Hello, and welcome to the Credit Edge, a weekly markets podcast. My name is James Crumby, I'm Missing It editor at Bloomberg.

Hello, and welcome to the Credit Edge, a weekly markets podcast. My name is James Crumby, I'm Missing It editor at Bloomberg.

And I'm Arnold Kakuta, a senior credit analyst covering US banks at Bloomberg Intelligence. And this week we're very pleased to welcome Ted Goldthorpe. He's the head of BC Partner's Credit. Welcome Ted, how.

And I'm Arnold Kakuta, a senior credit analyst covering US banks at Bloomberg Intelligence. And this week we're very pleased to welcome Ted Goldthorpe. He's the head of BC Partner's Credit. Welcome Ted, how.

Are you doing? Thank you and thank you for having me. Well, so a little bit on Ted.

Are you doing? Thank you and thank you for having me. Well, so a little bit on Ted.

Before launching PC Partner's Credit in twenty seventeen, he was president at Apollam Investment Corps, and prior to that, he held senior roles at Goldman Sachs Sachs's Distressed and Special Situations Group. So seen a lot of things, done, a lot of things, and without I'll hand it over to James to start the grilling full week real.

Before launching PC Partner's Credit in twenty seventeen, he was president at Apollam Investment Corps, and prior to that, he held senior roles at Goldman Sachs Sachs's Distressed and Special Situations Group. So seen a lot of things, done, a lot of things, and without I'll hand it over to James to start the grilling full week real.

I just wanted to set the scene a little bit here. Global markets on getting whipswored by recession fears and alarming developments on the geopolitical front. Investors are spooked by increasingly haphazard and nuretic US policy making, particularly on trade. I was just looking up how many times the word uncertainty appears on the Bloomberg terminal more than six thousand times a day now, which is the highest since the depths of the COVID pandemic in twenty twenty. We're hearing that word in surround sound. But despite that, credit spreads are actually quite tight. There's a hope that the longer term trajectory of the US economy remains up and that the new administration will do its best to defend growth, and high yields are still luring buyers on the credit side. Plus, there's not enough supply of corporate debt to satisfy all the demand corporate debt markets that meanwhile pricing in low odds of a US recession, which is being talked about a lot more as US consumers weaken and business leaders are complaining that they can't take long term decisions in this environment. Every dip in recent memory has been swiftly bought, and you only have to look at last week's twenty six billion dollar bond deal from Mars, which got one hundred and fifteen billion in orders to see how how strong the demand is for this stuff. But ted, what's your take as an investor? Is this the time to be loading up on credit or are we going to see more fundamental damage from what's happening in Washington.

I just wanted to set the scene a little bit here. Global markets on getting whipswored by recession fears and alarming developments on the geopolitical front. Investors are spooked by increasingly haphazard and nuretic US policy making, particularly on trade. I was just looking up how many times the word uncertainty appears on the Bloomberg terminal more than six thousand times a day now, which is the highest since the depths of the COVID pandemic in twenty twenty. We're hearing that word in surround sound. But despite that, credit spreads are actually quite tight. There's a hope that the longer term trajectory of the US economy remains up and that the new administration will do its best to defend growth, and high yields are still luring buyers on the credit side. Plus, there's not enough supply of corporate debt to satisfy all the demand corporate debt markets that meanwhile pricing in low odds of a US recession, which is being talked about a lot more as US consumers weaken and business leaders are complaining that they can't take long term decisions in this environment. Every dip in recent memory has been swiftly bought, and you only have to look at last week's twenty six billion dollar bond deal from Mars, which got one hundred and fifteen billion in orders to see how how strong the demand is for this stuff. But ted, what's your take as an investor? Is this the time to be loading up on credit or are we going to see more fundamental damage from what's happening in Washington.

I'm probably in the latter camp, you know, spreads around their ninety eighth percentile. And the comment you made is very very spot on, which is what's happening in credit markets today. There's no supply, so when we have uncertainty, there's less transaction volume. So coming into this year, m and A, pipelines, m A backlogs, you know, the mood within boardrooms post Trump selection was up for it from a business perspective, and today, you know, there's just not a lot of deal activity. So when we see a good deal, it's very very competitive, just because there's not a lot of volume. So I think what you said, I actually think you framed today's market perfectly.

I'm probably in the latter camp, you know, spreads around their ninety eighth percentile. And the comment you made is very very spot on, which is what's happening in credit markets today. There's no supply, so when we have uncertainty, there's less transaction volume. So coming into this year, m and A, pipelines, m A backlogs, you know, the mood within boardrooms post Trump selection was up for it from a business perspective, and today, you know, there's just not a lot of deal activity. So when we see a good deal, it's very very competitive, just because there's not a lot of volume. So I think what you said, I actually think you framed today's market perfectly.

So, but but the yield, right, like, there's yield to be had. So is it just kind of you know, given all the uncertainty, you think maybe there's there's kind of a pause there, this this yield euphoria, everybody kind of stepping in even though maybe let's say the stock markets are kind of showing this this this weakness maybe not so much in the credit So is it kind of better to kind of wait it out right now before we kind of start seeing you know, the flight to safety aspector.

So, but but the yield, right, like, there's yield to be had. So is it just kind of you know, given all the uncertainty, you think maybe there's there's kind of a pause there, this this yield euphoria, everybody kind of stepping in even though maybe let's say the stock markets are kind of showing this this this weakness maybe not so much in the credit So is it kind of better to kind of wait it out right now before we kind of start seeing you know, the flight to safety aspector.

I mean, the thing that's been really helpful for us is, you know, private credit is still very interesting because even those spreads have come down in the last twelve months, spreads are where they were two or three years ago, and SOFA has gone from zero to four. So we're basically getting double the return we got three years ago to lend the same oftentimes less leverage because obviously people are solving for a fixed charge coverage ratio. So we're getting higher absolute returns just because rates are higher. And if you think about what Trump's doing, a lot of the policies that the administration's pursuing is higher for longer. So you know, the curve for SOFA has obviously gone up, and that's a big, big talent for our business.

I mean, the thing that's been really helpful for us is, you know, private credit is still very interesting because even those spreads have come down in the last twelve months, spreads are where they were two or three years ago, and SOFA has gone from zero to four. So we're basically getting double the return we got three years ago to lend the same oftentimes less leverage because obviously people are solving for a fixed charge coverage ratio. So we're getting higher absolute returns just because rates are higher. And if you think about what Trump's doing, a lot of the policies that the administration's pursuing is higher for longer. So you know, the curve for SOFA has obviously gone up, and that's a big, big talent for our business.

But it's private credit not moving because people aren't marking it.

But it's private credit not moving because people aren't marking it.

