June 20, 2024 • 44 mins
Up to a quarter of Europe’s high-yield borrowers can’t afford to pay the current high interest rates to refinance debt that’s coming due, according to alternative asset manager Arini. “The market has been very active in refinancing these companies but we still have a lot to do,” says Hamza Lemssouguer, founder and chief investment officer of Arini, in the latest Credit Edge podcast from Bloomberg Intelligence. For as much as 25% of the market, “it’s just impossible to afford the current interest rates,” Lemssouguer tells Bloomberg News’ James Crombie and Giulia Morpurgo, and Bloomberg Intelligence Senior Credit Analyst Tolu Alamutu. Also in this episode, Lemssouguer and Alamutu discuss challenges in the commercial and residential real estate sector. And Lemssouguer talks about how to invest in debt collectors.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:18):
Hello and welcome to The Credit Edge, a weekly markets podcast.
My name is James Crumbie. I'm a senior editor at Bloomberg.
This week, we're very pleased to welcome Hamsa Lemsiger, founder
of a Renie, a specialized alternative asset manager focused on credit.
How are you, Hamsa?
Speaker 2 (00:31):
Very good, always good to be here. Thank you for
having me.
Speaker 1 (00:34):
Thank you so much for joining us today. We're very
excited to have you on the show. And to Julia Morpurgo,
who covers distressed debt from Bloomberg for Bloomberg News in London.
Welcome Julia, Thank you. Also delighted to see Tollu Alamutu
with Bloomberg Intelligence.
Speaker 3 (00:46):
Hello Tollu, Hello James. Great to be here as always.
Speaker 1 (00:49):
So credit's getting exciting again. Investors are piling back in
chasing the highest corporate debt yields in years. It's a
golden age, or so we keep hearing, and private credit
in particular is hot. Most people love it, but there
are some big critics, like Jamie Diamond, who expect it
to blow up after very swift growth over the last
few years. Debt spreads are tight, You're not getting very
(01:10):
much compensation for the risk of default or downgrades and
corporate debt. On that note, companies that took on a
lot of debt when rates when near zero are coming
under a lot of pressure, not just the small ones.
We're seeing some significant stress in large capital structures like Altes,
which looks likely to force losses on creditors. And there
are some other big distress situations such as Atos and
Thames Water that are still ongoing. Creditor on creditor violence
(01:33):
is becoming more prevalent. Distress debt markets are getting tougher
over all, though there seems to be a fair amount
of complacency in market pricing given how much we all
have to worry about debt defaults, commercial real estate stress, war, geopolitics.
France is getting messy, and everyone's loaded up on US
assets going into a very noisy presidential election. So I
want to start there, Hams A. We're in Europe. You're
(01:54):
stomping ground for listeners in other regions who think Europe
is too small, to a liquid to risk in, too
complex compared to the US. What's the appeal right now?
Why for credit markets? Why should people think about Europe more?
Speaker 2 (02:06):
Yeah, thank you a lot to consider. I'll try to
be helpful, but it's a very interesting start. Look, Europe
has been always considered very small versus the US. It
was small, but it changed over the last twenty years.
To give you some numbers, European leverage finance, which is
a mix of high bonds and loans, used to be
around seventy billion seven zero outstanding notional and today that's
(02:28):
over seven hundred billion, So the growth was a factor
of ten x. At the same time for the last
twenty years, the US market grew by a factor of
three and a half x. So Europe clearly outgrew the
US market. And all of that was done at the time,
as you said, when rates were negative, and I think
it's very important to go back and highlight what was
different in Europe versus the US over the last fifteen
(02:48):
twenty years. That allowed for the market to develop. What's
different now and what's going to happen we think in
the future. If I look in the last fifteen years,
the ECB policy was very different to the US. Both
were accommodative, but Europe had negative rates, the US was positive,
was always positive. The ECB purchased corporate investment grade bonds,
(03:10):
the US only did that after COVID, or for as
a measure for COVID. And I think those two factors
are really important to understand the risk capitite that developed
in the market. Those vicious at times you destroyed capital
by doing nothing. You never destroyed capital by doing nothing
in the US, So that's already pushes you to take
risk just to preserve your money. To keep your capital,
(03:31):
you had to take risk, which is not the nature
of fixed income. And then the second order is by
buying investment grade debt, they pushed the yield of investment
grade bonds below one percent for many, many years. And
as you think who are the investors in Europe, we're
talking about savers, so mainly pension funds, insurance companies. They're
(03:52):
used to buying ig investment grade and generating three, four, five,
six percent over the last decades, and all of a sudden,
that market is now paying one percent. So how can
you generate your cost of capital which is often above
four percent? To these institutions, you had to take more risk,
and they took more risk by borrowing to these high companies.
(04:13):
And I think that happened at the same time as
banks had a lot of debt to offload. If you
think about European economy in the nineties or early two thousands,
it was funded by banks. If you're a French business,
you went to a French bank. If you're a German business,
you went to your German bank. And after GFC capital
became a lot more expensive, banks had a lot of
debt to offload to syndicate, and that was met with
(04:35):
a lot of demand from pensions, from insurance, from the buyside,
and that's how the market grew from seventy to seven
hundred billion and created this big asset class that's now volatile,
that's now the subject of these headlines.
Speaker 3 (04:45):
That's an excrudinary, useful introduction. Thank you so much, Hamza.
But one of the key things that we've been dealing with,
I guess in Green Bank Intelligence is all the headlines
around France, and I guess it goes to the point
on volatility that you mentioned. So there's all this talk
about the search to the right. I guess in some
places it's also concerned about search to the left as well,
(05:06):
I should say far right. Rather. Is that something that
you think that European investors are prepared for, or do
you think that maybe people shouldn't be concerned about the
political headlines that we're getting more and more of now.
Speaker 2 (05:20):
Of course, I mean it's I think we're almost COVID
was very interesting because the market became immune to negative news.
It takes a lot to move the market now, and
we're living in a market in a world where we
have a lot of risks from geopolitically, risk, economy, risk,
inflation is very volatile, and we're just thinking what's more important.
In Europe particularly, we've seen Brexit. We've seen how long
(05:43):
it took and how uncertain that is. I mean, it's
been eight years since the initial vote and people are
still trying, all of us to figure out what are
the impacts. It's still not clear. As you think about politics,
it is absolutely very important. We've seen the UK in
September twenty twenty two, in October with the budget problems
in the UK impossible. We see that is it with
the left or the right or both in front? Very possible,
(06:05):
and I think these type of risks are we live with.
It is just very hard to know which one will
materialize more than another. And as investors, we prepare for
different scenarios because really everything can happen, and we think
about stress testing our positions, stress testing our analysis, but
not needing to depend on these things. And that is
why we have been avoiding sectors that are highly political,
(06:27):
like utilities or very stressed banks, because then the regulator
that can be influenced by the politics might influence your
recovery and we don't like that.
Speaker 4 (06:38):
I'm just interested, obviously, like taking the political factor into account,
taking the macroeconomy and the financial health of single corporates.
How are you seeing the European corporate high yield market
right now and how are you positioning yourself to kind
of trade that thinking?
Speaker 2 (06:59):
I think, Look, what's importance is, yeah, the market grew.
Another thing that is very important. We said, yeah, it
grew from seventy billion to seven hundred billion between bonds
and loans over the last fifteen to twenty years. The
second thing is all of these capital structures were put
in place at a time when rates were negative and
spreads were very tight. What does it mean? It gives
you the wrong or false sense of comfort that you
(07:20):
have a lot of money and that you can afford
a lot more debt. And that's what companies have been
doing over the last decade is push the leverage a
little bit more because you can afford it because rates
are stable, spreads our stable, and any episode of volatility
we had even COVID was very short lived, so companies
had time to access the market back again. And so
that increasing leverage obviously pushed MNA volumes. We had a
(07:42):
lot more m and A, and we had a lot
more DV recaps, and the market was extremely active. The
issue is, particularly in Europe, we're now moving from a
world where high yield debt. Think about your average single
BEE used to be funded at three and a half percent,
today is probably above eight percent, and that means that
your average single B company is more than doubling its
(08:04):
interest expense. And as we think about when does that happen,
because we've heard a lot of chatter around why is
the economy is still solid? Why our company is not
falling over when rates move from zero from negative to
four or five percent, And the reason is, if you
have a fixed debt, you don't necessarily see the impact
of those rates volatility until you have to refinance. And
(08:27):
we've seen it's been six nine months that the market
has been very active in refinancing these companies, but we
still have a lot to do. We have about half
of the market is mature in the next three years,
and as companies go through that exercise, they'll have to
start paying higher interest if they can afford it. So
we're seeing, to your point, the health of the market,
we're seeing two markets. We're seeing a market where eighty
(08:49):
percent of the companies need to refinance. They have to
pay two three times more than they paid in the
previous vintage, but they can still afford it, and that's
what the new issue market is about today. And then
we're seeing another tale of probably twenty twenty five percent
of the market where it's just impossible to afford the
current interest rates, and it's actually even very difficult to
(09:10):
afford any small deviation from the initial interest rate that
they paid a few years ago. And I think this
is the dynamic that we have now. We really have
two markets, one market credit risk limited and one market
probably twenty percent twenty five percent very risky and trading
at the press levels. However, when we think about the
impact of that on other asset classes, for example equity
(09:32):
or other things, companies have to pay a lot more
now and so there is a lot less money available
for capex, there is a lot less money available for equity,
for shareholder distributions, and so a lot of the cash
flow generation, even for safe companies, has to go to
pay the firstly in debt and then the unsecured debt,
and then we'll see what's left for other activities.
