Coup book, which if you haven't read, I
(02:58):
would highly recommend, especially on that point about distressed debt
fights getting kind of nasty sigit. Thank you so much
for coming on all thoughts.
Speaker 5 (03:08):
Hi, Racy Joe, it's great to be here.
Speaker 3 (03:10):
Thank you.
Speaker 2 (03:11):
So, I guess my first question is, you know, we
see these headlines about creditor on credit or violence, or
you know, someone will be writing about the private credit
market and they'll be in aside about creditor on credit
or violence and how it's becoming more of a thing.
Can you give us some context around whether or not
this is becoming a bigger trend. I feel like it is,
(03:31):
but it's not like there's a violence index that we
can look at.
Speaker 5 (03:36):
Yeah, so the idea of violence in corporate restructuring and
private equity deals is not a new idea. Imagine the
business that's been bought by the private equity firm is
just less valuable over time, the pious shrunk, there's going
to be a fight over who gets what piece and
how big those pieces are. The creditor on creditor of
(03:59):
violence phenomena, though, is a little bit more nuanced and novel,
And that's the idea that imagine you, Joe, U, Tracy,
and me. We are all holders of the first lean
term loan. Let's say you own five hundred million, Joe,
you've got three hundred million. Let's say I'm poor, say
worth the ft, and only have fifteen million. But there
would be the view that since we're all in the
(04:21):
same security governed by the same document, that our rights
are the same and we are all going to be
treated equally in this fight with the private equity firm
and maybe the junk bond holders below us. The creditor
on credit of violence nuance now is that in fact
we are not equal, and you two, as large holders,
can do things to me small holder that are not
(04:43):
equal in treatment, arguably unfair, arguably impermissible.
Speaker 4 (04:47):
Just to be clear, in this theoretical setting in which
all of us are quote equal in the in the
firm's liabilities, did we all have the exact same language
did we all enter into the same contractual language when
we purchased the debt or when we lent money to
the company. And furthermore, if we did all have the
(05:09):
same language, what are the tools that we use to
change our change our priorities?
Speaker 5 (05:15):
Yeah, so we do. We all are governed by the
firstly in credit agreement. Maybe you bought in the original
LBO and maybe you're clos an i'm or you are
a distressed debt hedge fund which bought in later at
a different price, but we're all governed by the same
document and in concept have the same rights and protections.
Speaker 4 (05:34):
So then where how do I do something to you guys?
If we're what are the basic tools at my disposal
if I want to somehow gain an advantage for me
that doesn't accrue to you.
Speaker 5 (05:45):
Yeah, So let's talk about why that scenario was first arise.
And imagine the company is running into trouble. There's a
maturity coming up, but there's some liquidity challenge. As you
said earlier, these documents now since the financial crisis are
covenant light or no covenant, so there's a lot of
flexibility for the borrower, which is the company and the
private equity firm that owns the company, and rather than
(06:07):
just declaring bankruptcy and going to bankruptcy court and finding
out there, which is messy, it's time consuming, it has
its own restrictions on what you can do in the
private equity firm will typically if the equity holder will
get wiped out. Bankruptcy is like not an attractive option
for those reasons, and so what you can try to
do is raise new capital. And you're going to raise
(06:28):
new capital, often from the existing lenders. Those lenders in
exchange for giving you more money are going to ask
for some things. What are they going to ask you for? First,
the company itself is probably going to want to reduce
the principle balance, So they want people to take haircuts.
So there's gonna be some haircuts involved, and then there's
gonna be brought this new money, brought in that new money. However,
(06:52):
if I'm giving you new money into this troubled company,
I'm gonna want some things to do. That gota and
those things I'm gonna want is the most senior priority,
which calls super priority. Okay, that's all sort of standard,
that's not new. The nuance is the company itself has
some amount of value it can pass out as cookies
to these in this new financing process. And in the
(07:14):
old world, what they would do is, let's say I've
got one hundred million dollars and I'm making that number
up of value to allocate in this new transaction that
I'm going to raise new money in. Rather than splitting
that up pro rata amongst the three of us, I'm
just going to give it to two of you. And
so why is that From the companys point of youw
it's one hundredllion dollars. How the three of us divide
it up? They don't really care about But you too,
(07:36):
care about getting as much as you can since you
own the mo what we all care about it? But
you guys have the possibility of being let's say, a
fifty one percent group and saying I can take all
the cookies for me and leave Sejeet behind. And that
is the idea of creditor on creditor of violence. We
are theoretically PARTI pursue. We are in the same place
with the same document, but you, because you choose to
(07:57):
and the sponsor wants to doesn't really care where responsor
will just go to you it's easier to deal to
cuts if there's two of you, not three of us
negotiate with and that is the nuance of creditor on
credit violence. You two theoretically standing with me, but the
same document can impose pain on me simply because you're bigger.
Speaker 2 (08:13):
Super priority kind of reminds me of double secret probation,
right like that, I wonder, can you have like super
super priority that would I guess you could like keep
doing it forever pretty much, or at least until all
the collection.
Speaker 5 (08:26):
It's kind of like one point five. Yeah, I mean
that's kind of put between first and second. And then
there's been double creditor on creditor violence cases, so there
is like this spiral, uh and kind of like through
the looking guests violence squared. Yeah.
Speaker 2 (08:40):
So one thing I don't really get about the creditor
on creditor violence is its connection with private credit. And
I've seen people talk about private credit as a response
to creditor on creditor violence in the sense that, you know,
maybe it's easier to be a single lender to a company.
You're higher up in the payment waterfall, you don't have
(09:02):
to worry about getting into fights with a bunch of
other investors. But then I also see headlines saying that
creditor on credit or violence is becoming more of a
thing in private credit too, So basically I'm confused.
Speaker 5 (09:16):
Yeah, so let's just take a step back and just
think about that. I think there's two factors that are
behind the generalized credit or on credit or violence concept.
One is what we hit on before, which is just
the technical aspect of these credit agreements, which is the
legal contract that governs like a leverage loan. And then
you know, what are the restrictions or covenants that are
(09:38):
in that document that prevent this kind of creativity and
like refinancing and exchange offers. And there is like a
real legal dispute about whether these changes can be done
with or without unanimity, whether you need one hundred percent
of the group, all three of us to agree to
a change an interest rate or pull maturity. It does
(10:00):
are called the so called sacred rights, if you will,
And that's like a legal question that's been liting at it,
and we can talk about that more if you want.
But then there's also the social aspect. And the social
aspect is the idea that me private equity forms they
may have the legal ability for this mischief, but they
ultimately wouldn't pursue that. And they wouldn't do that because
(10:23):
they are a repeat player in the leverage finance markets.
And if they get a reputation as a firm that
gets too cute, that will cause them to borrow at
higher interest rates and down the line and the next deal,
the deal after that, the different partners who are not
in this deal are going to face the consequences. So
there's a social aspect and also within the deal itself.
If you ultimately antagonize your creditors down the road, you
(10:45):
may need to have restructure again. And if they remember
you as the person who is rough with them, they're
not going to be so kind when you need their help.
Speaker 2 (10:52):
And yet Argentina exists exactly.
Speaker 5 (10:56):
So that brings us to the private credit point. And
you were obviously a lover's finance reporter and a lover's
loan mayven. And you know how that market works, which
is it's really big. It involves banks who underwrite these
deals and then they sell them on in the syndication process,
and that's a whole kind of machine. And you know,
in in a big leveraged loan credit, there's going to
(11:18):
be dozens of clos and regular way mutual funds and
then hedge funds, and it's like a wide, widely dispersed
kind of group, and that dynamic affects how the document
is negotiated and just you know, all the kind of
interactions down the line. And a private credit deal where
you truly have like a club or maybe even a
single lender, whether there's you know, four or five or
three or two, maybe one firm that's providing a loan
(11:41):
to a private equity backed company, that group is just
much smaller. The negotiations around that document are much more intimate.
And again for those social reasons, there was the idea
that in a private credit deal, the private equity firm
sponsor who owns the company is not going to declare
war or go to deaf Con five or deaf Cone
(12:02):
one with whichever the highest one is, to pursue their
own ends. It's going to be much more of a collaborative,
collaborative and.
Speaker 2 (12:10):
Kind friendly come by a relationship.
Speaker 5 (12:13):
And so this again now we go to the examples
of the credit or on credit violence that has arisen
down the private credit market and The examples are relatively
sparse so far because private credit is relatively new and too,
I do think this kind of social dynamic actually is true.
There's this case called plural Site, which Bloomberg has covered.
The ft is covered, where in fact, there was one
of these aggressive kind of reef financing transactions that happened
(12:36):
using kind of a loose document, and the private credit syndicate,
which was four or five firms, was reportedly indignant that
this had happened. In fact, this credit or on credit
of violance situation was extremely mild. It was like one
very small refinancing to make an interest payment. And then
ultimately what happened was the sponsor handed the keys to
the private credit firms to take ownership in a very
(12:57):
bloodless way. And in fact, I wouldn't even like that,
and I wouldn't even put this even close to the
real like headline grabbing violence cases.
Speaker 4 (13:21):
So let's say I am I don't know a small
there's sub sort of club dealer, there's subsort of deal
and I am a small holder, and I am aware
of the existence of creditor on creditor violence as a risk.