I mean, we have a very that's I think that's a very big misconception out there. I mean, you know, all of our assets, so first of all, we disclose everything we do. It's all very public, and all of our assets could mark by third parties, so we less and less over time, we have control over our own marketing process, almost all of it. Boards are insisted on third party marks, and so I don't think that's an accurate description. I know, we you know, I hear that, I hear that feedback quite commonly, But I.

I mean, we have a very that's I think that's a very big misconception out there. I mean, you know, all of our assets, so first of all, we disclose everything we do. It's all very public, and all of our assets could mark by third parties, so we less and less over time, we have control over our own marketing process, almost all of it. Boards are insisted on third party marks, and so I don't think that's an accurate description. I know, we you know, I hear that, I hear that feedback quite commonly, But I.

Don't agree with that big month.

Don't agree with that big month.

I mean, we obviously mark on a quarterly basis, because you know, if it's in a public vehicle, we report quarterly, right, But you know, the valuation process is very robust, and then actually we see that across there's not like a big it's not like we're seeing abuse in other credit managers. We feel generally speaking, people are relatively accurately marked, got it?

I mean, we obviously mark on a quarterly basis, because you know, if it's in a public vehicle, we report quarterly, right, But you know, the valuation process is very robust, and then actually we see that across there's not like a big it's not like we're seeing abuse in other credit managers. We feel generally speaking, people are relatively accurately marked, got it?

And then you know, in terms of the higher for longer aspect, but what about what about like with the all the unsernty right now, maybe prospects of a weaker economy, like doesn't that hurt the underlying portfolio companies?

And then you know, in terms of the higher for longer aspect, but what about what about like with the all the unsernty right now, maybe prospects of a weaker economy, like doesn't that hurt the underlying portfolio companies?

Right?

Right?

And then in a higher for longer scenario, I meant, great for you know, the ones collecting the interest, right, but then for the for the borrows themselves, isn't that kind of adding stress? So what does your take on that?

And then in a higher for longer scenario, I meant, great for you know, the ones collecting the interest, right, but then for the for the borrows themselves, isn't that kind of adding stress? So what does your take on that?

Yeah, I would say, I mean listen. I mean, this recent environment is only six weeks into it, right. If this persists for a long period of time, it's going to have impact on the credit worthiness of borders for sure. But what I would say is the issues that we're facing companies two or three years ago, a lot of them have gone away. So labor inflation, labor shortages, supply chain issues, a lot of those things have been kind of like rectified over the last eighteen months. So we actually really haven't had any real credit surprises in the last twelve months. Now, again that's on a trailing basis, and that's on a trailing metric. On a go forward basis, I mean, it's inevitable that the economy is going to slow down.

Yeah, I would say, I mean listen. I mean, this recent environment is only six weeks into it, right. If this persists for a long period of time, it's going to have impact on the credit worthiness of borders for sure. But what I would say is the issues that we're facing companies two or three years ago, a lot of them have gone away. So labor inflation, labor shortages, supply chain issues, a lot of those things have been kind of like rectified over the last eighteen months. So we actually really haven't had any real credit surprises in the last twelve months. Now, again that's on a trailing basis, and that's on a trailing metric. On a go forward basis, I mean, it's inevitable that the economy is going to slow down.

How does that affect your companies? As Enel says, you know, it's putting stress on them, and there's a lot of stuff coming down the pipe in terms of policies. We can't even see the policies very far, but that's got to hurt at some point. And you cover the middle market, right, so you must be getting some really interesting signals right now from that piece of the economy. What are they doing?

How does that affect your companies? As Enel says, you know, it's putting stress on them, and there's a lot of stuff coming down the pipe in terms of policies. We can't even see the policies very far, but that's got to hurt at some point. And you cover the middle market, right, so you must be getting some really interesting signals right now from that piece of the economy. What are they doing?

I mean, listen, if you're exposed to government spending the high end consumer or infrastructure, you're actually doing pretty well. If you're exposed to the low en consumer or you're you know, small businesses, you're you're feeling more pressure. So we actually really don't us as a us BC partners, but I think it's pretty prevalent across private credit.

I mean, listen, if you're exposed to government spending the high end consumer or infrastructure, you're actually doing pretty well. If you're exposed to the low en consumer or you're you know, small businesses, you're you're feeling more pressure. So we actually really don't us as a us BC partners, but I think it's pretty prevalent across private credit.

We don't have a lot of consumer exposure.

We don't have a lot of consumer exposure.

So when you hear consumer weakness, you know a lot of the businesses are going to be impacted by tariffs, a lot of them are exposed to consumer as well, you know, important importing of toys and all that kind of stuff, Like we really don't have that in our portfolio. You know, most private credit managers like US are healthcare, software, financial services, in our case, balance sheet light. So we're not exposed to banks. We're exposed to you know, wealth management, insurance, brokeerds, things like that.

So when you hear consumer weakness, you know a lot of the businesses are going to be impacted by tariffs, a lot of them are exposed to consumer as well, you know, important importing of toys and all that kind of stuff, Like we really don't have that in our portfolio. You know, most private credit managers like US are healthcare, software, financial services, in our case, balance sheet light. So we're not exposed to banks. We're exposed to you know, wealth management, insurance, brokeerds, things like that.

So a lot of the sectors that we're exposed.

So a lot of the sectors that we're exposed.

To aren't that correlated with what's aren't directly impacted by what's happening. All that being said, they're indirectly impacted, and there's you know, knock on effects that you know you may see.

To aren't that correlated with what's aren't directly impacted by what's happening. All that being said, they're indirectly impacted, and there's you know, knock on effects that you know you may see.

And for our listeners who don't really know what the middle market is, and I I must say, I'm like, I'm confused sometimes because we have guests recently who said a billion dollar could be a middle market loan? What does it mean in terms of size and scope?

And for our listeners who don't really know what the middle market is, and I I must say, I'm like, I'm confused sometimes because we have guests recently who said a billion dollar could be a middle market loan? What does it mean in terms of size and scope?

Yeah, no, you're so, it's so funny you say that.

Yeah, no, you're so, it's so funny you say that.

So you know, our business used to be called middle market lending, and then it was called direct lending, and now it's called private credit. So we've largely replaced the banks for lending. So like banks, market share in our world has gone from ninety four percent to four percent. Now we're getting into the regional banks world subscription lines Leonard Lennar Finance and again on vir off topics. So we view the middle market as call it ten to seventy five million of vibada. But if you ask ten managers, you'll get a slightly different definition by each manager. So there's no that it used to be middle market lending used to be ten to fifty and it's been like that for a long time. The definition of that is now changing. I view it as like, you know, once you move a little bit higher than that, now you're competing with the banks, So like you're competing with the JP Morgan or Golden Sachs syndicated loan. And that's where I feel like you're moving outside of what is what people refer to as the middle market.