Speaker 1 (09:53):
But to Julius question, how do you use an investor
take advantage of that? I mean, the performing stuff is
very very tight, you're not getting much. The other stuff
that's very stressed and distressed looks like it's you know,
pretty dangerous. But you know you're coming in as offering
rescue finance, you breaching them? What you what are you
doing an invested to exploit that situation?
Speaker 2 (10:11):
Okay, from this tight stuff, as you said in credit,
you know what you can get and when it's tied,
you know that you're not going to get much. Be
long and that has been a good hunting ground for
us on the short side because you can, obviously if
you hit the company six nine, twelve months before negative surprise,
before change dynamic in the industry, before a margin dilution,
(10:32):
then you're able to benefit from that single big company
going to triple C and then suffering those that repricing.
On the longside, we're focused on that twenty percent of
the market that is trading at the distressed or stressed
levels and focusing on ones that have ways of dealing
with those maturities. And by the way, even if there
is a destruction of capital from par you might pay
(10:54):
a lot less than that, you can still make money.
So we're not looking we're not private credit in that section.
We're not providing par capital. We're buying securities at a
fairly discounted price, so that even if there is a
heavy discount, we're still making significant total return. And our
focus there is really downside underwriting. If we're paying below
what we think is the fundamental downside, then it's only upside.
Speaker 1 (11:18):
And how do you shoot? Is there enough liquidity in
the CDs the CDX to do that sort of trade.
Speaker 2 (11:23):
I think what's been happening over the last few years
is the bond market became a lot more liquid for shorts.
We're seeing a lot more institutions lending their portfolio, which
means that you can short something that the US market
had for many years. European market took some time to
develop it, but I think banks did a very good
job in prime brokers did a very good job at
bringing inventory from different investors, from different mutual funds and
(11:48):
making it available to the market.
Speaker 3 (11:50):
Can we maybe go back to something that you mentioned
about sectors, So you said you are a little bit
cautious on utilities and maybe some of the smaller banks,
and are there other sectors that you think people should
be avoiding at this point, and then on the flip
side of that, other sectors that you think, you know what,
maybe these sectors are a little bit over sold. I
know that, for instance, you've hired somebody recently in real estate,
(12:13):
structured credit and so on. Is that the sector that
you think has significant opportunity?
Speaker 2 (12:19):
Yeah, okay, I think for us we never we rarely
take a view on the sector as a whole. So
everything we do is bottom up. We have different vehicles.
In some vehicles were required to be neutral or close
to neutral, so we have long short positioning, and in
other vehicles we have less constraint. And then we can
be a private credit provider, We can be a stressed investor,
(12:42):
or can be a performing investor. And the sectors that
we see are very busy. If you look at two
years ago, it was mostly consumers with the cost of
living crisis. There was a lot of confusion in the
system about which companies will be able to pass through
the cost to customers, which companies will probably lose market share,
and we companies have enough assets and cash flow to
defend their position in that tough time. Today, definitely, real
(13:06):
estate is something that is a big question mark and
we're seeing room for significant dispersions. So we've been hiring
and building that team.
Speaker 4 (13:14):
As you said, just I know you mentioned you obviously
never take a sector view of things. You look at
companies one by one. But there is a sector which
has been in the spotlight as many issuers are trying
to adjust their maturities and you know, the market has
become more competitive and margins have gone down, and it's
the that collection sector. So just wondering, you know, your
(13:37):
view on that collectors and what's happening all across the
spectrum with them in Europe.
Speaker 2 (13:43):
Yeah, I think that collectors is one of these sectors
that is complex. It is not your usual telecom company
where you can say subscribers are doing why in our
pool is here? So I can understand the revenue trends.
It is a little bit more complex than most sectors
we see in leverage finance, but from a creditor's lens,
we get comfort from the asset coverage. Dead collectors often
(14:07):
have a portfolio of non performing loans which we can
put a value on, and that really makes for our
downside scenario, and that's how we underwrite the downside case.
Whereas many other industries that probably don't have as much
complexity or volatility, they tend to have limited asset base
and become very hard to unteraction with downside. So whenever
(14:28):
we position or look to position, we think about our
protection as creditor, not necessarily as an equity holder. And
that's where really there's disconnect is when you look at
a company, you might think it's a good company, it's
a bad company, But what makes a good company for
creditor is not necessarily what makes for a good company
for an equity holder. The equity wants growth, the equity
(14:48):
wants a good story, whereas the creditor wants asset protection.
The creditor wants protectability, and we can get that from that. Collectors.
In some cases we.
Speaker 3 (14:58):
Talked about real estate a little bit earlier, and obviously
that's a sector that is extremely asset rich and also
obviously very highly leveled in some instances. But within real estate,
one of the sub sectors that I guess has got
a lot of focus is offices. What your thoughts there,
(15:19):
you know, given that everyone is still a little bit
concerned about the work from home trends and vacancies and
prime versus non prime, do you think that there are
single name opportunities there or do you would you class
that in the twenty to twenty five bucket that you
were saying of credits that may not quite make it?
Speaker 2 (15:35):
Basically, yeah, I think you know, real estates has gone
through different cycles over the last two and a half years.
Initially all redistates was panished, and the reason there was,
you know, we had a discount curve that was moving
aggressively from negative to plus four or five. Lending has
stopped from banks. Visibility on valuation was very difficult. But
(15:57):
also there was the question of you know, office space, commercial,
what can you fill? So there are really two problems
with really state. One of them is assets. Can you
fill your really state? If it's residential In Europe, most
times it's okay you know, you can still get tenants
in commercial you have a big division for some commercial
you can get tenants for office space in more complicated
(16:20):
and more difficult spots, you have a challenge fit in
that space and increasing the rents. So the first step
is we're focusing on assets that don't have a problem,
which means they have good tenancy ability to increase the rents,
and that is a starting point, and then it becomes
really balanceyet exercise, and that's where we have been involved
in when we see good opportunities where you can size
(16:42):
the debt and decide what is the next level of
LTV that is sustainable with the current yields and with
the rates being stable for now six eight months, we're
able to do that for some assets.
Speaker 3 (16:54):
Just a follow upon what you said about sort of
chasing the quality assets. So for displeasure, I'm primary real
estate analyst, so I'm always going to be sort of
a little bit positive on the sector, or more positive
than others, I guess. But one of the issues I
guess is that everybody seems to be chasing these sort
of prime assets, best in class and so on. So
wul do you not say that that's somehow reflected in
(17:16):
the valuations that you see, and those sorts of issuers
are allowed higher LTVs and so on. But the mid
to lower tier, where I guess fewer people are looking,
may be more attractively priced. Or do you think that
it's just not worth straying away from prime?
Speaker 2 (17:32):
I think prime is a really big question mark depends
what you mean by it. For US, prime means you
have visibility on tenants. You know you can get tenants
and residential, think of residential in big cities. We're happy
to price a high LTV situation when the tenancy and
the quality of the returns are predictable and we can
cize the balance it as a result. Anything that is
(17:55):
lower than that we have been staying away for now
because one rates volatility is still not over. But also,
you know the trends that you talked about, work from home,
Brexit in the UK, the US, the move from west
coast to east coast. There's a lot of trends that
are happening for the asset that make it very hard
to combine that bad asset. That balance sheet makes it
(18:16):
very tough exercise.
Speaker 4 (18:18):
I'm just curious, staying on real estate, how do you
invest in the sector, do you invest mostly via public markets,
do you have a private strategy as well, and what
are the type of returns that you're ideally targeting?
Speaker 3 (18:31):
And to follow up on that, one of the issues
that has come up in some of our conferences has been,
I guess, the toggle if you like, between private and
public financing, especially in real estate, because the aims of
the two parties might be slightly different. The terms that
they look at in terms of like maturities or holding periods,
(18:53):
I guess can be different. How do you deal with
that when you're also on the public side, bondholder and
so on, and maybe may not have some of the
information that perhaps people on the private side may be
privy to.
Speaker 2 (19:07):
You're not looking at asset by assets. You're looking at
a corporate level, just like any corporate debt. We're seeing
it as in the same process of any corporate debt.
On the writing, we look at the revenues, we look
at the profitability, and we look at the asset coverage
at an aggregate level. Whereas most private investors will likely
(19:28):
in real estate focus on asset by asset, so we're
going to tend to focus on bigger companies, larger caps
and catad is driven investing with shorter dated maturities and
less granular on asset by asset.
Speaker 3 (19:41):
I have to too quick follow up questions on that.
The first is, when you're looking at that sort of
public lending, are you then saying it's mostly unsecured? That's
the first question. And then in terms of returns, what
would you consider sort of adequate or even attractive for
real estate at the moment, because obviously the sector did
extraordinarily well at the tail end of last year as
(20:01):
a whole in Europe, so that those yields are not
are still a little bit high, but not where they
were towards the end of last year. So what kind
of returns do you think real estate maybe could generate
this year?
Speaker 2 (20:13):
I think from today it's definitely a lot of the
returns have been made already, and we've participated in those returns,
but we're not looking at high yield headline yield. It's
more the spread compression and the way you make money
in secondary bonds. If you buy an eight percent bond
that titans to five or four because of an upgrade
because of an asset sale, if the duration is long
(20:34):
enough then the total return can be significant and you
end up making fifteen to twenty percent total return of
a bond that had the headline yield of eight nine percent.
And that is how we targeted the sector and has
been profitable for us over the last six to nine months.
Speaker 3 (20:49):
You talked there about catalysts and so on. I guess
one of the issues within real estate before we sort of,
I guess, take a step back to it as a whole,
is that some of those positives that you're talking about
have probably transpired already. So would you still say that
those opportunities still exist, as in, you know, the big
(21:10):
upgrades and so on, especially given the rate cuts which
were supposed to be the big catalyst where the relic
state sector haven't really transpired in the way that people
may have been anticipating.