I perceive me as being the one who might get screwed,
so to speak, at some point in the future, what
am I doing, along with my law firm, to write
(13:45):
that document into such a way so as to reduce
my odds of finding myself in that position.
Speaker 5 (13:50):
If you're a small player in the leverage finance market
now and or a CLO, which is basically a passive instrument,
as you guys know, things that just accumulate loans and
turned in securities, and you're not like a shark hedge fund.
This leverage loan market has changed quite a bit. And
so if we just take a step back, leverage loans
are the most senior part of a capital structure, even
(14:12):
in a levered company. And so what that means is,
even if things go south, the recovery rates and leverage
loans historically have been very high, like eighty ninety one
hundred percent, and so the people who hold these relatively
risk averse institutions. And so two things have happened. Of
like one is this credit on credit of violence common concept.
But also, as you alluded to earlier, this market is
(14:36):
huge now. Leverage loansally speaking, it's exploded in the last
ten years, and there are a lot of loan only companies.
There is nothing below the leverage loan other than the equity.
There's no high yield bond, and so the recovery rates
have become lower because there's less loss absorption below you.
And this idea that conservative buyer over leverage loan have
(14:59):
bought the safest security and you have the first lean,
the first claim on the assets. That idea has been eroded,
and that's actually very profound, and that this market has
become much riskier than it used to be for the
technical reasons and the social reasons. So getting your question
on what you should do about it, one, you have
to ask yourself, do you want to be in this business? Okay?
And there's a lot of people who, now you know,
(15:20):
unless they're like one of a handful of really big
players that can impact of a distress situation and actually
be in the negotiating room, they're thinking long and hard
about being in this business. And two, you do hope
that the documents themselves are being tightened over time, and
there are ebbs and flows in the market. You know,
there's supply and demand, and you know there's there's waves
(15:41):
of when the documents are tight and when they're loose,
and now you hear these terms about there's a j
CREU blockers, Yeah, there is, and there are these like blockers,
these blockers, like the J crew blocker, the sort of blocker,
and that just means that in the in the document,
the lawyers will negotiate tighter terms and restrictions that prevent
j crue transaction the sort of transaction. And we can
(16:02):
talk about this more in detail if you want. There
is again this push and pull about you know, the
documents and how title loose there are and how people
push back. So you know, but the thing is, though,
like everyone tends to be a price taker in these markets,
and you kind of take the document that is the
market at the time, and if you are a firm
that tries to push back in the negotiations, they can
(16:25):
just pass you over.
Speaker 2 (16:26):
Right, There's plenty of others someone else.
Speaker 5 (16:27):
Will take the bad document when you won't. And that
is just that's the difficult dynamic right now.
Speaker 2 (16:33):
So there's this great bit in your book where the
lawyers are arguing over the meaning of and in a
contracts end or like whether and means a bunch of
conditions have to be met or maybe only some.
Speaker 4 (16:49):
Of them, you know, I've always thought in language, this
is a weird term because it's exactly right, it's off anyway, Yes,
I didn't, I've always thought this is a weird term.
Speaker 2 (16:58):
Sorry, keep going so personal aside, But my husband is
a former corporate lawyer, and it takes him ages to
send a text message, Like he will spend twenty minutes
writing a text message that's like two sentences, and he
blames it on his legal background and the fact that
you really have to consider the meaning of every single word.
The thing I don't get about covenants and indentures and
(17:22):
things like that is I would have thought a lot
of it nowadays is like standard boiler plate. But I
mean the fact that these issues arise and that there
can be arguments over them suggests that maybe it isn't. So.
I guess my question is like, how much of this
is standardized versus customized for particular companies.
Speaker 5 (17:42):
Yeah, I mean, I think if we just take a
step back and think about like the industrial organization of
these markets, and to your point, I think there was
a sense that these documents are standardized and there's some
kind of like template which you downloaded, and they're all
kind of the same more or less. What's happened is
(18:05):
there has been now this arms race amongst the law
firms and the investment banks to read these documents really
carefully and then in their laboratories in the basement come
up with crazy transaction structure. So the big credit or
on credit of violence techniques. There's something called the drop down.
There's something called the up to exchange. There's something more
(18:26):
exotic called the double dip. It's called pari plus. And
these are like designed by these law firms and these
investments and when you do one of these transactions, you
are not just checking a boxing. I want to do
up to your exchange, and something like it just happens.
There's like five crazy things you have to do which
are kind of unnatural and combine together create an up
to her exchange or a drop down, and the result
(18:50):
is all the same, which is you, senior lender, suddenly
in the left behind group, collateral that you owned now
is somewhere else and is not reachable to you. And
I've described our different techniques to do those things. And
so people realize not only are the documents sort of looser,
but the creativity that lawyers and bankers try to exploit
(19:12):
has been accelerated and ratcheted up, and there's this idea
that we're going to ask for forgiveness, not permission. We'll
do the transaction. If someone wants to sue, we'll see
them in court. That'll go on forever. And what you're
ultimately trying to do in all these cases is create
negotiating leverage for the actual settlement where everyone will come
into a room and sort it out. But in fact
(19:34):
who has the leverage is determined by you know, who's
in the group and who's not. The actual transaction may
or may not be important, but what it does is
does set the parameters for the ultimate negotiation.
Speaker 2 (19:45):
So we've been talking a lot about behavior on the
borrower and the lender side, but there is a sort
of third party here, which is the court itself and
the judges. And speaking of great books on credit, there's
a great book on the Argentina restructure that came out
relatively recently called Default, The landmark court battle over Argentina's
(20:05):
one hundred billion dollar debt restructuring. And one of the
takeaways that I got from reading that book is so
much depends on the judge that is put in charge
of a particular case, and there are moments in that
book where like the judge is just really tired and
fed up with everyone, and so he kind of like
does things kind of hastily, I guess. But what's been
(20:29):
the response from the courts to more aggressive creditor on
creditor in fighting.
Speaker 5 (20:35):
So that's a great question, and not just the actual
writing of the document the lawyers are doing is part
of what the service they're offering. They're offering an entire
kind of choreography on how this chess match is going
to like each chest move is going to in florid,
We're going to the document to the actual creditor on
(20:56):
credit of violence transaction, and then ultimately the litigation and
how we game out each of these moves.
Speaker 2 (21:01):
So like we'll be in this jurisdiction, we can expect
maybe to get like this particular judge and the company
or the other lender will respond this way.
Speaker 5 (21:09):
Yeah, And so these documents are all now almost all
of them are written under New York state law, but
that doesn't mean they always end up in New York
state court. Sometimes they end up in New York State court.
Sometimes they end up in federal court where the federal
court is interpreting New York state law. And then sometimes
they end up in bankruptcy court, which is a federal
(21:29):
court as well and has its own, like very kind
of unique powers, and they end up interpreting the document.
And there's a whole again art and science deciding, you
know how you think it's going to involve. The state
court and the federal courts are relatively slow, bankruptcy courts
are relatively fast. So like one case, it's really interesting
and I followed closely. Is this sort of Simmons from
(21:50):
a couple of years ago, which was which is one
of the emblematic creditor on creditor. Oh yeah, and so
this is a mattress company. Obviously we all heard of
it got into trouble during the pandemic. They in an
effort to raise more capital, essentially went to their existing
lenders and said, we need more money. Who can give
us a deal? And this is a fun case because
(22:12):
they end up being two competing groups and they each
propose their own deal. One is an uptier exchange. One
is a drop down essentially accomplishing the same things, which
is new capital in the company, the exchange of debt
for a discount, and the company essentially had an auction
for new capital. They picked one so one group one.
(22:33):
One group lost.
Speaker 3 (22:34):
Wait was it the up tier the so the up.
Speaker 5 (22:38):
Tor exchange group one. And there's a whole a side
about this where the drop down group, which is Apollo
an Angela Gordon, very aggressive smart firms that are in
this market all the time. You know, think the actual
up tier structure is something that actually is actually legally
offensive in a way a drop down is not. And
that's a rabbit hole we can go down. That's sort
of at that point is actually very interesting.
Speaker 2 (22:59):
Theoretically essentially add like a new layer of debt to
the capital step.
Speaker 5 (23:03):
Yeah, they both do the same thing. You end up
in the same place. There's this whole question of whether
the up to exchange is something that's actually contemplated in
the original document, the drop down kind of is or
not in that we can go down that rabbit hole
if you want. But the point is, eventually STA had
to file for bankruptcy. The Apollo angel Gordon group had
sued in New York state court, and I can't recall
(23:23):
that ended up in federal court or not for jurisdiction reasons.
But anyway, there was some lawsuit kind of going through
the court. There are multiple lawsuits about the transactions. One
the company went into bankruptcy. The company and the winning
group sought to have the bankruptcy court to declare the
transaction permissible, and the court bankrupt court, which was very fast,
the Houston Court at the time, very very fast, blessed
(23:44):
the transaction, the deal, the bankruptc deal got done, and
the people in the winning group ultimately the kind of
took control of the company. The people left behind, you know,
got hoosed for dimes on the dollar. So yes, So
to answer your question, yes, the whole kind of legal
game theory, the judicial is actually very important, and these
questions are kind kind of often left outstanding and hanging
because what happens is people ultimately settle out before they
(24:05):
get vial ruling.
