Apr 21, 2022 · 1h 0m · capital-allocators
Andrew Milgram – Mid-Market Distressed Investing at Marblegate (Manager Meetings EP.29)
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Manager Meetings, host Ted Seides interviews Andrew Milgram, Managing Partner and CIO of Marblegate Asset Management, detailing his career, middle-market distressed credit strategy, hands-on due diligence, and landmark restructurings including New York City taxi medallions.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 21.7% of the talking time here. How this is scored →
Ted as informed peer 4.2 Guest teaching 2.7 Guest disagreement 0.3 Ted pushing back 0.0
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 29:45 Condemnation of loose credit agreements and creditor-on-creditor predation
Andrew strongly criticizes the widespread erosion of credit covenants, decrying the resulting predatory creditor-on-creditor violence and opportunistic asset-stripping across the market.
Hardest push from Ted ▶ 18:05 Ted queries whether distressed mid-market assets offer genuine valuation discountsTed presses Andrew on whether distressed mid-market debt truly prices at fundamental discounts or whether smaller companies merely carry proportionate structural flaws.
Biggest teaching moment ▶ 39:00 Andrew details empirical economic reality of taxi medallions versus UberAndrew educates Ted by demonstrating through proprietary surveys and personal driving experience that traditional yellow taxi drivers actually capture superior net take-home economics compared to Uber drivers.
Ted holds their own ▶ 14:04 Ted articulates the dynamic nature of distressed debt where creditor actions dictate outcomesTed demonstrates deep allocator domain expertise by pinpointing the fundamental distinction between passive middle-market inefficiency and active distressed intervention where investor actions directly alter credit recoveries.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Episode Overview: Andrew Milgram and Marblegate Asset Management | 4 | 1 | 0 | 0 | Ted frames the episode with a structured introduction of Marblegate and prompts Andrew to detail his childhood introduction to investing. Andrew warmly recounts walking with his father and learning fundamental analysis at an early age. | |
| Formative Career at Swiss Bank Corporation in London | 5 | 2 | 0 | 0 | Ted demonstrates solid knowledge of the late 90s emerging markets timeline to steer the narrative. Andrew details the 1998 Russian default, the Swiss Bank/UBS merger, and moving into distressed debt workouts. | |
| Buy-Side Distressed Execution and the Intersection of Law and Commerce | 5 | 3 | 0 | 0 | Ted inquires about the practical shift from sell-side capital markets to principal distressed investing. Andrew explains how the intersection of law, commerce, and primary on-the-ground research drives restructuring outcomes. | |
| Middle-Market Distressed Strategy and Macro Opportunity | 5 | 3 | 0 | 0 | Ted probes the operational inefficiencies in the middle market. Andrew highlights that mid-market bankruptcies make up three quarters of restructurings, yet remain underserved by mega-cap distressed funds. | |
| Underwriting Discipline, Filtering Dry Holes, and Buy-Price Primacy | 4 | 3 | 1 | 0 | Ted asks about relative valuation discounts in distressed assets. Andrew gently pushes back against conventional assumptions, noting distressed paper often trades at irrational premiums to public comps and stressing that buy price dictates all returns. | |
| Cross-Functional Due Diligence and Bilateral Deal Negotiation | 4 | 2 | 0 | 0 | Ted asks how analytical due diligence is conducted given wide bid-ask spreads. Andrew describes cross-functional team analysis focused on working capital liquidity constraints and bilateral negotiations with regional bank committees. | |
| Portfolio Construction and Avoiding Uncontrollable Commodity Risk | 4 | 3 | 0 | 0 | Ted asks about portfolio construction discipline. Andrew illustrates their underwriting boundaries by explaining why Marblegate explicitly avoids oil and gas debt to eliminate unhedgeable commodity price risk. | |
| Case Study: Education Management Corporation and the Trust Indenture Act | 5 | 4 | 1 | 0 | Ted brings up Marblegate's prominent role in the Education Management Corporation case. Andrew explains the legal nuances of the Trust Indenture Act Section 316(b) and details the rising trend of creditor-on-creditor violence. | |
| Sponsor Message: Ridgeline Investment Management Platform | 3 | 1 | 0 | 0 | Following the mid-roll break, Ted asks about the practical dynamics of competing alongside mega-funds in restructurings. Andrew explains that relationship history and middle-market focus mitigate multi-party conflict. | |
| Case Study: New York City Taxi Medallions – Origination and Initial Auction | 4 | 4 | 1 | 0 | Ted introduces the New York City taxi medallion case study. Andrew shares how he originally dismissed the thesis as the worst idea ever before accepting his partner's challenge to find a viable entry price. | |
| Diligence Findings: NYC Infrastructure and Driver Economics vs. Uber | 4 | 4 | 0 | 0 | Ted asks what data countered the obvious threat from Uber. Andrew outlines the municipal importance, public transit last-mile necessity, and how obtaining his own taxi license confirmed superior driver net economics. | |
| Borrower Restructuring, City Resources, and Union Collaboration | 4 | 3 | 0 | 0 | Ted explores the human and operational complexity of restructuring loans held by individual medallion owner-drivers. Andrew describes collaborating with the NYC Taxi Driver Resource Center and the union to right-size balance sheets. | |
| Balancing Fiduciary Returns with Human Impact and ESG Responsibility | 4 | 2 | 0 | 0 | Ted asks about balancing headline reputation risk with target fund returns. Andrew explains that responsible fiduciary investing means structuring fair, sustainable post-reorganization debt terms across all counterparties. | |
| Deglobalization, Supply Chain Shifts, and Active Creditor Value Preservation | 5 | 4 | 1 | 0 | Ted prompts Andrew for his macro outlook on distressed debt. Andrew delivers an incisive thesis on sustained inflation, supply chain nearshoring, and warns that passive creditors will see their capital destroyed in upcoming reorganizations. | |
| Leadership Lessons and Driving Inclusion in the Boy Scouts of America | 3 | 2 | 0 | 0 | Ted contrasts the combative distressed landscape with Andrew's leadership in the Boy Scouts. Andrew explains his efforts driving inclusion in the Greenwich Council before answering the standard closing questions. |
Statements from this episode (23)
UBS was effectively insolvent before 1998 Swiss Bank merger, says Milgram
“UBS was effectively insolvent and there'd been a shotgun marriage forced by the Swiss national bank.”