Speaker 2 (21:22):
I think, yeah, six months ago is a lot more
interesting than today, for sure.
Speaker 3 (21:25):
I think we were going to take a step back
and just considered maybe credit as a whole. So we
talked a lot about, you know, real estate returns and
so on. Would your comments regarding real estate also apply
to credit as a whole or do you think that
it's more of a special case.
Speaker 2 (21:40):
I think From a passive investor perspective, credit is a
lot tighter than it was six months ago, nine months ago,
and that was a result of inflows. More certainty around
the rates of volatility gave investor confidence to invest in credit,
because two years ago we were moving from zero to
five percent. Today most investors have conviction that rates vole
(22:04):
is going to be lower and maybe we're going to
end up at six, maybe at four and a half.
We're not going to end up. We're unlikely to end
up at ten percent rates, and that confidence is what
drove a lot of the inflows, and those inflows drove
spread tightening. So from an investor passive investor perspective, it
is a lot less interesting than it was a year
ago or ear and a half ago, and spread we're
(22:25):
at four to fifty bases points five hundred basis points,
and we're positioning ourselves more as catalysts driven investor from
bottom up in situations that are a little bit more
complex and less market driven kind of return. So the
returns we think going forward will hardly be driven by
credit being cheap. They'll have to be driven by individual
(22:46):
situations where you have an edge, either a complex sector
you alluded to that Collectors which is now has been
seeing a lot of volatility over the last two to
three months, and that can drive a lot of total
return going forward. In Europe, particularly, twenty percent of the
market is seeing high level of dispersion, so we are busy.
Speaker 4 (23:07):
Yeah, I'm just curious obviously. You know, since the beginning
of the year, which is something that James touched upon
and you also touched upon, we've seen strong credits in
the aield market coming to the market, refinancing with no issues,
high investor demand. Maybe even names that you know, a
few years ago we're trading at a big discount. But
we've also seen you know, I think some issuers and
(23:30):
some large ones especially kind of stumble onto their maturity
wall and having to rethink completely about their capital structure.
As an investor in the aield market, like, how do
you like, how's that been to kind of try to
navigate around those names and try to position maybe take
advantage of the sharp oper prices that we've seen.
Speaker 2 (23:50):
Yeah, I think for our firm particularly, we've been organized
by sector. Our senior analysts have been covering their sectors
for sometimes twenty five years, and that allows for continuity
of intellectual property. What that mean is when that situation
becomes volatile, when it becomes risky or perception of risk
(24:10):
becomes higher for the market. We've looked at it for
some five years, ten years, fifteen years, twenty years, and
we have all the research done before the event, so
when the volatility starts, when the company needs capital, we're
not outsider to the situation. And I think that's what
allows us sometimes to be a first mover in these situations,
because you know, our dead collector analyst has covered these
(24:32):
sector for eleven years, our financials analysts have covered these
sectors for over twenty five years, and that allows us
to move quickly, and sometimes moving quickly means eliminating some
situations too because there are too risky, is hard to
get comfortable with the downside, and as the volatility kicks
off and a lot of forced setting happens, which is
very cute, as you've seen in Europe and you're reported
(24:53):
on many times, the ability to move quickly allows us
to get our size at the price that is very
interest seen before a lot of the credit investors come
up with the same conclusions as we do, and really
being first mover you can do it when you have
the intellectual property ready, and you can have the intellectual
property ready when you have continuity of IP. We have
(25:14):
very limited turnover in the analyst team, and we have
a long history of covering these credits and being prepared
to move or not or decide to stop the work
because you know, doing the work and not investing is
also a negative carery for the analyst team. If you
spend two months on a situation and you don't invest,
it's a time that is wasted that you cannot get back.
So the ability to decide where we spend time and
(25:35):
having high heit ratio a lot of confidence allows us
to position at interesting prices.
Speaker 1 (25:41):
But in really basically terms of running a credit fund,
you basically just want to avoid losses, right You just
don't want to take any principal loss. A lot of
these big names in that we've been talking about, they're
blowing up. They're inflicting losses on traders. Then there's sorry
on creditors. Credits are also fighting against each other, which
is making the situation more complex. How do you avoid
(26:02):
these real trouble spots that we're seeing right now, and
how do you avoid losses?
Speaker 2 (26:07):
I think it's important to highlight that you lose from
the price you enter. If you bought a bond that
in the primary market, you bought it at par or
close to par. Any loss is a loss. However, as
secondary market develops and a few months, a few years
after the initial issues, these securities that we're trading to
(26:27):
their investing in today have been issued over the last
five seven years close to par, and the price changes
with the perception of risk, with mature news on the sector,
on macro, on the country, on the company itself, and
as those developments happen, we look to position by paying
below what we think or what we have confidence on
(26:48):
being the downside valuation. And I think this is where
it's important. When you're lending. If you're a bank, you're
lending at par, so any loss is from your principle.
When you're buying security at four at fifty cents to dollars,
even if there's a big haircut of thirty cents, which
is a lot, you're making twenty cents on something you
paid fifty four, so that is a forty percent total return.
(27:11):
I think this is the math we're looking at, is
avoiding being involved too early in some of the risky situations,
and we can do that thanks to that sector coverage
we have and that continuity of intellectual property that were
built in our firm.
Speaker 4 (27:24):
Jumping in, I'm interested in something that James mentioned earlier,
which is, you know, kind of the notion of creditor
and creditor violence more aggressive liability management. That's been a
trend in the US for the past few years, but
now we're seeing it spilling over in some European situations.
You know, sometimes creditors are protecting themselves preemptively and signing
(27:47):
these creditor corporation agreements. How are you thinking about this
concept in general, and how are you trying to protect
yourself as a credit investor in a lot.
Speaker 2 (27:56):
Of these situations. I mean, just to give background, covenants mean,
you know, the creditors have rights and protections, which sometimes
it's a definition of the fault. What constitutes a default.
If you go back fifteen to twenty years ago, default
was not just not having money to pay your interest.
It was a lot of things like having too much leverage,
(28:16):
like having too little cash today or recently with the
negative rates environments and covenant light that that was issued
in that time. Default means almost just missing your interest
payment or not being able to pay your principles. So
companies can do a lot before their default, and they
(28:37):
can use that week covenant package to take collateral out,
raise additional debt, use a creditor class against another to
kind of try to extract some discounts. And we've seen
the market. We've seen those techniques and moving in the
US earlier than Europe, so they've been taking place in
the US, I would say for the last three to
four years, and it's been happening in here for the
(28:58):
last few months, as you've seen with large capital structures,
engaging in restructurings or targeting det reduction through exchanges and
sometimes coercive, sometimes friendly, and I think you cannot do that.
It can be defense mechanism, you know, these co ops
and working with different creditors, But for us, we see
it as something you need to do before investing. So
(29:21):
it is something you need to analyze before you invest.
It cannot be Hey, something is going wrong. I need
to call the lawyers. I need to figure out what's happening.
You have to call the lawyers before you invest. You
have to be prepared for the downside scenario before you invest.
You have to be in touch with your fellow creditors,
bank lenders for the situations before you invest. And when
these things happen, they are just one of different scenarios
(29:43):
that can play out. They shouldn't come at a surprise
because over levered companies will have to find ways of
dealing with their capital structures. So I think we're going
to see more and more of that.
Speaker 4 (29:52):
Yeah, and you know, when it comes to creditor creditor
and violence. Speaking to people in the market, I heard
that is something that you know, LP are also starting
to ask about think about. But I just wanted to
ask a more general question. You know, you obviously are
running your own fund. What are LPs looking for these
days that they changed their requirements? Do they want more disclosure,
(30:15):
more transparency? What is it that they want, you know,
to ensure that their money is invested well, especially actors
like sovereign wealth sons or state back entities.
Speaker 2 (30:26):
I cannot comment particularly on one type or another. I'm
not sure I'm the right person for that, but I
think in general rates are moving from zero to five percent.
So if you think about what should hatch funds or
investment firm deliver when rates are at five percent, it's
not the same thing as when rates for zero percent.
(30:47):
And I think that's the really big question is what
is the excess return we need above risk creer rate?
Now that risk creer rate is no longer zero, it's
five percent. I think that would be one consideration. The
second thing, and what allowed us to grow very quickly
is partnership. We are in a very transactional industry, but
if you take a long term view with your clients,
(31:09):
if you take a long term view with your colleagues,
you see the benefits very quickly. And I do think
that investors value that a lot.
Speaker 3 (31:16):
So you mentioned partnership, which is exactly what I was
sort of thinking of, but maybe in a slightly different way.
So obviously you do have a relationship with square points
at the moment. But one of the trends I guess
we're seeing in the asset management sector as a whole
is some forms of consolidation. But you also mention that
it's good to be sort of nimble and good to
(31:36):
be able to act quickly when you see an opportunity.
So how do you square those two things, as in
being nimble but also dealing with the fact that the
industry is consolidating in some ways. Basically so playing small
enough to act fast, but big enough to be relevant.
Speaker 2 (31:57):
I guess yeah. I think big structures benefits from the
fact that they have good operations, good counterparts, relationships, and
you get good advice on how you structure your business
to make it scalable, efficient and avoid beginner's mistakes. However,
you know, the way we organize our firm, we're an
open floor. I don't have a corner office. We all
(32:19):
sit next to each other, We communicate. We have pretty
flat structure, and that's what guarantee I really think. I've
seen organizations that are very small but still very bureaucratic,
and I've seen large organizations that still manage to keep
fairly flat structure. And that's what we're aiming to do.
Keeping communication, making sure that it's meritocracy, that junior talents
(32:39):
can speak up, can really share their ideas, that their
ideas are valued. And you know, we're in this city
and in this industry, meritocracy is very important. So it
is one of our most important principles.