Speaker 4 (24:06):
Well, I'm to add on to Tracy's question, has there
been an evolution over time? So okay, lawyers are racing
to come up with new ideas and new interpretations of
words and oh, but in the dream world, you do
transactions without ever really having to like red down to
the document itself. Right, everyone is operating good faith. We
(24:29):
know what all these things mean? Hopefully you don't have
to spend the time a lot of time look at
where commas are or what and or actually means. Has
there been an evolution among judges in courts in terms
of the degree to which they say, look, we know
what all we know what these words mean, while you
guys trying to redefine words versus I guess like a
more literal like what do these words mean in the
(24:50):
English language as described in the original document.
Speaker 5 (24:53):
Yeah, that brings up an interesting point if you read
the actual complaints that, like the losing group will write
in their lawsuits, go through all their contrastual points that
you can't actually do this up to her exchange and
the five crazy things to get it done, and the
very last count that they'll add to their to their
complaint is something called the covenant of good faith. And Yeah,
and that is the idea that let's just put the
(25:15):
wards aside. What do these actulety parties mean when they
struck this transaction? Like, what was the actual intent? Was
the spirit of the document?
Speaker 2 (25:22):
Right?
Speaker 4 (25:22):
Because in the end, we don't want to have to
live in a world right. I assume many investors lawyers might,
but investors probably don't want to live in a world
where every comma and word is being challenged as it's definition.
And I'm curious if there's been some erosion of norms
about the degree to which we sort of accept good
people investors accept.
Speaker 3 (25:44):
Yeah, we all knew what this meant, good faith.
Speaker 5 (25:46):
Yeah, And I think there is some level of exhaustion.
And you know, there have been some subsequent rulings where
court frowns upon the credit or on creditor violence transaction.
There's just now this idea of also cooperation groups, which
is this idea where the creditors, instead of like doing
this fifty one to forty nine kind of fight, they
all sign a contract to say we're going to be
(26:07):
one single block and we will negotiate as group with
the company and there can be no drawing credit violence
because often what will happen in these deals is the
sponsor will find the fifty one percent group and they're
in cahoots to do this thing. Right now, they're saying, you,
financial sponsor, don't do that, because we're all one group
and you can't pick and you can't.
Speaker 3 (26:25):
Say separately from the separately from the bond doc or
the low.
Speaker 5 (26:28):
Yeah, we'll say, well, is that we are not going
to sign into a deal for the next six months
or a year or to the maturity. And if the
company wants to negotiate, they negotiate with all of us
as a block. So that's one thing. And there is
now an effort to actually do what are called still
called pro rata transactions where there is a refinancing, but
the entire group Tracy, Joe, Sujit all get a chance
(26:52):
to participate.
Speaker 2 (26:53):
What happened to the leverage lending guidance because you alluded
to how big this market is earlier, and it's huge
and it's been booming since like the twenty tens, and
I remember at one point regulators seemed concerned, and so
they issued these guidelines of how to do leverage loans
and you know, like what kind of leverage you should have,
(27:17):
and I remember a bunch of bankers freaking out about
them at the time, but it doesn't seem to have
had much of an impact. Uh.
Speaker 5 (27:26):
Yeah, So that was the idea that a bank couldn't
extend a leverage loan where the DEBTIBA dollar issue was
more than six times, and that was because you know,
it's a bank and they can't do RESI shouldn't do
these risky these risky deals. So a couple things happened. One,
there's just a whole non bank market too. You know,
there's some banks like Jeffrees that are not subject to
these guidance lines. Three, there's this private credit which is
(27:49):
a whole different world which is obviously not regulated by banks.
And four I think banks found ways to push the
limits or change the definition bit dah. But even six times.
I mean, if you go up to six, that's like
a lot of leverage. And you know, even if you're
doing it six and banks themselves. I think there's a
story in somewhere about City Bank or City Group, which
(28:12):
hasn't been a big player in leverage loans, it has
been kind of usurped in the market share now suddenly
has a new guy from Jacone Morgan. There's a story
yesterday in the journal I think about how he's going
to push to get more into the leverage loan market.
There's a reason City is not like aggressive in this
because you know, it's risky, right, So we'll see how
that works out for them. So yeah, there was the
actual idea of you know, how much leverage is their
total and then you know, then these kind of interpersonal
dynamics once the loan is extended.
Speaker 4 (28:51):
As a former banker, you know, again you mentioned the
law firms come in. They have new ideas up to
your exchange offers as.
Speaker 3 (28:58):
It dropped downs, cetera.
Speaker 4 (29:00):
They have the whole choreography of how it's going to
play out, et cetera. These are skills that they bring
to the table that are something different from valuation and
you know, debt dynamics and so forth. Is that visible
in the pie? There's a certain amount of money that
gets spent every year on services for transactions by companies,
(29:23):
by borrowers or lenders, et cetera. Has there been a
shift in the tilt of the pie of like how
much goes to lawyers versus how much goes to the
deal makers.
Speaker 5 (29:33):
Yeah, that's a great point too. So you've now I've
seen these stories about the law firm war as the
lawyer's getting paid twenty thirty million dollars a year and
they're shifting firms like baseball players or hedge fund guys
typically do. And that's unusual because historically you started a
law firm as an associate and you made it a partner.
You stated at that firm your whole career, and it
was prestigious and you've got a huge pension. You made
(29:54):
a few million dollars a year. It was less than
being a banker and less than being you know, a
hedge fun star, but it was a stable and respect
So now there is this like warfare because there are
a set of lawyers who matter in this world and
who specialize in private equity and are thought to be,
you know, the big brains around these crazy contracts. So
that is something that's happened. And also, and this is
actual the company point which is really interesting, the hedge
(30:17):
funds and the private equity firms and the investors in
this market that people actually put money to capital, They
are increasingly horrified how much lawyers cost. Oh yeah, how
much bankers cost. How much the whole kind of process costs.
Like in bankruptcy, if you do end up filing for bankruptcy,
there is transparency because you your fees are approved by
the court and you can see now there's lawyers who
(30:38):
are charging twenty five hundred dollars an hour. There's bankers
who are getting success fees for you know, a pretty
standard deal for like fifty million, Like we work, for example,
a relatively small company. At the end of the case
seven hundred and fifty million dollars there was you know,
something like one hundred million dollars in fees. Wow. And
there is real money in these kind of professional services
in a way that is relatively new, and the cost
(30:59):
are so much that it's affecting the returns of these funds.
And they're thinking kind of proactively, how can we limit
the damage because it's affecting you know, how much we're
going to make and the deal ourselves.
Speaker 2 (31:10):
If I'm a distressed at investor in the current environment,
would it be better to be really good at valuation
in math or be really good at reading legal document?
Speaker 5 (31:21):
Yeah?
Speaker 3 (31:21):
I mean I was going to wonder.
Speaker 4 (31:22):
It's like, if you our lawyer, you know, makes sense,
why doesn't lawyer start a hedge fund?
Speaker 5 (31:25):
Anyway? Keep going, There are a lot of lawyers who
start hedge funds. I do think though, that this kind
of the legal creativity that is becoming a little bit commoditized,
and ultimately, if if you're going to make a lot
of money, it's going to be less on a technical
factor and that like the technical part I think is defensive. Ultimately,
(31:49):
to make money, I think you have to be an
entrepreneur and have a thesis around how is this business
going to turn around? And if I end up owning it,
you know, how do I grow the market share and
have more customers? And that really kind of commercial business aspect.
And there are cases, you know, like Hurts I think
is a great story that was a big bidding or
during the bankruptcy and there was two competing private equity
(32:10):
firms with different plans for growing the business, and that
stuff I think ultimately is important. The gamesmanship again truly defensive,
and it's hard to differentiate yourself consistently. It is interesting
now in this market to see in one deal XYZ
famous hedge fund is on the outs, the other one
(32:32):
they're in the inn, and that's kind of coin flip.
And for that reason, you know, you just don't know
how it's coming. You think you're in the winning group,
and then you wake up and you see the press
release and you're not. That's a hard way to make
a living. It's a hard way to sleep. And I
don't know how long that will continue.
Speaker 2 (32:50):
I'm going to ask a devil's advocate question. But one
of the arguments that used to come up with the
rise of cove light loans was this idea that, well,
maybe it's actually a good thing for companies because they
get more flexibility and there are more options available to
them in terms of raising capital. On the other side,
you know, maybe there is like a long term cost
(33:13):
associated with like legal wrangling over every single deal. What
Joe was kind of alluding to, where do you fall
on that argument. Is this ultimately good for companies or
is it a bad thing because maybe it makes people
feel a little bit different about capital markets.
Speaker 5 (33:32):
Yeah, so if we go back to like the Surta case,
which I think is a good example, again, you've got
two competing groups, two aggressive transactions, and someone's going to win,
someone's going to lose, and someone's feelings are going to
be hurt, and there's going to be a litigation. But
from the company's perspective, you have an auction and you're
trying to get the lowest cost of capital for the
one hundred million dollars that you need, and who wins
(33:55):
or who loses to you doesn't matter. And this whole
kind of distributional point, who wins who loses, Like, why
do anyvists care if famous hedge fund access on the
outs in this deal and in that deal and the
winning sidn of that deal. That doesn't really matter. But
if a company can raise capital at the best terms
and avoid bankruptcy, that seems like a social positive. The
(34:20):
the points to temper that are, I think are two things. One,
does the overall cost of capital go up, because.