The LBO market acts as the manufacturing division for distressed investing
“So if you think about the leverage buyout market as the manufacturing division of the distressed market, the growth of the distressed investor mirrored the growth of the LBO investor for good reason.”
US middle market represents 75% of bankruptcies and restructurings
“Meanwhile, the middle market constitutes Roughly a third of US GDP has forty eight million employees. And at the same time, the middle market constitutes about three quarters of all bankruptcies and restructurings.”
Milgram: Middle-market companies typically have only 12 to 18 creditors
“A typical creditor group in a middle market company, be 1215, maybe 18 creditors, as opposed to 50 or a hundred in a large name, they have less flexible capital structure.”
Distressed assets sometimes trade at valuation premiums to public comps
“So I can tell lots of stories about where you would see something trading in the distress market at a premium from a valuation perspective, to where it's public market comps are trading, which I view is literally insane, but it happens and it happens, believe …”
Bank loan portfolio decisions are driven entirely by regulatory pressures
“Banks in particular make decisions about their portfolio for three reasons. Regulatory, regulatory, and regulatory. Because banks are regulated industries. As a regulated industry, they are very focused on how they deal with their regulator and the bank examin…”
Milgram: Original lenders lack incentives and capacity to work through troubled loans
“Oftentimes original lenders don't have the manpower or the time or sometimes even the economic interest to go super deep in understanding how they're going to work through those idiosyncratic problems.”
Working capital management is misunderstood and undervalued in levered companies
“Because problems at a company can persist for a very long time, they punctuate because of a liquidity problem. And at the end of the day, working capital management is a really misunderstood and undervalued portion of highly levered company management, and it …”
Milgram: About three-quarters of Marblegate's purchases are direct-sourced and non-competitive
“About three quarters of what we have bought has been direct sourced, non-competitive.”
Marblegate avoids oil and gas due to uncontrollable commodity risk
“We stayed away from oil and gas primarily because as we thought about it, there was, you were primarily taking commodity price risk. And that's a hard thing for us. Well, impossible thing for us to control. And so the tools of restructuring our value biased ap…”
Marblegate buys legal documents rather than just companies to drive restructuring
“First and foremost, part of our investment process is that while we invest in companies, we Buy documents. And those documents are what enable us to drive the investment process.”
Milgram recounts Marblegate's landmark TIA Section 316(b) lawsuit against EDMC
“And we brought EDMC to court, to district court in New York, where the district court ruled in our favor. Now, in fairness, it was appealed and went to the second circuit court where the second circuit broadly read the Section three 16 B and said, we didn't ha…”
Creditor-on-creditor violence and priming transactions will increase in coming years
“And this creditor on creditor violence is a rising trend that I don't see going away anytime soon. Until the creditor groups start to write tighter credit agreements, or the courts define very narrow guidelines around how these credit agreements can be interpr…”
Credit investors are obligated by fiduciary duty to seize value creation
“And I think there's a much more level playing field today, and I think that, look, we all have a fiduciary duty to the investors we serve, and so if the opportunity for value creation exists, it's your obligation to take it.”
Milgram: Middle-Market Distressed Credit Avoids Multi-Deal Mega-Fund Conflicts
“Honestly, it's why we like to be in the middle market because there's way, way, way less of that in the middle market. We are oftentimes the only secondary buyer in a credit we're working on. We're certainly the early Identifier and early adopter of that credi…”
Milgram: Marblegate bought 46 NYC taxi medallions at Citibank foreclosure auction
“Our first purchase was of outright medallions and literally found out about it by doing what any good distress guy does. I opened the wall street journal and I immediately turned to the distress guy sporting pages, which are the foreclosure notices in the back…”
NYC yellow taxi driver profitability is superior to Uber driver earnings
“The profitability of a yellow taxi driver was superior to that of an Uber driver.”
Milgram became a licensed NYC taxi driver to conduct investment diligence
“So one of the pieces of our diligence process is I became a licensed taxi driver and went out and drove cabs, which I still do.”
Many levered borrowers are already unable to satisfy their debts
“What we see today as we look at the earnings power of companies that we're talking to lenders about, that they are in that place already. They are facing real inability to satisfy their debts as they come due, which is one of the classic destinations of insolv…”
Restructuring will drive contract price resets across multiple sectors
“We haven't seen that kind of opportunity since like the early 2000 when natural gas spiked and we had to do a sort of price reset through the petrochemicals chain. But it strikes me that we're going to see that across a number of sectors in the coming period.”
Shift to just-in-case inventory will strain corporate balance sheets
“You're going to move from just in time to just in case. All of those things have balance sheet implications, Which today's balance sheets are not structured to handle.”
Milgram: Passive creditors risk losing as much value to restructuring as fundamental decay
“And as a consequence, you could see the reorganization process, if you are not an actively engaged creditor, destroy as much value as the underlying fundamentals are destroying. And so you cannot be a passive participant in a reorganization.”
Milgram: You invest with a butcher's knife, but restructure with a scalpel
“This is an in the weeds game. And so one of the things I talked to my investment team about is you invest with a butcher's knife, but you restructure with a scalpel. And if you don't do the detail work, You're going to get a bad outcome.”