So you know, our business used to be called middle market lending, and then it was called direct lending, and now it's called private credit. So we've largely replaced the banks for lending. So like banks, market share in our world has gone from ninety four percent to four percent. Now we're getting into the regional banks world subscription lines Leonard Lennar Finance and again on vir off topics. So we view the middle market as call it ten to seventy five million of vibada. But if you ask ten managers, you'll get a slightly different definition by each manager. So there's no that it used to be middle market lending used to be ten to fifty and it's been like that for a long time. The definition of that is now changing. I view it as like, you know, once you move a little bit higher than that, now you're competing with the banks, So like you're competing with the JP Morgan or Golden Sachs syndicated loan. And that's where I feel like you're moving outside of what is what people refer to as the middle market.

So the average deal size as well, No, I mean.

So the average deal size as well, No, I mean.

Our deal size is typically are are somewhere between one hundred and three hundred million dollars. Once we get above that, we feel we don't get covenants, spreads become tighter. We start having to face off against banks and all the big alternate asset managers who have you know, really good, really scale platforms, you know, Blackstone, Apollo, you know managers like that.

Our deal size is typically are are somewhere between one hundred and three hundred million dollars. Once we get above that, we feel we don't get covenants, spreads become tighter. We start having to face off against banks and all the big alternate asset managers who have you know, really good, really scale platforms, you know, Blackstone, Apollo, you know managers like that.

Yeah, and then you know, two years ago we had the regional bank stress and and you know set Will have talked about kind of being able to step in and kind of help you know, the balance sheet optimization there does that you know, is that some space that you played in and then is that opportunity kind of still there right now?

Yeah, and then you know, two years ago we had the regional bank stress and and you know set Will have talked about kind of being able to step in and kind of help you know, the balance sheet optimization there does that you know, is that some space that you played in and then is that opportunity kind of still there right now?

Yeah, It's funny, like we're really plugged into that space. So I have in a background in that, so like we have a we're very very plugged in there, and we're really not seeing opportunities in the last six months, so we saw a lot of opportunities post Silicon Valley bank, so either to buy assets from banks to kind of prove their to your point, prove their marks. There's a lot of you know, red cap trades, so you guys would call them SRTs, and they always they go. They have a different name every year, but it's the same thing, right, it's buying a first lost piece on a portfolio.

Yeah, It's funny, like we're really plugged into that space. So I have in a background in that, so like we have a we're very very plugged in there, and we're really not seeing opportunities in the last six months, so we saw a lot of opportunities post Silicon Valley bank, so either to buy assets from banks to kind of prove their to your point, prove their marks. There's a lot of you know, red cap trades, so you guys would call them SRTs, and they always they go. They have a different name every year, but it's the same thing, right, it's buying a first lost piece on a portfolio.

We're really not seeing a lot of activity in that sector. In the last six months.

We're really not seeing a lot of activity in that sector. In the last six months.

Bank leaning in regional banks was averaging ten percent a year and it's gone to zero. So that gap has been made up by US. So we are now replacing the regional banks because the regional banks are their funding costs have gone up and a lot of them have marked market holes due to securities they held, so it's harder for them to be offensive at a market like this.

Bank leaning in regional banks was averaging ten percent a year and it's gone to zero. So that gap has been made up by US. So we are now replacing the regional banks because the regional banks are their funding costs have gone up and a lot of them have marked market holes due to securities they held, so it's harder for them to be offensive at a market like this.

And then on the SRTs, I mean, I guess we had this buzzline game new regulation in the US which was going to be very onerous. It seems like it's on pause. And then you know, maybe that kind of put a damper on kind of the US usage of SRTs. But do you think that's going to still be like a big thing in Europe, maybe less so in the US or what are your thoughts on that.

And then on the SRTs, I mean, I guess we had this buzzline game new regulation in the US which was going to be very onerous. It seems like it's on pause. And then you know, maybe that kind of put a damper on kind of the US usage of SRTs. But do you think that's going to still be like a big thing in Europe, maybe less so in the US or what are your thoughts on that.

I mean, one of the issues we have just generally speaking, and this goes to James's point right at the start of the podcast, is there's no velocity of capital. So there's all this venture that's just trapped in funds. Private equity average hoole period's gone from three to eight years. Real estate is just sitting there waiting for there's just no activity. And the reason for it is, you know, it's financing costs are high. So my point about banks, to your point is there's no velocity of their balance sheet, like it slowed down. So you know they do a lot of construction lending and cire they get taken out by the developer and you know there's this and that's just not happening, and so the multiplier of money is just slowed down. And so there's this wall of activity that has to happen. And again post election, we all thought that that was this is the year. Like if you if we sat down two months ago, I would have told you that we're gonna have a very robust deal environment. You know, our pipeline is terrible, Like we have a very very small pipeline right now. And I think you could hear that, you know, if people are telling you honestly, Like there's just not a lot of deal.

I mean, one of the issues we have just generally speaking, and this goes to James's point right at the start of the podcast, is there's no velocity of capital. So there's all this venture that's just trapped in funds. Private equity average hoole period's gone from three to eight years. Real estate is just sitting there waiting for there's just no activity. And the reason for it is, you know, it's financing costs are high. So my point about banks, to your point is there's no velocity of their balance sheet, like it slowed down. So you know they do a lot of construction lending and cire they get taken out by the developer and you know there's this and that's just not happening, and so the multiplier of money is just slowed down. And so there's this wall of activity that has to happen. And again post election, we all thought that that was this is the year. Like if you if we sat down two months ago, I would have told you that we're gonna have a very robust deal environment. You know, our pipeline is terrible, Like we have a very very small pipeline right now. And I think you could hear that, you know, if people are telling you honestly, Like there's just not a lot of deal.

Flow right now.

Flow right now.

When was it last this bad.

When was it last this bad.

Deal flow wise?

Deal flow wise?

Yeah?

Yeah?

I mean usually when.

I mean usually when.

The world is bad, we do really well. I hate to say it, so like when people aren't lending, we lend. So we were really really busy in twenty one twenty two, there were great environments for us, So overall activities are very low, but that was good for us. Today it's not a robust deal environment for US nor everybody else. So it's kind of a weird. It's pretty unique six weeks or four weeks or I don't know how long it's been going on for it, but it's pretty unique.

The world is bad, we do really well. I hate to say it, so like when people aren't lending, we lend. So we were really really busy in twenty one twenty two, there were great environments for us, So overall activities are very low, but that was good for us. Today it's not a robust deal environment for US nor everybody else. So it's kind of a weird. It's pretty unique six weeks or four weeks or I don't know how long it's been going on for it, but it's pretty unique.

Like this is not typical at all.

Like this is not typical at all.

For yeah, but you think it might come back. Is there some reason to believe that we will get this long awaited revival in M and A.