Speaker 4 (32:51):
I think, you know, kind of going back to fund
management and the way you trade in this market. There's
been a spotlight in recent tiers on you know, how
hedge funds use leverage. How are you thinking about leverage
to which its standard user? Do you have like self
impose limit to it? Just curious from you know, fund
manager perspective, how you go about it.
Speaker 2 (33:13):
Yeah, I think these are in credit. You will not
see the most leverage in the market from a fund perspective.
We have a very moderate leverage or sometimes close to
none in different funds, but I think that's a fund
by fund basis and you have to position yourself as
an investor to see it.
Speaker 4 (33:31):
So there's no precise number to it, I guess no.
Speaker 2 (33:34):
And to clarify that there is a precise number that
I'm not sure I'll be able to share here, but
because it depends on the strategy, on the investor's requirement.
Speaker 3 (33:42):
But one of the things that you mentioned earlier was
the focus on research, which coming from Bloomberg Intelligence, is
extremely great to hear. You know, we have like five
hundred analysts here looking at various sectors, various industries, even
have people doing through legal work, I guess sometimes even
partnering with some of Julius team and so on. So
I think you know, I agree definitely that research is
(34:04):
extraordinarily important and doing the work is important as well.
But one of the issues I guess you faced the
analyst can face is that an opportunity a new name
sort of comes up. So are you able to act
quickly when it's a new name that maybe the market
doesn't know as well? Given what you said, is the
(34:26):
emphasis on deep analysis and deep single name analysis, or
do you think that sometimes you would sort of pass
over those opportunities because you haven't had the time to,
as you say, speak to the lawyers before stepping in.
Speaker 2 (34:41):
Yeah, I think we have a high bar from new
investments if we didn't know the credit for some time,
and we're happy to miss. Sometimes you have to be
disciplined because we just don't feel confident in underwriting the
downside because of lack of history the credit, lack of
understanding of the industry cycle, understanding of the balance and
off balance sheets agreement that the company has. And sometimes
(35:04):
there are things that are tempting for the short term
that we just avoid because the research is not enough,
and we're just happy to miss on those opportunities.
Speaker 4 (35:13):
I think in the past that you know, we've seen
from ARENI are really taking high conviction trades going in
with large positions, and I'm just is this kind of
the signature trade of the fund do you Is it
the one that you mostly use? Do you take a
more you know, do you take a different approach in
other situations? Is this a trade that can work long
(35:37):
term in the market? How are you thinking about that?
Speaker 1 (35:39):
Yeah?
Speaker 2 (35:39):
I think you know, in every strategy you have high conviction,
medium conviction, less conviction, all good trade, but you have
different levels of conviction. We have over one hundred positions
just to give you, so it's highly diversified. But obviously
you have different levels of conviction. What ends up being
communicated usually is the highest conviction ones, but it is
(36:01):
not you know, like any strategy, we don't have only
high conviction positions or size as such. We have different
levels of positions.
Speaker 3 (36:09):
So, I mean, you talked about over one hundred positions,
so I'm just imagining over one hundred documents to go
through over one hundred different spreadsheets with multiple tabs and
so on. One of the issues that's come up recently
again in the sector that I look at is different
ways of interpreting documentation, can you maybe talk about potential,
(36:35):
the potential for that happening where like maybe the issuer says, hey,
you know what, we haven't breached any of the terms,
but the investor might have a slightly different view. How
do you square that? Especially where as Julia was asking
you earlier, even within the creditor body, there might be
different views of whether or not the issuer has breached
(36:55):
certain covenants or whether there's been an event of deforce
or not. How do you think about that?
Speaker 2 (37:00):
Yeah, so to the number, we have thirty investment professionals,
of which fifteen are analysts, And so when you think
about how many positions per analyst, is not that much.
And that's what matters is really the focus. We're giving
every position and every model, every legal analysis, every coverage,
and that is a relatively concentrated way of thinking about
(37:23):
it because it's a big team. Even if the funds
are diversified and the strategy is diversified, analysts have time
to take a deep dive for the legal side, the
game theory, and as you said, sometimes it takes hundreds
of pages to read from the legal side, many many
hours of calls, and a lot of modeling, in scenario analysis.
(37:44):
And I think what's important is that again continuity of
intellectual property. Not to repeat myself again three times, but
really the ability for the same analysts to cover these
credits over many, many years allows us to really be
able to develop these when times change, when there's an
inflection one way or another, we're able to revisit our models.
(38:05):
We're able to update them. Instead of starting from zero.
If you always have to start from zero, it is
a difficult job. You know, you start from zero. Okay,
today it's going to be a TMT company to the
hit tomorrow is going to be a bank that heastor
is going to be a cruise line. That is why
we prefer the sector coverage, even if at times some
sectors tend to be boring and nothing is happening, but
the analysts are still tasked to do in the work
(38:27):
doing the research. We think about them as R and
D not just risk takers, but also sometimes it's developing
research that why it might not be useful today, it
is going to be useful next year, in two years.
And that's what's important in the ren is that taking
that long term view of the research we're doing, not
about the next trade.
Speaker 4 (38:46):
So can we ask you what's your highest conviction trade
right now? I mean, even without names, just some details
of it.
Speaker 2 (38:53):
I think European credit is a lot is happening, and
what is exciting is spreads are extremely tight, so there's
no easy money, because you know, the easy money is
the market, and the market is extremely tight. It's close
to levels we've seen in QWI. But within that, we're
having a high level of dispersion, a lot of different
(39:13):
views on some names that are tight that we think
are risky, or some names that are at distress levels
as stress levels that need new capital, or where securities
and secondaries are interesting and we think they're going to
be catalyists for positive repricing. So we're very busy. That's
what I can tell you.
Speaker 3 (39:30):
That's great to hear. I mean, obviously, the fund started
a couple of years ago. Now it was an especially
challenging time, So kudos for getting that done. Despite what
was happening in twenty twenty two twenty three, as we
were saying was a better year, this year has been
a little bit lukewarm. So in that context, I know
you're saying that there's sort of still opportunities to consider
(39:52):
going forward. But what would you say worries you the most?
What would you say keeps a RENI people up at
night at this point? Is it something on the political side, geopolitics,
or is it more single name stresses that you would
say are the concern.
Speaker 2 (40:09):
We always have concerns or credit investors. We only think
about the downside. I think, you know, for all of
us as a group, we're really concerned about the politics. Obviously,
things are changing very quickly and we always have to
assess what is the impact of that, and it's somewhat
outside our control. And what we're trying to do is
just focus on industries that are as decorrelated as possible.
(40:31):
That is why we avoided a lot of the utility situations,
we avoided a lot of the financial institutions that are
highly political. We try to focus on things that we
can predict, control or as best as we can. But
the politics is really definitely gee. Politics in general are
very challenging for us, and we try to react, we
try to stress tests, but we don't position on and
(40:54):
we don't bet on that For me personally, is clearly
the talent only as good as we are or where
we are. Thanks to our team and keeping the team together,
keeping the senior team, interacting, keeping that long term view
with our investors, with our colleagues is a priority for me,
and that is really what keeps me up at night,
is keep my colleagues happy, keep them busy, keep them
(41:18):
intellectually challenged, and keep the atmosphere that we have. And
that's what we delivered and that's what hopefully will continue
to deliver.
Speaker 1 (41:26):
So we are the credit edge hands what is your edge?
What's the almost contrarian trade?
Speaker 2 (41:29):
Do you think our edge is really being in a
high transactional industry and still keeping the long term view
with our.
Speaker 1 (41:36):
People and with our clients, And how do you do that.
Speaker 2 (41:39):
Being principled integrity and having high standards internally and externally,
even if sometimes you know things are driven by short
term trends, we are focused on the long term. It's
tempting sometimes to be focused on the short term, but
we always think about the long term. We're a young
firm in many ways, and we want to be seen
(42:01):
as the long term firm that thinks about clients and
colleagues and has a very long term vision, not just transactional.
Speaker 1 (42:09):
And last y, I've got to ask about the parrots.
What's a lot about? Come on, tell us, tell us
what goes on there?
Speaker 2 (42:15):
It took some time. Yeah, so you know I. Reni
is the name of our firm, is a family of
parrots in Latin America, mostly Brazil, in the Amazonian forests.
And that's a passion of mine that started when I
was eight. So I was breeding parrots when I was
in Morocco, and then when COVID happened, I stopped doing that.
(42:36):
When I left Morocco when I was seventeen, studied in France,
came to the UK about ten years ago and started
again in COVID, started breeding parrots that are endangered for
conservation purposes. So we have a conservation effort of over
one hundred parrots with some of the most endangered parrot species,
(42:56):
and the effort is trying to reproduce them and then
hopefully or introduce them to the wide further down the line.
Speaker 1 (43:02):
Where are they in London?
Speaker 2 (43:03):
They are in Sorry, great stuff.
Speaker 1 (43:05):
HANSA. Lensiger, founder of Areni. It's been a pleasure having
you on the credit edge many.
Speaker 2 (43:10):
Thanks, thank you very much for having me and.
Speaker 1 (43:12):
Julia Moreporgo with Bloomberg News cheers.
Speaker 3 (43:14):
Thank you.
Speaker 1 (43:15):
Check out all Julia's scoops on the Bloomberg Terminal and
of course at Bloomberg dot com. And to Tolu ali
Muto with Bloomberg Intelligence, thank you so much.
Speaker 3 (43:22):
Great to be here. As always, thank you James.
Speaker 1 (43:25):
For more analysis read all of Tollu's great work on
the Bloomberg Terminal. Bloomberg Intelligence is part of our research department,
with five hundred analysts and strategists working across all markets.