Speaker 4 (34:27):
Well, if the investors are getting less returns because they
have to factor in their legal fees, that sounds like
higher less returns.
Speaker 5 (34:34):
And you're just there's some chance you're just gonna get
you hold a senior loan and you're gonna be at
the bottom of the bottom of the totem pole and
that that and you're just a boring clo. That's gonna
be like it seems bad. And then two, if the
company this is this is something that we're seeing a
lot of. If the company ultimately does file for bankruptcy
and ends up in bankruptcy court, you end up with
this like Frankenstein capital structure, where you have super senior
(34:59):
firstly one point five lean third out of and the
banksty court and the banks process has to figure out
what the actual order is. There's probably litigation.
Speaker 2 (35:09):
That happened with Caesar's, right, it.
Speaker 5 (35:11):
Did, I mean Caesars. There is a little bit of
creditor on credit of violence, which against the idea of
inter or intra conflict of Caesar's is more the classic
case where you have a fight between the equity holders,
the junk bondholders, and the senior loans. Yes, and there
are people who are holding holds, but.
Speaker 2 (35:25):
I just mean in terms of having a capital structure
that was so complicated that like the bankruptcy court was
struggling to understand it and deal with it, Like, yeah.
Speaker 5 (35:34):
Exactly that. Yeah, you of like the company before bankruptcy
is trying to lower its cost of capital by selling
all these like bespoke securities for this particular type of investor,
and it seems like a good idea at the time,
and it maybe is, But then when you're actually trying
to divide up a shrunken pie, that is a mess
and that process ends up being like very costly. And
(35:56):
we've seen cases where there is a credit on credit
violent refancing and then six months later the entire companies
in bankruptcy. In the bankruptcy is much more complicated t
plus six months rather than if they had just decided
to do it on day zero.
Speaker 4 (36:11):
This is always this crazy thing when I think about
like distressed stuff is like, man, there's just a risk
in it at all. Like everyone is trying to like eke
out their extra pennies or extra dollars, but you could
really just like collapse the whole thing.
Speaker 5 (36:22):
Yeah, you're picking up pennies in front of the steam roller,
and that is bad.
Speaker 2 (36:27):
So, speaking of Caesar's, there's one more question I wanted
to ask you, which is what's the deal with Apollo? Like,
can you just explain Apollo to me? Because they seem
to be everywhere nowadays. I see like a headline after
headline about what Apollo is doing, what they're thinking about doing.
What's your take?
Speaker 5 (36:46):
Yeah, I mean I think they're the most interesting example
of like the broader theme in either alternatives assets, alternative assets,
or just private capital generally, and that there are a
set of firms that started as started out as in
the eighties or nineties, as like leveraged buyout firms they
bought whole businesses or carbouts of big businesses. As an
(37:07):
equity player, they borrowed a bunch of money. They owned
the they owned the company, they managed it, and they
sold it five years later ideally at a big profit.
That's a great business. You can make a lot of money.
Pretty risky, but you know it created a lot of
billion dollar fortunes. But there is a limit on how
many companies you can buy. And these firms have realized
that they have such expertise in negotiating valuation, understanding businesses
(37:32):
and business models and just being creative generally that the
credit markets are just much bigger. And you couple that
with the idea that the banking sector has undergone like
massive systemic changes post financial crisis, and those businesses are
much more constrained and complicated and not equipped, you know,
maybe for like the modern capital market. So they have,
(37:53):
for lack of a better phrase, use regulatory arbitrage to
encroach into every aspect of lending. And that is a
lot them to become trillion dollar managers. And that is
like a sea change. Whether it's good or bad, too
soon to say, but you know, Apollo is the clearest
example you know from whose heritage is in credit, coming
out of Drexel. But in fact, you know, credit markets
(38:16):
are much deeper, much wider, and there's just much more
opportunity to build a massive firm and that's.
Speaker 2 (38:21):
What they're doing, all right, Suji, thank you so much
for coming on all thoughts. Truly the perfect guest, and
I cannot recommend your book enough, So everyone who's listening
definitely go check that out if you haven't done. Right Joe,
(38:45):
I thought that was so good, and I feel like
I have a lot more clarity about what's going on now.
I did think that the social aspect that Suji brought
up is really interesting because, like I, okay, obviously cove
lights became more of a thing, and then you had
higher interest rates in recent years, and so more companies
were under pressure and maybe they got more creative and
(39:07):
how they're raising capital. But I do think like the
difference or the change in social behavior on the part
of investors is also a big part of the story,
and so I guess the question is whether or not
it could change again. To Sijit's point about maybe having
investors team up and have their own contracts about how
they're all going to work together and things like that, no.
Speaker 4 (39:29):
I thought it was there are some really interesting social
questions arising out of that. And you know, I'm not
a lawyer, but it does not. So I'm biased because
I'm not the beneficiary of this trend. But it does
not seem great to have a ton of, you know,
human hours devoted towards the definition of and or or
(39:52):
things that were We all thought we knew the definition
of et cetera. But actually, technically, if you look at
and or, then the second one has to be in there,
because that's how I've always read it too. But maybe
we thought it meant something else, or maybe we just
thought it meant and whatever.
Speaker 2 (40:07):
Hire Joe for your litigation.
Speaker 3 (40:09):
I'm glad you brought this up.
Speaker 4 (40:10):
This has always bothered me so and it's interesting to
think like it's actually eating into the returns these legal costs,
that it actually even setting aside an incident of credit
on credit or violence, or even setting aside an incident
of bankruptcy, that it would eat into returns just because
of how much you're paying the law firms to go
(40:30):
over every one of these legal documents.
Speaker 2 (40:33):
It is crazy also just to think about like the
amount of brain power that's being spent on debating this.
And again that's something that comes through in Sidjet's book,
like how much people are thinking about this, and it
certainly comes through in the Argentina book. Just how like
mentally taxing and time consuming sorting the stuff out is.
Speaker 4 (40:54):
I thought it was also a really interesting point about
the sort of I don't know if it's like dis
economies of scale from capital efficiency. Right, So you have
all of these different instruments. You have equity, you have
junk bonds, you have all the you know, super plus whatever,
and individually, each one of these transactions is designed to
be the most capital efficient to align the company's borrowing
(41:17):
needs with the investors' needs. But then you end up
with this sort of you know, Frankenstein's monster of a
capital stack. And in the event that that has to
be unwound, that is it's like a tail risk, right, Yeah,
merges that in the event that has to be unwound,
it'll be a much costlier process than had it simply
been equity and bonds or something like that.
Speaker 2 (41:38):
Yeah, I mean there can be like a parent company,
an operating company, like convertible bonds, the loans, preferred stock,
like it can go on and on and on, and
someone has to go through all of that. Uh, Okay. Well,
on that note, shall we leave it there?
Speaker 3 (41:53):
Let's leave it there.
Speaker 2 (41:54):
This has been another episode of the All Thoughts podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 4 (42:00):
And I'm joll Wisenthal. You can follow me at the Stalwart.
Follow our guest Sujit in Depth. He's at s in
Depth and check out his book. He is the co
author of The Caesars Palace Coup, came out in twenty
twenty one. Follow our producers Carmen Rodriguez at Kerman Erman
dash Ol Bennett at Dashbot and Calebrooks at Kale Brooks.
Thank you to our producer Moses Ondam. More Oddlots content,
(42:22):
go to Bloomberg dot com slash od loots, where you
have transcripts, a blog, and a new daily newsletter and
you can chat about all of these topics twenty four
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Speaker 2 (42:33):
And if you enjoy odd Lots, if you like it
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And remember, if you are a Bloomberg subscriber. In addition
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(42:54):
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Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:21):
Hello and welcome to another episode of the All Thoughts podcast.
I'm Tracy Alloway.
Speaker 3 (00:25):
And I'm Joe Wisenthal.
Speaker 2 (00:27):
Joe, what do you know about creditor on creditor violence.
I don't know anything other than it's it's a very punch.
Speaker 4 (00:33):
It's a great that's literally it. It's come up a
few times in all Right. It's come up a few
times in episodes we've done about credit, and I get
the impression that, you know, lenders to affirm have different
status and some are higher up in the rank than others,
and that they would like to probably use the technicalities
of the legal code to improve their rank in some
(00:57):
sense when money gets paid out to lenders.
Speaker 2 (01:00):
Yes, so it has come up in a number of well,
some of the fights get pretty nasty. Okay. Well, so
when I think about it, I think back to when
I covered the leverage loan market at the Ft and
this was sort of like twenty thirteen, twenty fourteen, and
I remember writing stories about how leverage loans, more of them,
(01:23):
were becoming covelight, so weaker covenants for lenders or investors.
What that means is companies basically had more leeway to
restructure their assets if they were trying to raise new
capital or stave off bankruptcy or whatever at the expense
of those lenders slash investors. And back in twenty fourteen,
(01:46):
I think the proportion of the leverage loan market that
was cove light was something like thirty percent, and that
was like a big deal that was already higher than
the leverage buyout boom in two thousand and seven. Now,
the vast majority of leverage loans I think something like
ninety percent could be called cove light. So the entire
(02:08):
market is basically cove light at this point, which fits
into the creditor on creditor violence theme. So I feel
like we need to we need to dive into.