For yeah, but you think it might come back. Is there some reason to believe that we will get this long awaited revival in M and A.

I mean, listen, if uncertainty fades, so even if they implement tariffs, at least you have certainty. And if you implement tariffs in certain ways or like you know they're gonna do targeted tariffs, I'm not going to just do broad tariffs on total countries. So if they do that, then you at least have certainty and then you can make an underwriting decision.

I mean, listen, if uncertainty fades, so even if they implement tariffs, at least you have certainty. And if you implement tariffs in certain ways or like you know they're gonna do targeted tariffs, I'm not going to just do broad tariffs on total countries. So if they do that, then you at least have certainty and then you can make an underwriting decision.

You know.

You know.

Today, you know, we have companies that import pieces from China into Ohio, they assemble them, they send all the pieces down to Tijuana, Mexico, and then re import them. So now they're subject to two tariffs. So what do they do? They Should they ship everything to Tijuana and just you know, not make stuff in the United States. Should they find a new supply for China. I mean, what's going on in boardrooms right now is like war games. Plan out if this if then you know, if this happens, and do this, if that happens, to do that, and that is taken up a lot of management bandwidth.

Today, you know, we have companies that import pieces from China into Ohio, they assemble them, they send all the pieces down to Tijuana, Mexico, and then re import them. So now they're subject to two tariffs. So what do they do? They Should they ship everything to Tijuana and just you know, not make stuff in the United States. Should they find a new supply for China. I mean, what's going on in boardrooms right now is like war games. Plan out if this if then you know, if this happens, and do this, if that happens, to do that, and that is taken up a lot of management bandwidth.

Right, But is the ultimate hope that the Trump the administration sees sense and you know, wants to defend these businesses because ultimately the goal is to bring back back jobs to the US. Right, So it is a sense that you know that sanity might prevail.

Right, But is the ultimate hope that the Trump the administration sees sense and you know, wants to defend these businesses because ultimately the goal is to bring back back jobs to the US. Right, So it is a sense that you know that sanity might prevail.

Sanity typically preparels.

Sanity typically preparels.

You know, there's a big movement from you know, again like from our perspective, there's gonna be a lot of movement from public sector to private sector, so they're moving jobs in the private sector, spendings moving to the private sector. And so again it's just a macro theme that you just when you're underwriting credits you have to be aware of, right.

You know, there's a big movement from you know, again like from our perspective, there's gonna be a lot of movement from public sector to private sector, so they're moving jobs in the private sector, spendings moving to the private sector. And so again it's just a macro theme that you just when you're underwriting credits you have to be aware of, right.

And then you know, I think I when I checked LinkedIn, I think that that Riddell investment that you guys did, you know, prominently featured. So I think that's a very good metaphor for kind of maybe what people are looking for right now. Something defensive, right, Riddell helmet maker, right protects football players heads.

And then you know, I think I when I checked LinkedIn, I think that that Riddell investment that you guys did, you know, prominently featured. So I think that's a very good metaphor for kind of maybe what people are looking for right now. Something defensive, right, Riddell helmet maker, right protects football players heads.

And American football.

And American football.

Real football.

Real football.

Yeah, so but I think it's it's something you people are looking for, something defensive perhaps, or you know, something on the protection area. So is that something that you're looking at, maybe like in Europe, right, I guess they're talking about having to defend themselves, so so you know the defense industry there, or is that sort of sort of a theme that you guys are looking at.

Yeah, so but I think it's it's something you people are looking for, something defensive perhaps, or you know, something on the protection area. So is that something that you're looking at, maybe like in Europe, right, I guess they're talking about having to defend themselves, so so you know the defense industry there, or is that sort of sort of a theme that you guys are looking at.

Or I mean, listen, I mean a lot of companies have greatly benefited from stimulus or spent government spending, and you know, it'll be interesting to see how Europe reacts to what's happening. So you know, Germany's announced a massive increase in defense spending and they carved it out of their budget, so they don't they don't have to do that sealing issue. And so some governments are spending more and our government is attempted to spend less. So I don't think it's a broad based theme. But I mean, listen, I mean we all I hate to say that geopolitical conflict is probably here to stay and therefore it's probably some tailwinds in the defense space. So you know, we had a large loan to two defense companies that just got refinanced last week, so we're pretty big in that that space. And you know, I mean, unfortunately, there's a lot of tailwinds in that space.

Or I mean, listen, I mean a lot of companies have greatly benefited from stimulus or spent government spending, and you know, it'll be interesting to see how Europe reacts to what's happening. So you know, Germany's announced a massive increase in defense spending and they carved it out of their budget, so they don't they don't have to do that sealing issue. And so some governments are spending more and our government is attempted to spend less. So I don't think it's a broad based theme. But I mean, listen, I mean we all I hate to say that geopolitical conflict is probably here to stay and therefore it's probably some tailwinds in the defense space. So you know, we had a large loan to two defense companies that just got refinanced last week, so we're pretty big in that that space. And you know, I mean, unfortunately, there's a lot of tailwinds in that space.

I just wanted to deep on sports because you did identify that as something that you you know, you have a focus on. Everyone loves sports. They do well in you know, political good and bad times. So where's the opportunity for an investor in sports? And you know, how are you playing that?

I just wanted to deep on sports because you did identify that as something that you you know, you have a focus on. Everyone loves sports. They do well in you know, political good and bad times. So where's the opportunity for an investor in sports? And you know, how are you playing that?

Yeah, so we've avoided teams and we're much more involved with like the ecosystem of sports. So you know, Radelle is a good example of that. You know, we own one of the largest. We're on the board of one of the largest sports agencies' a GCS called GS so you know we're the we're the largest agent and golf tennis third in the NFL. We have an MBA practice. We're getting involved with hospitality and everything else. And again like that market, you know, live events, it's what's happened in Music's have it everywhere like live events are greatly benefiting the whole the whole ecosystem. So you don't have to go buy a soccer team to benefit from the rise of sports. And so we're playing it in those ways. The second we're playing it is through media. So we marry our media assets with our sports assets. So we have this platform that we're involved with called Dude Perfect, which you know you have a fifteen year old although what it is, you know, if you watch Jude Perfect. We can marry them with our athletes, we can marry them with bridell, we can marry them with all kinds of things and create synergies for portfolio companies.

Yeah, so we've avoided teams and we're much more involved with like the ecosystem of sports. So you know, Radelle is a good example of that. You know, we own one of the largest. We're on the board of one of the largest sports agencies' a GCS called GS so you know we're the we're the largest agent and golf tennis third in the NFL. We have an MBA practice. We're getting involved with hospitality and everything else. And again like that market, you know, live events, it's what's happened in Music's have it everywhere like live events are greatly benefiting the whole the whole ecosystem. So you don't have to go buy a soccer team to benefit from the rise of sports. And so we're playing it in those ways. The second we're playing it is through media. So we marry our media assets with our sports assets. So we have this platform that we're involved with called Dude Perfect, which you know you have a fifteen year old although what it is, you know, if you watch Jude Perfect. We can marry them with our athletes, we can marry them with bridell, we can marry them with all kinds of things and create synergies for portfolio companies.