Coverage includes over two thousand equities and credits and outlooks
on more than ninety industries in one hundred market industries,
currencies and commodities. Please do subscribe on to the Credit
Edge wherever you get your podcasts. We're on Apple, Spotify
(43:46):
and other good podcast providers, including the Bloomberg Terminal at
b pod Go. Give us a review, tell your friends,
or email me directly at jcrombiate at Bloomberg dot net.
I'm James Cromby. It's been a pleasure having you join
us again next week on the Credit Edge.
Hello and welcome to The Credit Edge, a weekly markets podcast.
My name is James Crumbie. I'm a senior editor at Bloomberg.
This week, we're very pleased to welcome Hamsa Lemsiger, founder
of a Renie, a specialized alternative asset manager focused on credit.
How are you, Hamsa?
Speaker 2 (00:31):
Very good, always good to be here. Thank you for
having me.
Speaker 1 (00:34):
Thank you so much for joining us today. We're very
excited to have you on the show. And to Julia Morpurgo,
who covers distressed debt from Bloomberg for Bloomberg News in London.
Welcome Julia, Thank you. Also delighted to see Tollu Alamutu
with Bloomberg Intelligence.
Speaker 3 (00:46):
Hello Tollu, Hello James. Great to be here as always.
Speaker 1 (00:49):
So credit's getting exciting again. Investors are piling back in
chasing the highest corporate debt yields in years. It's a
golden age, or so we keep hearing, and private credit
in particular is hot. Most people love it, but there
are some big critics, like Jamie Diamond, who expect it
to blow up after very swift growth over the last
few years. Debt spreads are tight, You're not getting very
(01:10):
much compensation for the risk of default or downgrades and
corporate debt. On that note, companies that took on a
lot of debt when rates when near zero are coming
under a lot of pressure, not just the small ones.
We're seeing some significant stress in large capital structures like Altes,
which looks likely to force losses on creditors. And there
are some other big distress situations such as Atos and
Thames Water that are still ongoing. Creditor on creditor violence
(01:33):
is becoming more prevalent. Distress debt markets are getting tougher
over all, though there seems to be a fair amount
of complacency in market pricing given how much we all
have to worry about debt defaults, commercial real estate stress, war, geopolitics.
France is getting messy, and everyone's loaded up on US
assets going into a very noisy presidential election. So I
want to start there, Hams A. We're in Europe. You're
(01:54):
stomping ground for listeners in other regions who think Europe
is too small, to a liquid to risk in, too
complex compared to the US. What's the appeal right now?
Why for credit markets? Why should people think about Europe more?
Speaker 2 (02:06):
Yeah, thank you a lot to consider. I'll try to
be helpful, but it's a very interesting start. Look, Europe
has been always considered very small versus the US. It
was small, but it changed over the last twenty years.
To give you some numbers, European leverage finance, which is
a mix of high bonds and loans, used to be
around seventy billion seven zero outstanding notional and today that's
(02:28):
over seven hundred billion, So the growth was a factor
of ten x. At the same time for the last
twenty years, the US market grew by a factor of
three and a half x. So Europe clearly outgrew the
US market. And all of that was done at the time,
as you said, when rates were negative, and I think
it's very important to go back and highlight what was
different in Europe versus the US over the last fifteen
(02:48):
twenty years. That allowed for the market to develop. What's
different now and what's going to happen we think in
the future. If I look in the last fifteen years,
the ECB policy was very different to the US. Both
were accommodative, but Europe had negative rates, the US was positive,
was always positive. The ECB purchased corporate investment grade bonds,
(03:10):
the US only did that after COVID, or for as
a measure for COVID. And I think those two factors
are really important to understand the risk capitite that developed
in the market. Those vicious at times you destroyed capital
by doing nothing. You never destroyed capital by doing nothing
in the US, So that's already pushes you to take
risk just to preserve your money. To keep your capital,
(03:31):
you had to take risk, which is not the nature
of fixed income. And then the second order is by
buying investment grade debt, they pushed the yield of investment
grade bonds below one percent for many, many years. And
as you think who are the investors in Europe, we're
talking about savers, so mainly pension funds, insurance companies. They're
(03:52):
used to buying ig investment grade and generating three, four, five,
six percent over the last decades, and all of a sudden,
that market is now paying one percent. So how can
you generate your cost of capital which is often above
four percent? To these institutions, you had to take more risk,
and they took more risk by borrowing to these high companies.
(04:13):
And I think that happened at the same time as
banks had a lot of debt to offload. If you
think about European economy in the nineties or early two thousands,
it was funded by banks. If you're a French business,
you went to a French bank. If you're a German business,
you went to your German bank. And after GFC capital
became a lot more expensive, banks had a lot of
debt to offload to syndicate, and that was met with
(04:35):
a lot of demand from pensions, from insurance, from the buyside,
and that's how the market grew from seventy to seven
hundred billion and created this big asset class that's now volatile,
that's now the subject of these headlines.
Speaker 3 (04:45):
That's an excrudinary, useful introduction. Thank you so much, Hamza.
But one of the key things that we've been dealing with,
I guess in Green Bank Intelligence is all the headlines
around France, and I guess it goes to the point
on volatility that you mentioned. So there's all this talk
about the search to the right. I guess in some
places it's also concerned about search to the left as well,
(05:06):
I should say far right. Rather. Is that something that
you think that European investors are prepared for, or do
you think that maybe people shouldn't be concerned about the
political headlines that we're getting more and more of now.
Speaker 2 (05:20):
Of course, I mean it's I think we're almost COVID
was very interesting because the market became immune to negative news.
It takes a lot to move the market now, and
we're living in a market in a world where we
have a lot of risks from geopolitically, risk, economy, risk,
inflation is very volatile, and we're just thinking what's more important.
In Europe particularly, we've seen Brexit. We've seen how long
(05:43):
it took and how uncertain that is. I mean, it's
been eight years since the initial vote and people are
still trying, all of us to figure out what are
the impacts. It's still not clear. As you think about politics,
it is absolutely very important. We've seen the UK in
September twenty twenty two, in October with the budget problems
in the UK impossible. We see that is it with
the left or the right or both in front? Very possible,
(06:05):
and I think these type of risks are we live with.
It is just very hard to know which one will
materialize more than another. And as investors, we prepare for
different scenarios because really everything can happen, and we think
about stress testing our positions, stress testing our analysis, but
not needing to depend on these things. And that is
why we have been avoiding sectors that are highly political,
(06:27):
like utilities or very stressed banks, because then the regulator
that can be influenced by the politics might influence your
recovery and we don't like that.
Speaker 4 (06:38):
I'm just interested, obviously, like taking the political factor into account,
taking the macroeconomy and the financial health of single corporates.
How are you seeing the European corporate high yield market
right now and how are you positioning yourself to kind
of trade that thinking?
Speaker 2 (06:59):
I think, Look, what's importance is, yeah, the market grew.
Another thing that is very important. We said, yeah, it
grew from seventy billion to seven hundred billion between bonds
and loans over the last fifteen to twenty years. The
second thing is all of these capital structures were put
in place at a time when rates were negative and
spreads were very tight. What does it mean? It gives
you the wrong or false sense of comfort that you
(07:20):
have a lot of money and that you can afford
a lot more debt. And that's what companies have been
doing over the last decade is push the leverage a
little bit more because you can afford it because rates
are stable, spreads our stable, and any episode of volatility
we had even COVID was very short lived, so companies
had time to access the market back again. And so
that increasing leverage obviously pushed MNA volumes. We had a
(07:42):
lot more m and A, and we had a lot
more DV recaps, and the market was extremely active. The
issue is, particularly in Europe, we're now moving from a
world where high yield debt. Think about your average single
BEE used to be funded at three and a half percent,
today is probably above eight percent, and that means that
your average single B company is more than doubling its
(08:04):
interest expense. And as we think about when does that happen,
because we've heard a lot of chatter around why is
the economy is still solid? Why our company is not
falling over when rates move from zero from negative to
four or five percent, And the reason is, if you
have a fixed debt, you don't necessarily see the impact
of those rates volatility until you have to refinance. And
(08:27):
we've seen it's been six nine months that the market
has been very active in refinancing these companies, but we
still have a lot to do. We have about half
of the market is mature in the next three years,
and as companies go through that exercise, they'll have to
start paying higher interest if they can afford it. So
we're seeing, to your point, the health of the market,
we're seeing two markets. We're seeing a market where eighty
(08:49):
percent of the companies need to refinance. They have to
pay two three times more than they paid in the
previous vintage, but they can still afford it, and that's
what the new issue market is about today. And then
we're seeing another tale of probably twenty twenty five percent
of the market where it's just impossible to afford the
current interest rates, and it's actually even very difficult to
(09:10):
afford any small deviation from the initial interest rate that
they paid a few years ago. And I think this
is the dynamic that we have now. We really have
two markets, one market credit risk limited and one market
probably twenty percent twenty five percent very risky and trading
at the press levels. However, when we think about the
impact of that on other asset classes, for example equity
(09:32):
or other things, companies have to pay a lot more
now and so there is a lot less money available
for capex, there is a lot less money available for equity,
for shareholder distributions, and so a lot of the cash
flow generation, even for safe companies, has to go to
pay the firstly in debt and then the unsecured debt,
and then we'll see what's left for other activities.
Speaker 1 (09:53):
But to Julius question, how do you use an investor
take advantage of that? I mean, the performing stuff is
very very tight, you're not getting much. The other stuff
that's very stressed and distressed looks like it's you know,
pretty dangerous. But you know you're coming in as offering
rescue finance, you breaching them? What you what are you
doing an invested to exploit that situation?