Speaker 3 (02:17):
This what it is.
Speaker 4 (02:18):
I just my impression is that if I'm going to
be affirmed that buys leverage loans, I need a good lawyer.
Speaker 3 (02:26):
For the contract.
Speaker 2 (02:27):
Well, I kind of wonder, I guess, I wonder relatively
how important like legal expertise is versus valuation expertise.
Speaker 3 (02:35):
This is what I am wondering as well.
Speaker 2 (02:36):
All right, so let's get into it. I am very
pleased to say we have the perfect guest, we're going
to be speaking with Sujet Endap. He is, of course, uh,
the Wall Street editor over at the FT, my former colleague.
We used to double byline on at least one piece.
I think he is also the author of the excellent
Caesar's Palace Coup book, which if you haven't read, I
(02:58):
would highly recommend, especially on that point about distressed debt
fights getting kind of nasty sigit. Thank you so much
for coming on all thoughts.
Speaker 5 (03:08):
Hi, Racy Joe, it's great to be here.
Speaker 3 (03:10):
Thank you.
Speaker 2 (03:11):
So, I guess my first question is, you know, we
see these headlines about creditor on credit or violence, or
you know, someone will be writing about the private credit
market and they'll be in aside about creditor on credit
or violence and how it's becoming more of a thing.
Can you give us some context around whether or not
this is becoming a bigger trend. I feel like it is,
(03:31):
but it's not like there's a violence index that we
can look at.
Speaker 5 (03:36):
Yeah, so the idea of violence in corporate restructuring and
private equity deals is not a new idea. Imagine the
business that's been bought by the private equity firm is
just less valuable over time, the pious shrunk, there's going
to be a fight over who gets what piece and
how big those pieces are. The creditor on creditor of
(03:59):
violence phenomena, though, is a little bit more nuanced and novel,
And that's the idea that imagine you, Joe, U, Tracy,
and me. We are all holders of the first lean
term loan. Let's say you own five hundred million, Joe,
you've got three hundred million. Let's say I'm poor, say
worth the ft, and only have fifteen million. But there
would be the view that since we're all in the
(04:21):
same security governed by the same document, that our rights
are the same and we are all going to be
treated equally in this fight with the private equity firm
and maybe the junk bond holders below us. The creditor
on credit of violence nuance now is that in fact
we are not equal, and you two, as large holders,
can do things to me small holder that are not
(04:43):
equal in treatment, arguably unfair, arguably impermissible.
Speaker 4 (04:47):
Just to be clear, in this theoretical setting in which
all of us are quote equal in the in the
firm's liabilities, did we all have the exact same language
did we all enter into the same contractual language when
we purchased the debt or when we lent money to
the company. And furthermore, if we did all have the
(05:09):
same language, what are the tools that we use to
change our change our priorities?
Speaker 5 (05:15):
Yeah, so we do. We all are governed by the
firstly in credit agreement. Maybe you bought in the original
LBO and maybe you're clos an i'm or you are
a distressed debt hedge fund which bought in later at
a different price, but we're all governed by the same
document and in concept have the same rights and protections.
Speaker 4 (05:34):
So then where how do I do something to you guys?
If we're what are the basic tools at my disposal
if I want to somehow gain an advantage for me
that doesn't accrue to you.
Speaker 5 (05:45):
Yeah, So let's talk about why that scenario was first arise.
And imagine the company is running into trouble. There's a
maturity coming up, but there's some liquidity challenge. As you
said earlier, these documents now since the financial crisis are
covenant light or no covenant, so there's a lot of
flexibility for the borrower, which is the company and the
private equity firm that owns the company, and rather than
(06:07):
just declaring bankruptcy and going to bankruptcy court and finding
out there, which is messy, it's time consuming, it has
its own restrictions on what you can do in the
private equity firm will typically if the equity holder will
get wiped out. Bankruptcy is like not an attractive option
for those reasons, and so what you can try to
do is raise new capital. And you're going to raise
(06:28):
new capital, often from the existing lenders. Those lenders in
exchange for giving you more money are going to ask
for some things. What are they going to ask you for? First,
the company itself is probably going to want to reduce
the principle balance, So they want people to take haircuts.
So there's gonna be some haircuts involved, and then there's
gonna be brought this new money, brought in that new money. However,
(06:52):
if I'm giving you new money into this troubled company,
I'm gonna want some things to do. That gota and
those things I'm gonna want is the most senior priority,
which calls super priority. Okay, that's all sort of standard,
that's not new. The nuance is the company itself has
some amount of value it can pass out as cookies
to these in this new financing process. And in the
(07:14):
old world, what they would do is, let's say I've
got one hundred million dollars and I'm making that number
up of value to allocate in this new transaction that
I'm going to raise new money in. Rather than splitting
that up pro rata amongst the three of us, I'm
just going to give it to two of you. And
so why is that From the companys point of youw
it's one hundredllion dollars. How the three of us divide
it up? They don't really care about But you too,
(07:36):
care about getting as much as you can since you
own the mo what we all care about it? But
you guys have the possibility of being let's say, a
fifty one percent group and saying I can take all
the cookies for me and leave Sejeet behind. And that
is the idea of creditor on creditor of violence. We
are theoretically PARTI pursue. We are in the same place
with the same document, but you, because you choose to
(07:57):
and the sponsor wants to doesn't really care where responsor
will just go to you it's easier to deal to
cuts if there's two of you, not three of us
negotiate with and that is the nuance of creditor on
credit violence. You two theoretically standing with me, but the
same document can impose pain on me simply because you're bigger.
Speaker 2 (08:13):
Super priority kind of reminds me of double secret probation,
right like that, I wonder, can you have like super
super priority that would I guess you could like keep
doing it forever pretty much, or at least until all
the collection.
Speaker 5 (08:26):
It's kind of like one point five. Yeah, I mean
that's kind of put between first and second. And then
there's been double creditor on creditor violence cases, so there
is like this spiral, uh and kind of like through
the looking guests violence squared. Yeah.
Speaker 2 (08:40):
So one thing I don't really get about the creditor
on creditor violence is its connection with private credit. And
I've seen people talk about private credit as a response
to creditor on creditor violence in the sense that, you know,
maybe it's easier to be a single lender to a company.
You're higher up in the payment waterfall, you don't have
(09:02):
to worry about getting into fights with a bunch of
other investors. But then I also see headlines saying that
creditor on credit or violence is becoming more of a
thing in private credit too, So basically I'm confused.
Speaker 5 (09:16):
Yeah, so let's just take a step back and just
think about that. I think there's two factors that are
behind the generalized credit or on credit or violence concept.
One is what we hit on before, which is just
the technical aspect of these credit agreements, which is the
legal contract that governs like a leverage loan. And then
you know, what are the restrictions or covenants that are
(09:38):
in that document that prevent this kind of creativity and
like refinancing and exchange offers. And there is like a
real legal dispute about whether these changes can be done
with or without unanimity, whether you need one hundred percent
of the group, all three of us to agree to
a change an interest rate or pull maturity. It does
(10:00):
are called the so called sacred rights, if you will,
And that's like a legal question that's been liting at it,
and we can talk about that more if you want.
But then there's also the social aspect. And the social
aspect is the idea that me private equity forms they
may have the legal ability for this mischief, but they
ultimately wouldn't pursue that. And they wouldn't do that because
(10:23):
they are a repeat player in the leverage finance markets.
And if they get a reputation as a firm that
gets too cute, that will cause them to borrow at
higher interest rates and down the line and the next deal,
the deal after that, the different partners who are not
in this deal are going to face the consequences. So
there's a social aspect and also within the deal itself.
If you ultimately antagonize your creditors down the road, you
(10:45):
may need to have restructure again. And if they remember
you as the person who is rough with them, they're
not going to be so kind when you need their help.
Speaker 2 (10:52):
And yet Argentina exists exactly.
Speaker 5 (10:56):
So that brings us to the private credit point. And
you were obviously a lover's finance reporter and a lover's
loan mayven. And you know how that market works, which
is it's really big. It involves banks who underwrite these
deals and then they sell them on in the syndication process,
and that's a whole kind of machine. And you know,
in in a big leveraged loan credit, there's going to
(11:18):
be dozens of clos and regular way mutual funds and
then hedge funds, and it's like a wide, widely dispersed
kind of group, and that dynamic affects how the document
is negotiated and just you know, all the kind of
interactions down the line. And a private credit deal where
you truly have like a club or maybe even a
single lender, whether there's you know, four or five or
three or two, maybe one firm that's providing a loan
(11:41):
to a private equity backed company, that group is just
much smaller. The negotiations around that document are much more intimate.
And again for those social reasons, there was the idea
that in a private credit deal, the private equity firm
sponsor who owns the company is not going to declare
war or go to deaf Con five or deaf Cone
(12:02):
one with whichever the highest one is, to pursue their
own ends. It's going to be much more of a collaborative,
collaborative and.
Speaker 2 (12:10):
Kind friendly come by a relationship.