And you can make money, not just have fun.

And you can make money, not just have fun.

And you can make money. It's a good business, you know, very very good business.

And you can make money. It's a good business, you know, very very good business.

So that's for you. That business is directly lending to the companies that do this.

So that's for you. That business is directly lending to the companies that do this.

We do a lot of structured lending, which means, you know, we have some kind of upside, whether that's through a convertible or warrants or a liquidation preference. And then a lot of our companies we sit on the boards. So our strategy is kind of a hybrid between private equity and credit. So we're not like a pure ulplus five hundred lender to do a great company. We do a lot of stuff in between, and that's where we always find value. So sponsor finance has become very competitive and quite frankly, relatively commoditized. That kind of stuff is not right, and the reason for that is just less competitive, harder to source. The big guys, they can't scale it, so it's not worth our time. So we've been very successful with very very high turns partially because we don't compete with the big guys. You know, their minimum check size is larger than our largest deal.

We do a lot of structured lending, which means, you know, we have some kind of upside, whether that's through a convertible or warrants or a liquidation preference. And then a lot of our companies we sit on the boards. So our strategy is kind of a hybrid between private equity and credit. So we're not like a pure ulplus five hundred lender to do a great company. We do a lot of stuff in between, and that's where we always find value. So sponsor finance has become very competitive and quite frankly, relatively commoditized. That kind of stuff is not right, and the reason for that is just less competitive, harder to source. The big guys, they can't scale it, so it's not worth our time. So we've been very successful with very very high turns partially because we don't compete with the big guys. You know, their minimum check size is larger than our largest deal.

What does very high returns mean?

What does very high returns mean?

Mid teens? Okay? In credit?

Mid teens? Okay? In credit?

So that's the thing, Like you go back to this uncertainty question, like we're lending money today still, Like despite this collapse and spreads, you know, we're still lending money at ten to eleven percent. Yeah, so we could get in a big debate about where equity returns are going to be, and we're like, we're liquid, equity should trade or high yeld returns and the reality is boring is beautiful, Like I'm lending three or four times EBITDA great business business is worth like fifteen times, so I have a big margin of safety and I'm getting eleven to twelve percent.

So that's the thing, Like you go back to this uncertainty question, like we're lending money today still, Like despite this collapse and spreads, you know, we're still lending money at ten to eleven percent. Yeah, so we could get in a big debate about where equity returns are going to be, and we're like, we're liquid, equity should trade or high yeld returns and the reality is boring is beautiful, Like I'm lending three or four times EBITDA great business business is worth like fifteen times, so I have a big margin of safety and I'm getting eleven to twelve percent.

So you did mention the company that's getting burned on the Canadian and the Mexican texts at the same time that the tariffs, so there must be some risk in that portfolio as well.

So you did mention the company that's getting burned on the Canadian and the Mexican texts at the same time that the tariffs, so there must be some risk in that portfolio as well.

All right, So yeah, I mean I'm like to say, we don't have any risk on our portfolio, but you know, if you're if you're lending to good businesses at low leverage points. And again, the thing that's interesting that's changed, which I don't know if your other guests have talked about this, but companies are taking on less leverage because it's so expensive. You know, very few companies are generating unleveraged free casual returns higher than the leverage. So the leverage really isn't providing them any real accretion. So they do it because they need the money, or because they want to make acquisitions, or if they take money from us, they sell something a year later for two times money. So they're are being moycs. But generally speaking, like taking on lots of debts not a creative anymore. And it was when rates red zero. So our companies are asking us for less leverage. So our average leverage point is probably down one to two turns over the last you know, eighteen months, and.

All right, So yeah, I mean I'm like to say, we don't have any risk on our portfolio, but you know, if you're if you're lending to good businesses at low leverage points. And again, the thing that's interesting that's changed, which I don't know if your other guests have talked about this, but companies are taking on less leverage because it's so expensive. You know, very few companies are generating unleveraged free casual returns higher than the leverage. So the leverage really isn't providing them any real accretion. So they do it because they need the money, or because they want to make acquisitions, or if they take money from us, they sell something a year later for two times money. So they're are being moycs. But generally speaking, like taking on lots of debts not a creative anymore. And it was when rates red zero. So our companies are asking us for less leverage. So our average leverage point is probably down one to two turns over the last you know, eighteen months, and.

You'll secure it and you're getting some kind of upside. You say, the means that sort of profit share or something like that to benefit.

You'll secure it and you're getting some kind of upside. You say, the means that sort of profit share or something like that to benefit.

Yeah, it's product share, warrants, liquidation preference, if you guys know what that is?

Yeah, it's product share, warrants, liquidation preference, if you guys know what that is?

All the above, and how is it compared to what we'd call broadly syndicated loans in terms of you know, is there is a big spread difference now or is it getting squeezed via all of the competition.

All the above, and how is it compared to what we'd call broadly syndicated loans in terms of you know, is there is a big spread difference now or is it getting squeezed via all of the competition.

I mean, you know, all my peers will probably massively disagree with me, but liquid credits super hard. You know, there's this credit and credit of violence, like you know, people joke about it and you guys write about it.

I mean, you know, all my peers will probably massively disagree with me, but liquid credits super hard. You know, there's this credit and credit of violence, like you know, people joke about it and you guys write about it.

It's like getting really really bad, like really bad.

It's like getting really really bad, like really bad.

Like it used to be good for us, good for the company, and there's greatest decrestion of win wins and now it's a zero sum game and it's fully become zero sum. So if you're not big and you're not incredibly sophisticated, you should not buy anything in liquid credit because you can get run over by the smart, big guys. And we're we have you know, we're over ten billion dollars. We're doing really really well, like we're not big enough. So that's a that's become a really tough place to to traffic.

Like it used to be good for us, good for the company, and there's greatest decrestion of win wins and now it's a zero sum game and it's fully become zero sum. So if you're not big and you're not incredibly sophisticated, you should not buy anything in liquid credit because you can get run over by the smart, big guys. And we're we have you know, we're over ten billion dollars. We're doing really really well, like we're not big enough. So that's a that's become a really tough place to to traffic.

And again, no covenants. You know, sponsors.

And again, no covenants. You know, sponsors.