Speaker 2 (10:11):
Okay, from this tight stuff, as you said in credit,
you know what you can get and when it's tied,
you know that you're not going to get much. Be
long and that has been a good hunting ground for
us on the short side because you can, obviously if
you hit the company six nine, twelve months before negative surprise,
before change dynamic in the industry, before a margin dilution,
(10:32):
then you're able to benefit from that single big company
going to triple C and then suffering those that repricing.
On the longside, we're focused on that twenty percent of
the market that is trading at the distressed or stressed
levels and focusing on ones that have ways of dealing
with those maturities. And by the way, even if there
is a destruction of capital from par you might pay
(10:54):
a lot less than that, you can still make money.
So we're not looking we're not private credit in that section.
We're not providing par capital. We're buying securities at a
fairly discounted price, so that even if there is a
heavy discount, we're still making significant total return. And our
focus there is really downside underwriting. If we're paying below
what we think is the fundamental downside, then it's only upside.
Speaker 1 (11:18):
And how do you shoot? Is there enough liquidity in
the CDs the CDX to do that sort of trade.
Speaker 2 (11:23):
I think what's been happening over the last few years
is the bond market became a lot more liquid for shorts.
We're seeing a lot more institutions lending their portfolio, which
means that you can short something that the US market
had for many years. European market took some time to
develop it, but I think banks did a very good
job in prime brokers did a very good job at
bringing inventory from different investors, from different mutual funds and
(11:48):
making it available to the market.
Speaker 3 (11:50):
Can we maybe go back to something that you mentioned
about sectors, So you said you are a little bit
cautious on utilities and maybe some of the smaller banks,
and are there other sectors that you think people should
be avoiding at this point, and then on the flip
side of that, other sectors that you think, you know what,
maybe these sectors are a little bit over sold. I
know that, for instance, you've hired somebody recently in real estate,
(12:13):
structured credit and so on. Is that the sector that
you think has significant opportunity?
Speaker 2 (12:19):
Yeah, okay, I think for us we never we rarely
take a view on the sector as a whole. So
everything we do is bottom up. We have different vehicles.
In some vehicles were required to be neutral or close
to neutral, so we have long short positioning, and in
other vehicles we have less constraint. And then we can
be a private credit provider, We can be a stressed investor,
(12:42):
or can be a performing investor. And the sectors that
we see are very busy. If you look at two
years ago, it was mostly consumers with the cost of
living crisis. There was a lot of confusion in the
system about which companies will be able to pass through
the cost to customers, which companies will probably lose market share,
and we companies have enough assets and cash flow to
defend their position in that tough time. Today, definitely, real
(13:06):
estate is something that is a big question mark and
we're seeing room for significant dispersions. So we've been hiring
and building that team.
Speaker 4 (13:14):
As you said, just I know you mentioned you obviously
never take a sector view of things. You look at
companies one by one. But there is a sector which
has been in the spotlight as many issuers are trying
to adjust their maturities and you know, the market has
become more competitive and margins have gone down, and it's
the that collection sector. So just wondering, you know, your
(13:37):
view on that collectors and what's happening all across the
spectrum with them in Europe.
Speaker 2 (13:43):
Yeah, I think that collectors is one of these sectors
that is complex. It is not your usual telecom company
where you can say subscribers are doing why in our
pool is here? So I can understand the revenue trends.
It is a little bit more complex than most sectors
we see in leverage finance, but from a creditor's lens,
we get comfort from the asset coverage. Dead collectors often
(14:07):
have a portfolio of non performing loans which we can
put a value on, and that really makes for our
downside scenario, and that's how we underwrite the downside case.
Whereas many other industries that probably don't have as much
complexity or volatility, they tend to have limited asset base
and become very hard to unteraction with downside. So whenever
(14:28):
we position or look to position, we think about our
protection as creditor, not necessarily as an equity holder. And
that's where really there's disconnect is when you look at
a company, you might think it's a good company, it's
a bad company, But what makes a good company for
creditor is not necessarily what makes for a good company
for an equity holder. The equity wants growth, the equity
(14:48):
wants a good story, whereas the creditor wants asset protection.
The creditor wants protectability, and we can get that from that. Collectors.
In some cases we.
Speaker 3 (14:58):
Talked about real estate a little bit earlier, and obviously
that's a sector that is extremely asset rich and also
obviously very highly leveled in some instances. But within real estate,
one of the sub sectors that I guess has got
a lot of focus is offices. What your thoughts there,
(15:19):
you know, given that everyone is still a little bit
concerned about the work from home trends and vacancies and
prime versus non prime, do you think that there are
single name opportunities there or do you would you class
that in the twenty to twenty five bucket that you
were saying of credits that may not quite make it?
Speaker 2 (15:35):
Basically, yeah, I think you know, real estates has gone
through different cycles over the last two and a half years.
Initially all redistates was panished, and the reason there was,
you know, we had a discount curve that was moving
aggressively from negative to plus four or five. Lending has
stopped from banks. Visibility on valuation was very difficult. But
(15:57):
also there was the question of you know, office space, commercial,
what can you fill? So there are really two problems
with really state. One of them is assets. Can you
fill your really state? If it's residential In Europe, most
times it's okay you know, you can still get tenants
in commercial you have a big division for some commercial
you can get tenants for office space in more complicated
(16:20):
and more difficult spots, you have a challenge fit in
that space and increasing the rents. So the first step
is we're focusing on assets that don't have a problem,
which means they have good tenancy ability to increase the rents,
and that is a starting point, and then it becomes
really balanceyet exercise, and that's where we have been involved
in when we see good opportunities where you can size
(16:42):
the debt and decide what is the next level of
LTV that is sustainable with the current yields and with
the rates being stable for now six eight months, we're
able to do that for some assets.
Speaker 3 (16:54):
Just a follow upon what you said about sort of
chasing the quality assets. So for displeasure, I'm primary real
estate analyst, so I'm always going to be sort of
a little bit positive on the sector, or more positive
than others, I guess. But one of the issues I
guess is that everybody seems to be chasing these sort
of prime assets, best in class and so on. So
wul do you not say that that's somehow reflected in
(17:16):
the valuations that you see, and those sorts of issuers
are allowed higher LTVs and so on. But the mid
to lower tier, where I guess fewer people are looking,
may be more attractively priced. Or do you think that
it's just not worth straying away from prime?
Speaker 2 (17:32):
I think prime is a really big question mark depends
what you mean by it. For US, prime means you
have visibility on tenants. You know you can get tenants
and residential, think of residential in big cities. We're happy
to price a high LTV situation when the tenancy and
the quality of the returns are predictable and we can
cize the balance it as a result. Anything that is
(17:55):
lower than that we have been staying away for now
because one rates volatility is still not over. But also,
you know the trends that you talked about, work from home,
Brexit in the UK, the US, the move from west
coast to east coast. There's a lot of trends that
are happening for the asset that make it very hard
to combine that bad asset. That balance sheet makes it
(18:16):
very tough exercise.
Speaker 4 (18:18):
I'm just curious, staying on real estate, how do you
invest in the sector, do you invest mostly via public markets,
do you have a private strategy as well, and what
are the type of returns that you're ideally targeting?
Speaker 3 (18:31):
And to follow up on that, one of the issues
that has come up in some of our conferences has been,
I guess, the toggle if you like, between private and
public financing, especially in real estate, because the aims of
the two parties might be slightly different. The terms that
they look at in terms of like maturities or holding periods,
(18:53):
I guess can be different. How do you deal with
that when you're also on the public side, bondholder and
so on, and maybe may not have some of the
information that perhaps people on the private side may be
privy to.
Speaker 2 (19:07):
You're not looking at asset by assets. You're looking at
a corporate level, just like any corporate debt. We're seeing
it as in the same process of any corporate debt.
On the writing, we look at the revenues, we look
at the profitability, and we look at the asset coverage
at an aggregate level. Whereas most private investors will likely
(19:28):
in real estate focus on asset by asset, so we're
going to tend to focus on bigger companies, larger caps
and catad is driven investing with shorter dated maturities and
less granular on asset by asset.
Speaker 3 (19:41):
I have to too quick follow up questions on that.
The first is, when you're looking at that sort of
public lending, are you then saying it's mostly unsecured? That's
the first question. And then in terms of returns, what
would you consider sort of adequate or even attractive for
real estate at the moment, because obviously the sector did
extraordinarily well at the tail end of last year as
(20:01):
a whole in Europe, so that those yields are not
are still a little bit high, but not where they
were towards the end of last year. So what kind
of returns do you think real estate maybe could generate
this year?
Speaker 2 (20:13):
I think from today it's definitely a lot of the
returns have been made already, and we've participated in those returns,
but we're not looking at high yield headline yield. It's
more the spread compression and the way you make money
in secondary bonds. If you buy an eight percent bond
that titans to five or four because of an upgrade
because of an asset sale, if the duration is long
(20:34):
enough then the total return can be significant and you
end up making fifteen to twenty percent total return of
a bond that had the headline yield of eight nine percent.
And that is how we targeted the sector and has
been profitable for us over the last six to nine months.
Speaker 3 (20:49):
You talked there about catalysts and so on. I guess
one of the issues within real estate before we sort of,
I guess, take a step back to it as a whole,
is that some of those positives that you're talking about
have probably transpired already. So would you still say that
those opportunities still exist, as in, you know, the big
(21:10):
upgrades and so on, especially given the rate cuts which
were supposed to be the big catalyst where the relic
state sector haven't really transpired in the way that people
may have been anticipating.
Speaker 2 (21:22):
I think, yeah, six months ago is a lot more
interesting than today, for sure.
Speaker 3 (21:25):
I think we were going to take a step back
and just considered maybe credit as a whole. So we
talked a lot about, you know, real estate returns and
so on. Would your comments regarding real estate also apply
to credit as a whole or do you think that
it's more of a special case.
