The Ledger
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Non-traded BDCs recreate the structural asset-liability mismatches of the past
“Maybe we do a non-traded BDC, which was now up to 2018. That's where I was like, well, this is the original asset liability mismatch that you tried to cure by doing a drawdown fund because You might have all the investors looking for the exit, even though it's…”
Public BDCs show massive valuation discrepancies on identical syndicated club loans
“There's some obvious ones where you see, let's just say public BDCs that own the same club deal, the same loan. One BDC versus another, or two or three versus a fourth BDC, there's a massive variance, in a second lien especially, where you're like, wait, the f…”
Certain private credit loans drop from par to zero in one quarter
“Then you have micro situations where loans are getting marked from hundred to zero in one quarter.”
The software sector will experience a coming wave of debt defaults
“We're going to have a wave of defaults in the software space.”
Lending against ARR without equity upside is venture lending without warrants
“You're doing venture lending without warrants.”
Saba Capital is tendering for Blue Owl's OBDC-II fund at a discount
“We are tendering for one of the Blue Owl funds, their Blue Owl OBDC-II, which we're going to see if there is any demand for liquidity at a discount to NAV.”
Private credit BDCs are mislabeling industry concentrations in their loan portfolios
“Literally putting in every loan into Claude or ChatGBT to figure out what do they think it is. There has been some mislabeling of concentrations.”
Private credit returns depend entirely on fund-level leverage to attract investors
“One of the issues with private credit is all the returns are predicated at leverage at the fund level. You need fund level leverage to get anyone excited about it. If anyone came out with a unlevered BDC, it would be a yawn, especially after fees.”
Investors must exit successful trades that drift outside their core expertise
“Even if it's not mission drift, you just have to get out of trades. There were a bunch of trades that we went into. They were in my wheelhouse, and then they did well, and they got out of my wheelhouse, and some of them were really bad reversals.”
80% software gross margins will not last indefinitely against aggressive competition
“If you think about economic, 80% gross margins, they're not going to last forever. Someone's going to try to figure out how to attack them.”
Interval funds must prove total illiquidity to secure SEC exemption for gating
“The bar to gate is really high. You literally need an SEC exemption, and that's not because prices are low. You have to show the SEC, I don't have any liquidity.”
Private credit loans left unrefinanced after four years signal underlying trouble
“Because the loans in typical seven years, but you hope to be refined three or four years. Once it gets past four years, there's probably a reason for it.”
Trading talent will differentiate private credit firms during market liquidity crises
“There are firms that have more of a trading talent on the private credit side, and there's some that don't. That's going to be the differentiator.”
1997 Asian financial crisis marked the real beginning of credit derivatives
“That was the beginning of real credit derivatives with the Asian contagion of 97.”
SaaS stress is driving sharp CLO equity underperformance
“It reminds me today where you just had one or two sectors having a lot of stress like we have today and the SAS with respect to levered loans, and we're seeing it in CLO equity has way underperformed. The relative loan market, because all of the damage has bee…”
Boaz Weinstein's hostile takeover bid for Sculptor Capital failed after six months
“We went through that process. I'd never been in a hostile takeover situation. The bidding group was super interesting people that he's friends with. That took six months, and we didn't win.”
Unfunded loan commitments carry identical credit risk but yield lower returns
“Unfunded commitments, whether it's a delayed draw term loan or a revolver, no one wants those. There's like kind of a cost of doing business. That's why credit derivatives was started. Banks didn't want those on. Let's hedge them out. You're not getting paid a…”
Apollo's move to monthly portfolio marks is a win for credit transparency
“Apollo came out, we're going to mark every month. That's a good move.”
JPMorgan Chase marked down valuations on some software loans
“JP Morgan marked down some software loans as far as their bank lender.”
Non-traded BDCs exploded from zero to $350 billion in assets since 2018
“Zero to three hundred and fifty billion dollars in non-traded BDCs from 2018 to now. That's unprecedented.”