You know, if you're in a if you're in a deal with an aggressive sponsor, you know you kind of expected them to do what they needed to do to make sure they protected their LPs. Now everyone's doing it. You know, KKR did this deal called the Envision. You know, KKR used to treat their lendards very well and they you know, after that deal, like gloves are off, like you know, like if they're doing bad things to creditors, means everybody's going to do bad things to credits.

You know, if you're in a if you're in a deal with an aggressive sponsor, you know you kind of expected them to do what they needed to do to make sure they protected their LPs. Now everyone's doing it. You know, KKR did this deal called the Envision. You know, KKR used to treat their lendards very well and they you know, after that deal, like gloves are off, like you know, like if they're doing bad things to creditors, means everybody's going to do bad things to credits.

But what stops it moving down into the middle markets.

But what stops it moving down into the middle markets.

Hasn't come yet. I think a couple of things. Number one is, if you think about large cap sponsors versus bid cap sponsors, MidCap sports tend to have less companies in our portfolio, so if something goes bad, it's much worse for them. It's like it's harder for them to raise their next fund. The big guys tend to be a little bit more economically rational. A lot of times, the middle market sponsors will do things to help their companies because it means it's the difference between them raising and not raising their next fund.

Hasn't come yet. I think a couple of things. Number one is, if you think about large cap sponsors versus bid cap sponsors, MidCap sports tend to have less companies in our portfolio, so if something goes bad, it's much worse for them. It's like it's harder for them to raise their next fund. The big guys tend to be a little bit more economically rational. A lot of times, the middle market sponsors will do things to help their companies because it means it's the difference between them raising and not raising their next fund.

That's number one. And number two is, like, you know, our deals have covenants. You know, generally speaking, we hold it ourself or we're in a deal with like two guys and we all know each other, and you know, my peers are really smart. We all act very similarly, and so generally speaking, we're relatively aligned and working with a sponsor to get to the right place. We're not like suing each other and like like stealing their ip and like that. Just you can't do that with our documents, first of all, and second of all, like the middle market guys don't do that to each other.

That's number one. And number two is, like, you know, our deals have covenants. You know, generally speaking, we hold it ourself or we're in a deal with like two guys and we all know each other, and you know, my peers are really smart. We all act very similarly, and so generally speaking, we're relatively aligned and working with a sponsor to get to the right place. We're not like suing each other and like like stealing their ip and like that. Just you can't do that with our documents, first of all, and second of all, like the middle market guys don't do that to each other.

Yeah, it just seems that then the Broady isy indicated market, there is this kind of lack of products that people are pushing down a bit in terms of you know, trying to find opportunities in the you know, smaller deals because they can't find product elsewhere.

Yeah, it just seems that then the Broady isy indicated market, there is this kind of lack of products that people are pushing down a bit in terms of you know, trying to find opportunities in the you know, smaller deals because they can't find product elsewhere.

Well, that's that's happening.

Well, that's that's happening.

Yeah, So it does not just bring the same stuff from the other market, and you know, you lose the covenants because everyone's competing more, and then you get into these these violent credits to situations. I mean, does does it Does it naturally follow that Broady syndicated practices go into the middle markets.

Yeah, So it does not just bring the same stuff from the other market, and you know, you lose the covenants because everyone's competing more, and then you get into these these violent credits to situations. I mean, does does it Does it naturally follow that Broady syndicated practices go into the middle markets.

Because remember, like our stuff's ill liquid, So like in liquid markets, I can buy up.

Because remember, like our stuff's ill liquid, So like in liquid markets, I can buy up.

Some debt and go after you. You can't buy into our debt.

Some debt and go after you. You can't buy into our debt.

And if a middle market guy's sold debt A, the sponsor can block it and be oftentimes yea and B. If you did that, like you know what sponsor's going to do business with you if when times get tough, you sell your debt to some person who comes and like takes.

And if a middle market guy's sold debt A, the sponsor can block it and be oftentimes yea and B. If you did that, like you know what sponsor's going to do business with you if when times get tough, you sell your debt to some person who comes and like takes.

Your keys and yeah, you know, threatens you.

Your keys and yeah, you know, threatens you.

I mean, it's just not that's just not we'd be out of business, like we'd lose our franchise.

I mean, it's just not that's just not we'd be out of business, like we'd lose our franchise.

Yeah, how do you you know, you talked about the the middle market space really moving from the banks, you know, to the private credits side. But but that's that's I guess on the back of all the regulation put in place right post financial crisis. So do you feel like that's kind of shifting now that we're in like a Trump you know, deregulation world, or are certain a sense kind of some of these regional banks or even I think JP Morgan right, they're setting a credit funding, a private credit fund I think is ten to fifty billion or something like that.

Yeah, how do you you know, you talked about the the middle market space really moving from the banks, you know, to the private credits side. But but that's that's I guess on the back of all the regulation put in place right post financial crisis. So do you feel like that's kind of shifting now that we're in like a Trump you know, deregulation world, or are certain a sense kind of some of these regional banks or even I think JP Morgan right, they're setting a credit funding, a private credit fund I think is ten to fifty billion or something like that.

So what are your thoughts on that?

So what are your thoughts on that?

Yeah, I mean, listen, I mean the again, we don't compete with JP Morgan, but you know, JP Morgan is getting you know, I remember the first billion dollar unit Tronch was done by Blackstone and that was probably like twelve years ago, and now they're happening every day, and it was a big deal when it had happened, And that's like, you know, so that like the blue Owls of the world and the Blackstones of the world are taking a lot of market share from the traditional banks.

Yeah, I mean, listen, I mean the again, we don't compete with JP Morgan, but you know, JP Morgan is getting you know, I remember the first billion dollar unit Tronch was done by Blackstone and that was probably like twelve years ago, and now they're happening every day, and it was a big deal when it had happened, And that's like, you know, so that like the blue Owls of the world and the Blackstones of the world are taking a lot of market share from the traditional banks.

So those guys, the investment banks have to do something.

So those guys, the investment banks have to do something.

And so obviously JP Morgan is very sophisticated with an amazing franchise. All these banks have great front ends. I mean, they source lots of deals. So the reason you're seeing all these joint ventures, like we've announced three of them, these joint ventures are basically matching our capital, which has less constraints on it, with a big sourcing engine, and so it's a really good These joint ventures are very good marriage. JP Morgan's doing themselves because JP Morgan again has a big, big leverage finance franchise, and they're also, you know, very sophisticated.

And so obviously JP Morgan is very sophisticated with an amazing franchise. All these banks have great front ends. I mean, they source lots of deals. So the reason you're seeing all these joint ventures, like we've announced three of them, these joint ventures are basically matching our capital, which has less constraints on it, with a big sourcing engine, and so it's a really good These joint ventures are very good marriage. JP Morgan's doing themselves because JP Morgan again has a big, big leverage finance franchise, and they're also, you know, very sophisticated.