Speaker 2 (21:40):
I think From a passive investor perspective, credit is a
lot tighter than it was six months ago, nine months ago,
and that was a result of inflows. More certainty around
the rates of volatility gave investor confidence to invest in credit,
because two years ago we were moving from zero to
five percent. Today most investors have conviction that rates vole
(22:04):
is going to be lower and maybe we're going to
end up at six, maybe at four and a half.
We're not going to end up. We're unlikely to end
up at ten percent rates, and that confidence is what
drove a lot of the inflows, and those inflows drove
spread tightening. So from an investor passive investor perspective, it
is a lot less interesting than it was a year
ago or ear and a half ago, and spread we're
(22:25):
at four to fifty bases points five hundred basis points,
and we're positioning ourselves more as catalysts driven investor from
bottom up in situations that are a little bit more
complex and less market driven kind of return. So the
returns we think going forward will hardly be driven by
credit being cheap. They'll have to be driven by individual
(22:46):
situations where you have an edge, either a complex sector
you alluded to that Collectors which is now has been
seeing a lot of volatility over the last two to
three months, and that can drive a lot of total
return going forward. In Europe, particularly, twenty percent of the
market is seeing high level of dispersion, so we are busy.
Speaker 4 (23:07):
Yeah, I'm just curious obviously. You know, since the beginning
of the year, which is something that James touched upon
and you also touched upon, we've seen strong credits in
the aield market coming to the market, refinancing with no issues,
high investor demand. Maybe even names that you know, a
few years ago we're trading at a big discount. But
we've also seen you know, I think some issuers and
(23:30):
some large ones especially kind of stumble onto their maturity
wall and having to rethink completely about their capital structure.
As an investor in the aield market, like, how do
you like, how's that been to kind of try to
navigate around those names and try to position maybe take
advantage of the sharp oper prices that we've seen.
Speaker 2 (23:50):
Yeah, I think for our firm particularly, we've been organized
by sector. Our senior analysts have been covering their sectors
for sometimes twenty five years, and that allows for continuity
of intellectual property. What that mean is when that situation
becomes volatile, when it becomes risky or perception of risk
(24:10):
becomes higher for the market. We've looked at it for
some five years, ten years, fifteen years, twenty years, and
we have all the research done before the event, so
when the volatility starts, when the company needs capital, we're
not outsider to the situation. And I think that's what
allows us sometimes to be a first mover in these situations,
because you know, our dead collector analyst has covered these
(24:32):
sector for eleven years, our financials analysts have covered these
sectors for over twenty five years, and that allows us
to move quickly, and sometimes moving quickly means eliminating some
situations too because there are too risky, is hard to
get comfortable with the downside, and as the volatility kicks
off and a lot of forced setting happens, which is
very cute, as you've seen in Europe and you're reported
(24:53):
on many times, the ability to move quickly allows us
to get our size at the price that is very
interest seen before a lot of the credit investors come
up with the same conclusions as we do, and really
being first mover you can do it when you have
the intellectual property ready, and you can have the intellectual
property ready when you have continuity of IP. We have
(25:14):
very limited turnover in the analyst team, and we have
a long history of covering these credits and being prepared
to move or not or decide to stop the work
because you know, doing the work and not investing is
also a negative carery for the analyst team. If you
spend two months on a situation and you don't invest,
it's a time that is wasted that you cannot get back.
So the ability to decide where we spend time and
(25:35):
having high heit ratio a lot of confidence allows us
to position at interesting prices.
Speaker 1 (25:41):
But in really basically terms of running a credit fund,
you basically just want to avoid losses, right You just
don't want to take any principal loss. A lot of
these big names in that we've been talking about, they're
blowing up. They're inflicting losses on traders. Then there's sorry
on creditors. Credits are also fighting against each other, which
is making the situation more complex. How do you avoid
(26:02):
these real trouble spots that we're seeing right now, and
how do you avoid losses?
Speaker 2 (26:07):
I think it's important to highlight that you lose from
the price you enter. If you bought a bond that
in the primary market, you bought it at par or
close to par. Any loss is a loss. However, as
secondary market develops and a few months, a few years
after the initial issues, these securities that we're trading to
(26:27):
their investing in today have been issued over the last
five seven years close to par, and the price changes
with the perception of risk, with mature news on the sector,
on macro, on the country, on the company itself, and
as those developments happen, we look to position by paying
below what we think or what we have confidence on
(26:48):
being the downside valuation. And I think this is where
it's important. When you're lending. If you're a bank, you're
lending at par, so any loss is from your principle.
When you're buying security at four at fifty cents to dollars,
even if there's a big haircut of thirty cents, which
is a lot, you're making twenty cents on something you
paid fifty four, so that is a forty percent total return.
(27:11):
I think this is the math we're looking at, is
avoiding being involved too early in some of the risky situations,
and we can do that thanks to that sector coverage
we have and that continuity of intellectual property that were
built in our firm.
Speaker 4 (27:24):
Jumping in, I'm interested in something that James mentioned earlier,
which is, you know, kind of the notion of creditor
and creditor violence more aggressive liability management. That's been a
trend in the US for the past few years, but
now we're seeing it spilling over in some European situations.
You know, sometimes creditors are protecting themselves preemptively and signing
(27:47):
these creditor corporation agreements. How are you thinking about this
concept in general, and how are you trying to protect
yourself as a credit investor in a lot.
Speaker 2 (27:56):
Of these situations. I mean, just to give background, covenants mean,
you know, the creditors have rights and protections, which sometimes
it's a definition of the fault. What constitutes a default.
If you go back fifteen to twenty years ago, default
was not just not having money to pay your interest.
It was a lot of things like having too much leverage,
(28:16):
like having too little cash today or recently with the
negative rates environments and covenant light that that was issued
in that time. Default means almost just missing your interest
payment or not being able to pay your principles. So
companies can do a lot before their default, and they
(28:37):
can use that week covenant package to take collateral out,
raise additional debt, use a creditor class against another to
kind of try to extract some discounts. And we've seen
the market. We've seen those techniques and moving in the
US earlier than Europe, so they've been taking place in
the US, I would say for the last three to
four years, and it's been happening in here for the
(28:58):
last few months, as you've seen with large capital structures,
engaging in restructurings or targeting det reduction through exchanges and
sometimes coercive, sometimes friendly, and I think you cannot do that.
It can be defense mechanism, you know, these co ops
and working with different creditors, But for us, we see
it as something you need to do before investing. So
(29:21):
it is something you need to analyze before you invest.
It cannot be Hey, something is going wrong. I need
to call the lawyers. I need to figure out what's happening.
You have to call the lawyers before you invest. You
have to be prepared for the downside scenario before you invest.
You have to be in touch with your fellow creditors,
bank lenders for the situations before you invest. And when
these things happen, they are just one of different scenarios
(29:43):
that can play out. They shouldn't come at a surprise
because over levered companies will have to find ways of
dealing with their capital structures. So I think we're going
to see more and more of that.
Speaker 4 (29:52):
Yeah, and you know, when it comes to creditor creditor
and violence. Speaking to people in the market, I heard
that is something that you know, LP are also starting
to ask about think about. But I just wanted to
ask a more general question. You know, you obviously are
running your own fund. What are LPs looking for these
days that they changed their requirements? Do they want more disclosure,
(30:15):
more transparency? What is it that they want, you know,
to ensure that their money is invested well, especially actors
like sovereign wealth sons or state back entities.
Speaker 2 (30:26):
I cannot comment particularly on one type or another. I'm
not sure I'm the right person for that, but I
think in general rates are moving from zero to five percent.
So if you think about what should hatch funds or
investment firm deliver when rates are at five percent, it's
not the same thing as when rates for zero percent.
(30:47):
And I think that's the really big question is what
is the excess return we need above risk creer rate?
Now that risk creer rate is no longer zero, it's
five percent. I think that would be one consideration. The
second thing, and what allowed us to grow very quickly
is partnership. We are in a very transactional industry, but
if you take a long term view with your clients,
(31:09):
if you take a long term view with your colleagues,
you see the benefits very quickly. And I do think
that investors value that a lot.
Speaker 3 (31:16):
So you mentioned partnership, which is exactly what I was
sort of thinking of, but maybe in a slightly different way.
So obviously you do have a relationship with square points
at the moment. But one of the trends I guess
we're seeing in the asset management sector as a whole
is some forms of consolidation. But you also mention that
it's good to be sort of nimble and good to
(31:36):
be able to act quickly when you see an opportunity.
So how do you square those two things, as in
being nimble but also dealing with the fact that the
industry is consolidating in some ways. Basically so playing small
enough to act fast, but big enough to be relevant.
Speaker 2 (31:57):
I guess yeah. I think big structures benefits from the
fact that they have good operations, good counterparts, relationships, and
you get good advice on how you structure your business
to make it scalable, efficient and avoid beginner's mistakes. However,
you know, the way we organize our firm, we're an
open floor. I don't have a corner office. We all
(32:19):
sit next to each other, We communicate. We have pretty
flat structure, and that's what guarantee I really think. I've
seen organizations that are very small but still very bureaucratic,
and I've seen large organizations that still manage to keep
fairly flat structure. And that's what we're aiming to do.
Keeping communication, making sure that it's meritocracy, that junior talents
(32:39):
can speak up, can really share their ideas, that their
ideas are valued. And you know, we're in this city
and in this industry, meritocracy is very important. So it
is one of our most important principles.
Speaker 4 (32:51):
I think, you know, kind of going back to fund
management and the way you trade in this market. There's
been a spotlight in recent tiers on you know, how
hedge funds use leverage. How are you thinking about leverage
to which its standard user? Do you have like self
impose limit to it? Just curious from you know, fund
manager perspective, how you go about it.
Speaker 2 (33:13):
Yeah, I think these are in credit. You will not
see the most leverage in the market from a fund perspective.