Speaker 5 (12:13):
And so this again now we go to the examples
of the credit or on credit violence that has arisen
down the private credit market and The examples are relatively
sparse so far because private credit is relatively new and too,
I do think this kind of social dynamic actually is true.
There's this case called plural Site, which Bloomberg has covered.
The ft is covered, where in fact, there was one
of these aggressive kind of reef financing transactions that happened
(12:36):
using kind of a loose document, and the private credit syndicate,
which was four or five firms, was reportedly indignant that
this had happened. In fact, this credit or on credit
of violance situation was extremely mild. It was like one
very small refinancing to make an interest payment. And then
ultimately what happened was the sponsor handed the keys to
the private credit firms to take ownership in a very
(12:57):
bloodless way. And in fact, I wouldn't even like that,
and I wouldn't even put this even close to the
real like headline grabbing violence cases.
Speaker 4 (13:21):
So let's say I am I don't know a small
there's sub sort of club dealer, there's subsort of deal
and I am a small holder, and I am aware
of the existence of creditor on creditor violence as a risk.
I perceive me as being the one who might get screwed,
so to speak, at some point in the future, what
am I doing, along with my law firm, to write
(13:45):
that document into such a way so as to reduce
my odds of finding myself in that position.
Speaker 5 (13:50):
If you're a small player in the leverage finance market
now and or a CLO, which is basically a passive instrument,
as you guys know, things that just accumulate loans and
turned in securities, and you're not like a shark hedge fund.
This leverage loan market has changed quite a bit. And
so if we just take a step back, leverage loans
are the most senior part of a capital structure, even
(14:12):
in a levered company. And so what that means is,
even if things go south, the recovery rates and leverage
loans historically have been very high, like eighty ninety one
hundred percent, and so the people who hold these relatively
risk averse institutions. And so two things have happened. Of
like one is this credit on credit of violence common concept.
But also, as you alluded to earlier, this market is
(14:36):
huge now. Leverage loansally speaking, it's exploded in the last
ten years, and there are a lot of loan only companies.
There is nothing below the leverage loan other than the equity.
There's no high yield bond, and so the recovery rates
have become lower because there's less loss absorption below you.
And this idea that conservative buyer over leverage loan have
(14:59):
bought the safest security and you have the first lean,
the first claim on the assets. That idea has been eroded,
and that's actually very profound, and that this market has
become much riskier than it used to be for the
technical reasons and the social reasons. So getting your question
on what you should do about it, one, you have
to ask yourself, do you want to be in this business? Okay?
And there's a lot of people who, now you know,
(15:20):
unless they're like one of a handful of really big
players that can impact of a distress situation and actually
be in the negotiating room, they're thinking long and hard
about being in this business. And two, you do hope
that the documents themselves are being tightened over time, and
there are ebbs and flows in the market. You know,
there's supply and demand, and you know there's there's waves
(15:41):
of when the documents are tight and when they're loose,
and now you hear these terms about there's a j
CREU blockers, Yeah, there is, and there are these like blockers,
these blockers, like the J crew blocker, the sort of blocker,
and that just means that in the in the document,
the lawyers will negotiate tighter terms and restrictions that prevent
j crue transaction the sort of transaction. And we can
(16:02):
talk about this more in detail if you want. There
is again this push and pull about you know, the
documents and how title loose there are and how people
push back. So you know, but the thing is, though,
like everyone tends to be a price taker in these markets,
and you kind of take the document that is the
market at the time, and if you are a firm
that tries to push back in the negotiations, they can
(16:25):
just pass you over.
Speaker 2 (16:26):
Right, There's plenty of others someone else.
Speaker 5 (16:27):
Will take the bad document when you won't. And that
is just that's the difficult dynamic right now.
Speaker 2 (16:33):
So there's this great bit in your book where the
lawyers are arguing over the meaning of and in a
contracts end or like whether and means a bunch of
conditions have to be met or maybe only some.
Speaker 4 (16:49):
Of them, you know, I've always thought in language, this
is a weird term because it's exactly right, it's off anyway, Yes,
I didn't, I've always thought this is a weird term.
Speaker 2 (16:58):
Sorry, keep going so personal aside, But my husband is
a former corporate lawyer, and it takes him ages to
send a text message, Like he will spend twenty minutes
writing a text message that's like two sentences, and he
blames it on his legal background and the fact that
you really have to consider the meaning of every single word.
The thing I don't get about covenants and indentures and
(17:22):
things like that is I would have thought a lot
of it nowadays is like standard boiler plate. But I
mean the fact that these issues arise and that there
can be arguments over them suggests that maybe it isn't. So.
I guess my question is like, how much of this
is standardized versus customized for particular companies.
Speaker 5 (17:42):
Yeah, I mean, I think if we just take a
step back and think about like the industrial organization of
these markets, and to your point, I think there was
a sense that these documents are standardized and there's some
kind of like template which you downloaded, and they're all
kind of the same more or less. What's happened is
(18:05):
there has been now this arms race amongst the law
firms and the investment banks to read these documents really
carefully and then in their laboratories in the basement come
up with crazy transaction structure. So the big credit or
on credit of violence techniques. There's something called the drop down.
There's something called the up to exchange. There's something more
(18:26):
exotic called the double dip. It's called pari plus. And
these are like designed by these law firms and these
investments and when you do one of these transactions, you
are not just checking a boxing. I want to do
up to your exchange, and something like it just happens.
There's like five crazy things you have to do which
are kind of unnatural and combine together create an up
to her exchange or a drop down, and the result
(18:50):
is all the same, which is you, senior lender, suddenly
in the left behind group, collateral that you owned now
is somewhere else and is not reachable to you. And
I've described our different techniques to do those things. And
so people realize not only are the documents sort of looser,
but the creativity that lawyers and bankers try to exploit
(19:12):
has been accelerated and ratcheted up, and there's this idea
that we're going to ask for forgiveness, not permission. We'll
do the transaction. If someone wants to sue, we'll see
them in court. That'll go on forever. And what you're
ultimately trying to do in all these cases is create
negotiating leverage for the actual settlement where everyone will come
into a room and sort it out. But in fact
(19:34):
who has the leverage is determined by you know, who's
in the group and who's not. The actual transaction may
or may not be important, but what it does is
does set the parameters for the ultimate negotiation.
Speaker 2 (19:45):
So we've been talking a lot about behavior on the
borrower and the lender side, but there is a sort
of third party here, which is the court itself and
the judges. And speaking of great books on credit, there's
a great book on the Argentina restructure that came out
relatively recently called Default, The landmark court battle over Argentina's
(20:05):
one hundred billion dollar debt restructuring. And one of the
takeaways that I got from reading that book is so
much depends on the judge that is put in charge
of a particular case, and there are moments in that
book where like the judge is just really tired and
fed up with everyone, and so he kind of like
does things kind of hastily, I guess. But what's been
(20:29):
the response from the courts to more aggressive creditor on
creditor in fighting.
Speaker 5 (20:35):
So that's a great question, and not just the actual
writing of the document the lawyers are doing is part
of what the service they're offering. They're offering an entire
kind of choreography on how this chess match is going
to like each chest move is going to in florid,
We're going to the document to the actual creditor on
(20:56):
credit of violence transaction, and then ultimately the litigation and
how we game out each of these moves.
Speaker 2 (21:01):
So like we'll be in this jurisdiction, we can expect
maybe to get like this particular judge and the company
or the other lender will respond this way.
Speaker 5 (21:09):
Yeah, And so these documents are all now almost all
of them are written under New York state law, but
that doesn't mean they always end up in New York
state court. Sometimes they end up in New York State court.
Sometimes they end up in federal court where the federal
court is interpreting New York state law. And then sometimes
they end up in bankruptcy court, which is a federal
(21:29):
court as well and has its own, like very kind
of unique powers, and they end up interpreting the document.
And there's a whole again art and science deciding, you
know how you think it's going to involve. The state
court and the federal courts are relatively slow, bankruptcy courts
are relatively fast. So like one case, it's really interesting
and I followed closely. Is this sort of Simmons from
(21:50):
a couple of years ago, which was which is one
of the emblematic creditor on creditor. Oh yeah, and so
this is a mattress company. Obviously we all heard of
it got into trouble during the pandemic. They in an
effort to raise more capital, essentially went to their existing
lenders and said, we need more money. Who can give
us a deal? And this is a fun case because
(22:12):
they end up being two competing groups and they each
propose their own deal. One is an uptier exchange. One
is a drop down essentially accomplishing the same things, which
is new capital in the company, the exchange of debt
for a discount, and the company essentially had an auction
for new capital. They picked one so one group one.
(22:33):
One group lost.
Speaker 3 (22:34):
Wait was it the up tier the so the up.
Speaker 5 (22:38):
Tor exchange group one. And there's a whole a side
about this where the drop down group, which is Apollo
an Angela Gordon, very aggressive smart firms that are in
this market all the time. You know, think the actual
up tier structure is something that actually is actually legally
offensive in a way a drop down is not. And
that's a rabbit hole we can go down. That's sort
of at that point is actually very interesting.
Speaker 2 (22:59):
Theoretically essentially add like a new layer of debt to
the capital step.