Obviously you said it's kind of a pretty basic business lending, middle market lending. It's you know, fairly, you know, it used to be the most boring part of the bank. Now it's the most exciting because everyone loves private credit. To what extent is it being swept up in this kind of euphoria, you know, all this of tourist money coming in, that bad deals getting done again.

Obviously you said it's kind of a pretty basic business lending, middle market lending. It's you know, fairly, you know, it used to be the most boring part of the bank. Now it's the most exciting because everyone loves private credit. To what extent is it being swept up in this kind of euphoria, you know, all this of tourist money coming in, that bad deals getting done again.

Like when I started BDC's, which are business development companies that effectively make middle market loans, a lot of them were run by entrepreneurs. Today you think, like, you know, you roll for it all these years. It's you know KKR has won, oak Tree has won, Carlisle has won. I mean those are very sophisticated areas. These are very very sophisticated institutional managers. So we talked earlier about like mismarking the book and all that stuff. I mean, KKR is not going to mismark their book, you know, like it's a blue chip institution. And so I think the industry's just matured.

Like when I started BDC's, which are business development companies that effectively make middle market loans, a lot of them were run by entrepreneurs. Today you think, like, you know, you roll for it all these years. It's you know KKR has won, oak Tree has won, Carlisle has won. I mean those are very sophisticated areas. These are very very sophisticated institutional managers. So we talked earlier about like mismarking the book and all that stuff. I mean, KKR is not going to mismark their book, you know, like it's a blue chip institution. And so I think the industry's just matured.

Right.

Right.

So people always talk about this bubble in private credit. I've heard that for twenty five years, Like there's been a bubble for twenty five years in a row that hasn't popped, right, And what people they don't compare apples to apples, right, So what we talked about earlier, we used to do ten to fifty vibit dah, like most of these big guys they're average, but it does way over one hundred million dollars now. So they're doing things today that they weren't doing ten years ago. So now we just compete against each other. Now they're competing against the banks, right, or use another example, like we're all getting very big and especially finance, you know, lending to other lenders, lending into people's BDCs. I mean, that's like a new area that no one was in ten years ago. So we see the dollars raised. Those raised dollars are doing different things and we did ten years ago. So it's just not people talk about how crowd it is. It's like not that crowded. I mean, like private credit returns are higher than private equity over a one, two and three year basis, and I'll bet you a lot of money that will be higher than private equity over a five year period pretty soon.

So people always talk about this bubble in private credit. I've heard that for twenty five years, Like there's been a bubble for twenty five years in a row that hasn't popped, right, And what people they don't compare apples to apples, right, So what we talked about earlier, we used to do ten to fifty vibit dah, like most of these big guys they're average, but it does way over one hundred million dollars now. So they're doing things today that they weren't doing ten years ago. So now we just compete against each other. Now they're competing against the banks, right, or use another example, like we're all getting very big and especially finance, you know, lending to other lenders, lending into people's BDCs. I mean, that's like a new area that no one was in ten years ago. So we see the dollars raised. Those raised dollars are doing different things and we did ten years ago. So it's just not people talk about how crowd it is. It's like not that crowded. I mean, like private credit returns are higher than private equity over a one, two and three year basis, and I'll bet you a lot of money that will be higher than private equity over a five year period pretty soon.

But when we talk to your competitors and we you know, had this conversation last year with another big firm, you know, we were pushing them on the idea that maybe there's too much money and not enough deals, and they accepted that fat on the on the large of deals in the US, and that possibly, you know, mistakes get made at that point with taking new entrants. And then you know, you push them a bit more when they say, well, we succeed by not doing the bad deals. Then you say who's doing the bad deals? And they say the terrorists are doing the bad deal. So you know, at some point there must be some risk involved in what has been a very very fast growing market.

But when we talk to your competitors and we you know, had this conversation last year with another big firm, you know, we were pushing them on the idea that maybe there's too much money and not enough deals, and they accepted that fat on the on the large of deals in the US, and that possibly, you know, mistakes get made at that point with taking new entrants. And then you know, you push them a bit more when they say, well, we succeed by not doing the bad deals. Then you say who's doing the bad deals? And they say the terrorists are doing the bad deal. So you know, at some point there must be some risk involved in what has been a very very fast growing market.

I think the bigger issue is that our LPs are getting very focused on is you know, we're sole lead and own a lot of our own deals. Those really big deals are mostly clubbed up, and so a lot of people have an allocation to a number of different best in class managers, and when there's a default, like a company called plural Sites, they see a number of the guys they've allocated to in the same loan. And so urlps are now saying to us, so, wait a second, am I Long just one big? Because am I just long? Like an index fund of direct lending? And now they're asking for people who fish in a different pond, right, So like we don't we don't go head to head with those guys, like we just if you ask any of those guys, they would not used as competitor. They wuldn't even know who we are, right, So what that means is like there's a lot of the reason we're growing so quickly is we don't compete with those guys. So we're not seeing bad ones getting done. Like in my career, I've seen people do a lot of stupid stuff. I have seen some new entrants do dumb things. But remember these new entrants are tiny, tiny, tiny, Like if you think about our you know, eighty five percent of them on our in our space goes to like eight guys, and so yes, are the tourists doing bad deals?

I think the bigger issue is that our LPs are getting very focused on is you know, we're sole lead and own a lot of our own deals. Those really big deals are mostly clubbed up, and so a lot of people have an allocation to a number of different best in class managers, and when there's a default, like a company called plural Sites, they see a number of the guys they've allocated to in the same loan. And so urlps are now saying to us, so, wait a second, am I Long just one big? Because am I just long? Like an index fund of direct lending? And now they're asking for people who fish in a different pond, right, So like we don't we don't go head to head with those guys, like we just if you ask any of those guys, they would not used as competitor. They wuldn't even know who we are, right, So what that means is like there's a lot of the reason we're growing so quickly is we don't compete with those guys. So we're not seeing bad ones getting done. Like in my career, I've seen people do a lot of stupid stuff. I have seen some new entrants do dumb things. But remember these new entrants are tiny, tiny, tiny, Like if you think about our you know, eighty five percent of them on our in our space goes to like eight guys, and so yes, are the tourists doing bad deals?

They are, But I mean this is like a rounding error in our industry.

They are, But I mean this is like a rounding error in our industry.

And so any default on those would not riffle across and cause a panic and a you know, that's what people are worried about.

And so any default on those would not riffle across and cause a panic and a you know, that's what people are worried about.

But yeah, yeah, that's totally misguided. This whole like systemic risk around product credit. I mean, very smart people are saying that, Yeah, I really, yeah, am at a loss to know where they I'd love to hear them explain to be a boy.

But yeah, yeah, that's totally misguided. This whole like systemic risk around product credit. I mean, very smart people are saying that, Yeah, I really, yeah, am at a loss to know where they I'd love to hear them explain to be a boy.