We have a very moderate leverage or sometimes close to
none in different funds, but I think that's a fund
by fund basis and you have to position yourself as
an investor to see it.
Speaker 4 (33:31):
So there's no precise number to it, I guess no.
Speaker 2 (33:34):
And to clarify that there is a precise number that
I'm not sure I'll be able to share here, but
because it depends on the strategy, on the investor's requirement.
Speaker 3 (33:42):
But one of the things that you mentioned earlier was
the focus on research, which coming from Bloomberg Intelligence, is
extremely great to hear. You know, we have like five
hundred analysts here looking at various sectors, various industries, even
have people doing through legal work, I guess sometimes even
partnering with some of Julius team and so on. So
I think you know, I agree definitely that research is
(34:04):
extraordinarily important and doing the work is important as well.
But one of the issues I guess you faced the
analyst can face is that an opportunity a new name
sort of comes up. So are you able to act
quickly when it's a new name that maybe the market
doesn't know as well? Given what you said, is the
(34:26):
emphasis on deep analysis and deep single name analysis, or
do you think that sometimes you would sort of pass
over those opportunities because you haven't had the time to,
as you say, speak to the lawyers before stepping in.
Speaker 2 (34:41):
Yeah, I think we have a high bar from new
investments if we didn't know the credit for some time,
and we're happy to miss. Sometimes you have to be
disciplined because we just don't feel confident in underwriting the
downside because of lack of history the credit, lack of
understanding of the industry cycle, understanding of the balance and
off balance sheets agreement that the company has. And sometimes
(35:04):
there are things that are tempting for the short term
that we just avoid because the research is not enough,
and we're just happy to miss on those opportunities.
Speaker 4 (35:13):
I think in the past that you know, we've seen
from ARENI are really taking high conviction trades going in
with large positions, and I'm just is this kind of
the signature trade of the fund do you Is it
the one that you mostly use? Do you take a
more you know, do you take a different approach in
other situations? Is this a trade that can work long
(35:37):
term in the market? How are you thinking about that?
Speaker 1 (35:39):
Yeah?
Speaker 2 (35:39):
I think you know, in every strategy you have high conviction,
medium conviction, less conviction, all good trade, but you have
different levels of conviction. We have over one hundred positions
just to give you, so it's highly diversified. But obviously
you have different levels of conviction. What ends up being
communicated usually is the highest conviction ones, but it is
(36:01):
not you know, like any strategy, we don't have only
high conviction positions or size as such. We have different
levels of positions.
Speaker 3 (36:09):
So, I mean, you talked about over one hundred positions,
so I'm just imagining over one hundred documents to go
through over one hundred different spreadsheets with multiple tabs and
so on. One of the issues that's come up recently
again in the sector that I look at is different
ways of interpreting documentation, can you maybe talk about potential,
(36:35):
the potential for that happening where like maybe the issuer says, hey,
you know what, we haven't breached any of the terms,
but the investor might have a slightly different view. How
do you square that? Especially where as Julia was asking
you earlier, even within the creditor body, there might be
different views of whether or not the issuer has breached
(36:55):
certain covenants or whether there's been an event of deforce
or not. How do you think about that?
Speaker 2 (37:00):
Yeah, so to the number, we have thirty investment professionals,
of which fifteen are analysts, And so when you think
about how many positions per analyst, is not that much.
And that's what matters is really the focus. We're giving
every position and every model, every legal analysis, every coverage,
and that is a relatively concentrated way of thinking about
(37:23):
it because it's a big team. Even if the funds
are diversified and the strategy is diversified, analysts have time
to take a deep dive for the legal side, the
game theory, and as you said, sometimes it takes hundreds
of pages to read from the legal side, many many
hours of calls, and a lot of modeling, in scenario analysis.
(37:44):
And I think what's important is that again continuity of
intellectual property. Not to repeat myself again three times, but
really the ability for the same analysts to cover these
credits over many, many years allows us to really be
able to develop these when times change, when there's an
inflection one way or another, we're able to revisit our models.
(38:05):
We're able to update them. Instead of starting from zero.
If you always have to start from zero, it is
a difficult job. You know, you start from zero. Okay,
today it's going to be a TMT company to the
hit tomorrow is going to be a bank that heastor
is going to be a cruise line. That is why
we prefer the sector coverage, even if at times some
sectors tend to be boring and nothing is happening, but
the analysts are still tasked to do in the work
(38:27):
doing the research. We think about them as R and
D not just risk takers, but also sometimes it's developing
research that why it might not be useful today, it
is going to be useful next year, in two years.
And that's what's important in the ren is that taking
that long term view of the research we're doing, not
about the next trade.
Speaker 4 (38:46):
So can we ask you what's your highest conviction trade
right now? I mean, even without names, just some details
of it.
Speaker 2 (38:53):
I think European credit is a lot is happening, and
what is exciting is spreads are extremely tight, so there's
no easy money, because you know, the easy money is
the market, and the market is extremely tight. It's close
to levels we've seen in QWI. But within that, we're
having a high level of dispersion, a lot of different
(39:13):
views on some names that are tight that we think
are risky, or some names that are at distress levels
as stress levels that need new capital, or where securities
and secondaries are interesting and we think they're going to
be catalyists for positive repricing. So we're very busy. That's
what I can tell you.
Speaker 3 (39:30):
That's great to hear. I mean, obviously, the fund started
a couple of years ago. Now it was an especially
challenging time, So kudos for getting that done. Despite what
was happening in twenty twenty two twenty three, as we
were saying was a better year, this year has been
a little bit lukewarm. So in that context, I know
you're saying that there's sort of still opportunities to consider
(39:52):
going forward. But what would you say worries you the most?
What would you say keeps a RENI people up at
night at this point? Is it something on the political side, geopolitics,
or is it more single name stresses that you would
say are the concern.
Speaker 2 (40:09):
We always have concerns or credit investors. We only think
about the downside. I think, you know, for all of
us as a group, we're really concerned about the politics. Obviously,
things are changing very quickly and we always have to
assess what is the impact of that, and it's somewhat
outside our control. And what we're trying to do is
just focus on industries that are as decorrelated as possible.
(40:31):
That is why we avoided a lot of the utility situations,
we avoided a lot of the financial institutions that are
highly political. We try to focus on things that we
can predict, control or as best as we can. But
the politics is really definitely gee. Politics in general are
very challenging for us, and we try to react, we
try to stress tests, but we don't position on and
(40:54):
we don't bet on that For me personally, is clearly
the talent only as good as we are or where
we are. Thanks to our team and keeping the team together,
keeping the senior team, interacting, keeping that long term view
with our investors, with our colleagues is a priority for me,
and that is really what keeps me up at night,
is keep my colleagues happy, keep them busy, keep them
(41:18):
intellectually challenged, and keep the atmosphere that we have. And
that's what we delivered and that's what hopefully will continue
to deliver.
Speaker 1 (41:26):
So we are the credit edge hands what is your edge?
What's the almost contrarian trade?
Speaker 2 (41:29):
Do you think our edge is really being in a
high transactional industry and still keeping the long term view
with our.
Speaker 1 (41:36):
People and with our clients, And how do you do that.
Speaker 2 (41:39):
Being principled integrity and having high standards internally and externally,
even if sometimes you know things are driven by short
term trends, we are focused on the long term. It's
tempting sometimes to be focused on the short term, but
we always think about the long term. We're a young
firm in many ways, and we want to be seen
(42:01):
as the long term firm that thinks about clients and
colleagues and has a very long term vision, not just transactional.
Speaker 1 (42:09):
And last y, I've got to ask about the parrots.
What's a lot about? Come on, tell us, tell us
what goes on there?
Speaker 2 (42:15):
It took some time. Yeah, so you know I. Reni
is the name of our firm, is a family of
parrots in Latin America, mostly Brazil, in the Amazonian forests.
And that's a passion of mine that started when I
was eight. So I was breeding parrots when I was
in Morocco, and then when COVID happened, I stopped doing that.
(42:36):
When I left Morocco when I was seventeen, studied in France,
came to the UK about ten years ago and started
again in COVID, started breeding parrots that are endangered for
conservation purposes. So we have a conservation effort of over
one hundred parrots with some of the most endangered parrot species,
(42:56):
and the effort is trying to reproduce them and then
hopefully or introduce them to the wide further down the line.
Speaker 1 (43:02):
Where are they in London?
Speaker 2 (43:03):
They are in Sorry, great stuff.
Speaker 1 (43:05):
HANSA. Lensiger, founder of Areni. It's been a pleasure having
you on the credit edge many.
Speaker 2 (43:10):
Thanks, thank you very much for having me and.
Speaker 1 (43:12):
Julia Moreporgo with Bloomberg News cheers.
Speaker 3 (43:14):
Thank you.
Speaker 1 (43:15):
Check out all Julia's scoops on the Bloomberg Terminal and
of course at Bloomberg dot com. And to Tolu ali
Muto with Bloomberg Intelligence, thank you so much.
Speaker 3 (43:22):
Great to be here. As always, thank you James.
Speaker 1 (43:25):
For more analysis read all of Tollu's great work on
the Bloomberg Terminal. Bloomberg Intelligence is part of our research department,
with five hundred analysts and strategists working across all markets.
Coverage includes over two thousand equities and credits and outlooks
on more than ninety industries in one hundred market industries,
currencies and commodities. Please do subscribe on to the Credit
Edge wherever you get your podcasts. We're on Apple, Spotify
(43:46):
and other good podcast providers, including the Bloomberg Terminal at
b pod Go. Give us a review, tell your friends,
or email me directly at jcrombiate at Bloomberg dot net.
I'm James Cromby. It's been a pleasure having you join
us again next week on the Credit Edge.
Host
James Crombie
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