Speaker 5 (23:03):
Yeah, they both do the same thing. You end up
in the same place. There's this whole question of whether
the up to exchange is something that's actually contemplated in
the original document, the drop down kind of is or
not in that we can go down that rabbit hole
if you want. But the point is, eventually STA had
to file for bankruptcy. The Apollo angel Gordon group had
sued in New York state court, and I can't recall
(23:23):
that ended up in federal court or not for jurisdiction reasons.
But anyway, there was some lawsuit kind of going through
the court. There are multiple lawsuits about the transactions. One
the company went into bankruptcy. The company and the winning
group sought to have the bankruptcy court to declare the
transaction permissible, and the court bankrupt court, which was very fast,
the Houston Court at the time, very very fast, blessed
(23:44):
the transaction, the deal, the bankruptc deal got done, and
the people in the winning group ultimately the kind of
took control of the company. The people left behind, you know,
got hoosed for dimes on the dollar. So yes, So
to answer your question, yes, the whole kind of legal
game theory, the judicial is actually very important, and these
questions are kind kind of often left outstanding and hanging
because what happens is people ultimately settle out before they
(24:05):
get vial ruling.
Speaker 4 (24:06):
Well, I'm to add on to Tracy's question, has there
been an evolution over time? So okay, lawyers are racing
to come up with new ideas and new interpretations of
words and oh, but in the dream world, you do
transactions without ever really having to like red down to
the document itself. Right, everyone is operating good faith. We
(24:29):
know what all these things mean? Hopefully you don't have
to spend the time a lot of time look at
where commas are or what and or actually means. Has
there been an evolution among judges in courts in terms
of the degree to which they say, look, we know
what all we know what these words mean, while you
guys trying to redefine words versus I guess like a
more literal like what do these words mean in the
(24:50):
English language as described in the original document.
Speaker 5 (24:53):
Yeah, that brings up an interesting point if you read
the actual complaints that, like the losing group will write
in their lawsuits, go through all their contrastual points that
you can't actually do this up to her exchange and
the five crazy things to get it done, and the
very last count that they'll add to their to their
complaint is something called the covenant of good faith. And Yeah,
and that is the idea that let's just put the
(25:15):
wards aside. What do these actulety parties mean when they
struck this transaction? Like, what was the actual intent? Was
the spirit of the document?
Speaker 2 (25:22):
Right?
Speaker 4 (25:22):
Because in the end, we don't want to have to
live in a world right. I assume many investors lawyers might,
but investors probably don't want to live in a world
where every comma and word is being challenged as it's definition.
And I'm curious if there's been some erosion of norms
about the degree to which we sort of accept good
people investors accept.
Speaker 3 (25:44):
Yeah, we all knew what this meant, good faith.
Speaker 5 (25:46):
Yeah, And I think there is some level of exhaustion.
And you know, there have been some subsequent rulings where
court frowns upon the credit or on creditor violence transaction.
There's just now this idea of also cooperation groups, which
is this idea where the creditors, instead of like doing
this fifty one to forty nine kind of fight, they
all sign a contract to say we're going to be
(26:07):
one single block and we will negotiate as group with
the company and there can be no drawing credit violence
because often what will happen in these deals is the
sponsor will find the fifty one percent group and they're
in cahoots to do this thing. Right now, they're saying, you,
financial sponsor, don't do that, because we're all one group
and you can't pick and you can't.
Speaker 3 (26:25):
Say separately from the separately from the bond doc or
the low.
Speaker 5 (26:28):
Yeah, we'll say, well, is that we are not going
to sign into a deal for the next six months
or a year or to the maturity. And if the
company wants to negotiate, they negotiate with all of us
as a block. So that's one thing. And there is
now an effort to actually do what are called still
called pro rata transactions where there is a refinancing, but
the entire group Tracy, Joe, Sujit all get a chance
(26:52):
to participate.
Speaker 2 (26:53):
What happened to the leverage lending guidance because you alluded
to how big this market is earlier, and it's huge
and it's been booming since like the twenty tens, and
I remember at one point regulators seemed concerned, and so
they issued these guidelines of how to do leverage loans
and you know, like what kind of leverage you should have,
(27:17):
and I remember a bunch of bankers freaking out about
them at the time, but it doesn't seem to have
had much of an impact. Uh.
Speaker 5 (27:26):
Yeah, So that was the idea that a bank couldn't
extend a leverage loan where the DEBTIBA dollar issue was
more than six times, and that was because you know,
it's a bank and they can't do RESI shouldn't do
these risky these risky deals. So a couple things happened. One,
there's just a whole non bank market too. You know,
there's some banks like Jeffrees that are not subject to
these guidance lines. Three, there's this private credit which is
(27:49):
a whole different world which is obviously not regulated by banks.
And four I think banks found ways to push the
limits or change the definition bit dah. But even six times.
I mean, if you go up to six, that's like
a lot of leverage. And you know, even if you're
doing it six and banks themselves. I think there's a
story in somewhere about City Bank or City Group, which
(28:12):
hasn't been a big player in leverage loans, it has
been kind of usurped in the market share now suddenly
has a new guy from Jacone Morgan. There's a story
yesterday in the journal I think about how he's going
to push to get more into the leverage loan market.
There's a reason City is not like aggressive in this
because you know, it's risky, right, So we'll see how
that works out for them. So yeah, there was the
actual idea of you know, how much leverage is their
total and then you know, then these kind of interpersonal
dynamics once the loan is extended.
Speaker 4 (28:51):
As a former banker, you know, again you mentioned the
law firms come in. They have new ideas up to
your exchange offers as.
Speaker 3 (28:58):
It dropped downs, cetera.
Speaker 4 (29:00):
They have the whole choreography of how it's going to
play out, et cetera. These are skills that they bring
to the table that are something different from valuation and
you know, debt dynamics and so forth. Is that visible
in the pie? There's a certain amount of money that
gets spent every year on services for transactions by companies,
(29:23):
by borrowers or lenders, et cetera. Has there been a
shift in the tilt of the pie of like how
much goes to lawyers versus how much goes to the
deal makers.
Speaker 5 (29:33):
Yeah, that's a great point too. So you've now I've
seen these stories about the law firm war as the
lawyer's getting paid twenty thirty million dollars a year and
they're shifting firms like baseball players or hedge fund guys
typically do. And that's unusual because historically you started a
law firm as an associate and you made it a partner.
You stated at that firm your whole career, and it
was prestigious and you've got a huge pension. You made
(29:54):
a few million dollars a year. It was less than
being a banker and less than being you know, a
hedge fun star, but it was a stable and respect
So now there is this like warfare because there are
a set of lawyers who matter in this world and
who specialize in private equity and are thought to be,
you know, the big brains around these crazy contracts. So
that is something that's happened. And also, and this is
actual the company point which is really interesting, the hedge
(30:17):
funds and the private equity firms and the investors in
this market that people actually put money to capital, They
are increasingly horrified how much lawyers cost. Oh yeah, how
much bankers cost. How much the whole kind of process costs.
Like in bankruptcy, if you do end up filing for bankruptcy,
there is transparency because you your fees are approved by
the court and you can see now there's lawyers who
(30:38):
are charging twenty five hundred dollars an hour. There's bankers
who are getting success fees for you know, a pretty
standard deal for like fifty million, Like we work, for example,
a relatively small company. At the end of the case
seven hundred and fifty million dollars there was you know,
something like one hundred million dollars in fees. Wow. And
there is real money in these kind of professional services
in a way that is relatively new, and the cost
(30:59):
are so much that it's affecting the returns of these funds.
And they're thinking kind of proactively, how can we limit
the damage because it's affecting you know, how much we're
going to make and the deal ourselves.
Speaker 2 (31:10):
If I'm a distressed at investor in the current environment,
would it be better to be really good at valuation
in math or be really good at reading legal document?
Speaker 5 (31:21):
Yeah?
Speaker 3 (31:21):
I mean I was going to wonder.
Speaker 4 (31:22):
It's like, if you our lawyer, you know, makes sense,
why doesn't lawyer start a hedge fund?
Speaker 5 (31:25):
Anyway? Keep going, There are a lot of lawyers who
start hedge funds. I do think though, that this kind
of the legal creativity that is becoming a little bit commoditized,
and ultimately, if if you're going to make a lot
of money, it's going to be less on a technical
factor and that like the technical part I think is defensive. Ultimately,
(31:49):
to make money, I think you have to be an
entrepreneur and have a thesis around how is this business
going to turn around? And if I end up owning it,
you know, how do I grow the market share and
have more customers? And that really kind of commercial business aspect.
And there are cases, you know, like Hurts I think
is a great story that was a big bidding or
during the bankruptcy and there was two competing private equity
(32:10):
firms with different plans for growing the business, and that
stuff I think ultimately is important. The gamesmanship again truly defensive,
and it's hard to differentiate yourself consistently. It is interesting
now in this market to see in one deal XYZ
famous hedge fund is on the outs, the other one
(32:32):
they're in the inn, and that's kind of coin flip.
And for that reason, you know, you just don't know
how it's coming. You think you're in the winning group,
and then you wake up and you see the press
release and you're not. That's a hard way to make
a living. It's a hard way to sleep. And I
don't know how long that will continue.
Speaker 2 (32:50):
I'm going to ask a devil's advocate question. But one
of the arguments that used to come up with the
rise of cove light loans was this idea that, well,
maybe it's actually a good thing for companies because they
get more flexibility and there are more options available to
them in terms of raising capital. On the other side,
you know, maybe there is like a long term cost
(33:13):
associated with like legal wrangling over every single deal. What
Joe was kind of alluding to, where do you fall
on that argument. Is this ultimately good for companies or
is it a bad thing because maybe it makes people
feel a little bit different about capital markets.
Speaker 5 (33:32):
Yeah, so if we go back to like the Surta case,
which I think is a good example, again, you've got
two competing groups, two aggressive transactions, and someone's going to win,
someone's going to lose, and someone's feelings are going to
be hurt, and there's going to be a litigation. But
from the company's perspective, you have an auction and you're
trying to get the lowest cost of capital for the
one hundred million dollars that you need, and who wins
(33:55):
or who loses to you doesn't matter. And this whole
kind of distributional point, who wins who loses, Like, why
do anyvists care if famous hedge fund access on the
outs in this deal and in that deal and the
winning sidn of that deal. That doesn't really matter. But
if a company can raise capital at the best terms
and avoid bankruptcy, that seems like a social positive. The
(34:20):
the points to temper that are, I think are two things. One,
does the overall cost of capital go up, because.
Speaker 4 (34:27):
Well, if the investors are getting less returns because they
have to factor in their legal fees, that sounds like
higher less returns.
Speaker 5 (34:34):
And you're just there's some chance you're just gonna get
you hold a senior loan and you're gonna be at
the bottom of the bottom of the totem pole and
that that and you're just a boring clo. That's gonna
be like it seems bad. And then two, if the
company this is this is something that we're seeing a
lot of. If the company ultimately does file for bankruptcy
and ends up in bankruptcy court, you end up with
this like Frankenstein capital structure, where you have super senior
(34:59):
firstly one point five lean third out of and the
banksty court and the banks process has to figure out
what the actual order is. There's probably litigation.
Speaker 2 (35:09):
That happened with Caesar's, right, it.
Speaker 5 (35:11):
Did, I mean Caesars. There is a little bit of
creditor on credit of violence, which against the idea of
inter or intra conflict of Caesar's is more the classic
case where you have a fight between the equity holders,
the junk bondholders, and the senior loans. Yes, and there
are people who are holding holds, but.
Speaker 2 (35:25):
I just mean in terms of having a capital structure
that was so complicated that like the bankruptcy court was
struggling to understand it and deal with it, Like, yeah.
Speaker 5 (35:34):
Exactly that. Yeah, you of like the company before bankruptcy
is trying to lower its cost of capital by selling
all these like bespoke securities for this particular type of investor,
and it seems like a good idea at the time,
and it maybe is, But then when you're actually trying
to divide up a shrunken pie, that is a mess
and that process ends up being like very costly. And
(35:56):
we've seen cases where there is a credit on credit
violent refancing and then six months later the entire companies
in bankruptcy. In the bankruptcy is much more complicated t
plus six months rather than if they had just decided
to do it on day zero.
Speaker 4 (36:11):
This is always this crazy thing when I think about
like distressed stuff is like, man, there's just a risk
in it at all. Like everyone is trying to like eke
out their extra pennies or extra dollars, but you could
really just like collapse the whole thing.
Speaker 5 (36:22):
Yeah, you're picking up pennies in front of the steam roller,
and that is bad.
Speaker 2 (36:27):
So, speaking of Caesar's, there's one more question I wanted
to ask you, which is what's the deal with Apollo? Like,
can you just explain Apollo to me? Because they seem
to be everywhere nowadays. I see like a headline after
headline about what Apollo is doing, what they're thinking about doing.
What's your take?
Speaker 5 (36:46):
Yeah, I mean I think they're the most interesting example
of like the broader theme in either alternatives assets, alternative assets,
or just private capital generally, and that there are a
set of firms that started as started out as in
the eighties or nineties, as like leveraged buyout firms they
bought whole businesses or carbouts of big businesses. As an
(37:07):
equity player, they borrowed a bunch of money. They owned
the they owned the company, they managed it, and they
sold it five years later ideally at a big profit.
That's a great business. You can make a lot of money.
Pretty risky, but you know it created a lot of
billion dollar fortunes. But there is a limit on how
many companies you can buy. And these firms have realized
that they have such expertise in negotiating valuation, understanding businesses
(37:32):
and business models and just being creative generally that the
credit markets are just much bigger. And you couple that
with the idea that the banking sector has undergone like
massive systemic changes post financial crisis, and those businesses are
much more constrained and complicated and not equipped, you know,
maybe for like the modern capital market. So they have,
(37:53):
for lack of a better phrase, use regulatory arbitrage to
encroach into every aspect of lending. And that is a
lot them to become trillion dollar managers. And that is
like a sea change. Whether it's good or bad, too
soon to say, but you know, Apollo is the clearest
example you know from whose heritage is in credit, coming
out of Drexel. But in fact, you know, credit markets
(38:16):
are much deeper, much wider, and there's just much more
opportunity to build a massive firm and that's.
Speaker 2 (38:21):
What they're doing, all right, Suji, thank you so much
for coming on all thoughts. Truly the perfect guest, and
I cannot recommend your book enough, So everyone who's listening
definitely go check that out if you haven't done. Right Joe,
(38:45):
I thought that was so good, and I feel like
I have a lot more clarity about what's going on now.
I did think that the social aspect that Suji brought
up is really interesting because, like I, okay, obviously cove
lights became more of a thing, and then you had
higher interest rates in recent years, and so more companies
were under pressure and maybe they got more creative and
(39:07):
how they're raising capital. But I do think like the
difference or the change in social behavior on the part
of investors is also a big part of the story,
and so I guess the question is whether or not
it could change again. To Sijit's point about maybe having
investors team up and have their own contracts about how
they're all going to work together and things like that, no.
Speaker 4 (39:29):
I thought it was there are some really interesting social
questions arising out of that. And you know, I'm not
a lawyer, but it does not. So I'm biased because
I'm not the beneficiary of this trend. But it does
not seem great to have a ton of, you know,
human hours devoted towards the definition of and or or
(39:52):
things that were We all thought we knew the definition
of et cetera. But actually, technically, if you look at
and or, then the second one has to be in there,
because that's how I've always read it too. But maybe
we thought it meant something else, or maybe we just
thought it meant and whatever.
Speaker 2 (40:07):
Hire Joe for your litigation.
Speaker 3 (40:09):
I'm glad you brought this up.
Speaker 4 (40:10):
This has always bothered me so and it's interesting to
think like it's actually eating into the returns these legal costs,
that it actually even setting aside an incident of credit
on credit or violence, or even setting aside an incident
of bankruptcy, that it would eat into returns just because
of how much you're paying the law firms to go
(40:30):
over every one of these legal documents.
Speaker 2 (40:33):
It is crazy also just to think about like the
amount of brain power that's being spent on debating this.
And again that's something that comes through in Sidjet's book,
like how much people are thinking about this, and it
certainly comes through in the Argentina book. Just how like
mentally taxing and time consuming sorting the stuff out is.
Speaker 4 (40:54):
I thought it was also a really interesting point about
the sort of I don't know if it's like dis
economies of scale from capital efficiency. Right, So you have
all of these different instruments. You have equity, you have
junk bonds, you have all the you know, super plus whatever,
and individually, each one of these transactions is designed to
be the most capital efficient to align the company's borrowing
(41:17):
needs with the investors' needs. But then you end up
with this sort of you know, Frankenstein's monster of a
capital stack. And in the event that that has to
be unwound, that is it's like a tail risk, right, Yeah,
merges that in the event that has to be unwound,
it'll be a much costlier process than had it simply
been equity and bonds or something like that.
Speaker 2 (41:38):
Yeah, I mean there can be like a parent company,
an operating company, like convertible bonds, the loans, preferred stock,
like it can go on and on and on, and
someone has to go through all of that. Uh, Okay. Well,
on that note, shall we leave it there?
Speaker 3 (41:53):
Let's leave it there.
Speaker 2 (41:54):
This has been another episode of the All Thoughts podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 4 (42:00):
And I'm joll Wisenthal. You can follow me at the Stalwart.
Follow our guest Sujit in Depth. He's at s in
Depth and check out his book. He is the co
author of The Caesars Palace Coup, came out in twenty
twenty one. Follow our producers Carmen Rodriguez at Kerman Erman
dash Ol Bennett at Dashbot and Calebrooks at Kale Brooks.
Thank you to our producer Moses Ondam. More Oddlots content,
(42:22):
go to Bloomberg dot com slash od loots, where you
have transcripts, a blog, and a new daily newsletter and
you can chat about all of these topics twenty four
to seven in our discord Discord dot gg slash od loots.
Speaker 2 (42:33):
And if you enjoy odd Lots, if you like it
when we dig deep into creditor on creditor violence, then
please leave us a positive review on your favorite podcast platform.
And remember, if you are a Bloomberg subscriber. In addition
to getting our new daily newsletter. You can also listen
to all of our episodes absolutely ad free. All you
(42:54):
need to do is find the Bloomberg channel on Apple
Podcasts and follow the instructions there. Thanks for listening.
Hosts And Creators
Joe Weisenthal
Tracy Alloway
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