The other thing that the smart people are saying, you know, in particular Goldman, is that they're only going to be maybe eight players left once this whole thing shakes out, and implying that you need to be massive to survive in private credit. Do you need to grow, do you need to expand you need to acquire, you know, to to make your platform successful.

The other thing that the smart people are saying, you know, in particular Goldman, is that they're only going to be maybe eight players left once this whole thing shakes out, and implying that you need to be massive to survive in private credit. Do you need to grow, do you need to expand you need to acquire, you know, to to make your platform successful.

Well that's a good question.

Well that's a good question.

So I don't agree with the first premise because remember the world is big, right, Like, private credit's only five percent of global credit, So we have a lot of room to grow, right, So I don't agree that that there's gonna be like five guys left at the end. I don't think it's gonna be like AI or something else, because again, there's different parts of the market. There's specialty finance, like we're in insurance, Like the world is a big place and there's a lot of different teams you can play. So I don't agree with the first premise.

So I don't agree with the first premise because remember the world is big, right, Like, private credit's only five percent of global credit, So we have a lot of room to grow, right, So I don't agree that that there's gonna be like five guys left at the end. I don't think it's gonna be like AI or something else, because again, there's different parts of the market. There's specialty finance, like we're in insurance, Like the world is a big place and there's a lot of different teams you can play. So I don't agree with the first premise.

And what was the second? Sorry, what was there second?

And what was the second? Sorry, what was there second?

For you your firm, do you need to acquire to get scale to survive in this.

For you your firm, do you need to acquire to get scale to survive in this.

Yeah, that's that's a good question.

Yeah, that's that's a good question.

So it's not so much about scale, it's about think about the worst business to be in from an inflation perspective, us, you know, pressure on fees, we're pay our employees way more money, we're giving them remote work, so our productivity. I mean, we can debate remote work, but there's no doubt that productivity has gone down. And then like if you think about under the previous administration, and again you mentioned DoD Frank and all this stuff, like we're like despite what people say, like they call it the shadow banking system, which is so offensive, Like we're heavily, heavily regulated, you know, like we've complained, like we have you know, insurance regulations, we have public we're monitored by the SEC who's super smart. So the cost to run a business like ours has gone through the roof, and our fees are down. So like you know, think about like businesses you don't want to be in unless you have scale. Right, So you've seen a lot of my peers sell themselves over the last twelve to eighteen months. And these are really really smart, really best in class managers. Now, first of all, the purchase prices are massive, so like you know, eight times ebit does become thirty five times ebitdah. So you know, these people are obviously not stupid, but scale is important. So we've done thirty two acquisitions. Most of our acquisitions have been on the smaller side. But that being said, you know we can roll them on our platform. And then now you have like you know, instead of two audits, you have one audit. You know, you're instead of two CFOs, you have one CFO. And that's the way to combat lower fees and higher costs.

So it's not so much about scale, it's about think about the worst business to be in from an inflation perspective, us, you know, pressure on fees, we're pay our employees way more money, we're giving them remote work, so our productivity. I mean, we can debate remote work, but there's no doubt that productivity has gone down. And then like if you think about under the previous administration, and again you mentioned DoD Frank and all this stuff, like we're like despite what people say, like they call it the shadow banking system, which is so offensive, Like we're heavily, heavily regulated, you know, like we've complained, like we have you know, insurance regulations, we have public we're monitored by the SEC who's super smart. So the cost to run a business like ours has gone through the roof, and our fees are down. So like you know, think about like businesses you don't want to be in unless you have scale. Right, So you've seen a lot of my peers sell themselves over the last twelve to eighteen months. And these are really really smart, really best in class managers. Now, first of all, the purchase prices are massive, so like you know, eight times ebit does become thirty five times ebitdah. So you know, these people are obviously not stupid, but scale is important. So we've done thirty two acquisitions. Most of our acquisitions have been on the smaller side. But that being said, you know we can roll them on our platform. And then now you have like you know, instead of two audits, you have one audit. You know, you're instead of two CFOs, you have one CFO. And that's the way to combat lower fees and higher costs.

Are you on the lookout for more?

Are you on the lookout for more?

We are very inquisitive, you know, like we've announced six or seven public announcements this year around permanent capital. So you know, we're merging our Canadian permanent capital vehicle into the US. We're merging our two BDCs together. Is all public by way, We're merging our We just announced we took over an NL vehicle that we're going to.

We are very inquisitive, you know, like we've announced six or seven public announcements this year around permanent capital. So you know, we're merging our Canadian permanent capital vehicle into the US. We're merging our two BDCs together. Is all public by way, We're merging our We just announced we took over an NL vehicle that we're going to.

Use to acquire something very large. So we've been very very publicly acquiring lots.

Use to acquire something very large. So we've been very very publicly acquiring lots.

Of things just in the US or overseas as well.

Of things just in the US or overseas as well.

Mostly US.

Mostly US.

I will say that that is an interesting theme because I know you cover global credit. We can tack back if you want, but I'm interested in this is probably the first time in my whole career, like in twenty five years of doing this, this is probably the first time we're seeing actually decent relative value.

I will say that that is an interesting theme because I know you cover global credit. We can tack back if you want, but I'm interested in this is probably the first time in my whole career, like in twenty five years of doing this, this is probably the first time we're seeing actually decent relative value.

In Europe versus the US.

In Europe versus the US.

So Europe typically is worst companies, worse laws, more pick you know, good deal like, less deals and more more competitive, and so the US has always provided a better rout of value in every environment that's kind of changed. Like there's some really interesting I'm not saying this because of you, but there's some interesting opportunities in the UK. You know, in Europe we're back in a lot of family businesses, and so like our average fund has had four percent, our first funds four percent Europe. Now our second funds twelve recent upon is thirty five percent Europe. Like, that's the first time that's happened in my own career. So we are we are seeing every so bearish on Europe. But that doesn't mean there's not opportunity.

So Europe typically is worst companies, worse laws, more pick you know, good deal like, less deals and more more competitive, and so the US has always provided a better rout of value in every environment that's kind of changed. Like there's some really interesting I'm not saying this because of you, but there's some interesting opportunities in the UK. You know, in Europe we're back in a lot of family businesses, and so like our average fund has had four percent, our first funds four percent Europe. Now our second funds twelve recent upon is thirty five percent Europe. Like, that's the first time that's happened in my own career. So we are we are seeing every so bearish on Europe. But that doesn't mean there's not opportunity.

What kind of businesses are you looking at in the UK?

What kind of businesses are you looking at in the UK?

Mostly family owned businesses, you know, there's not there's not the same level of access to capital.

Mostly family owned businesses, you know, there's not there's not the same level of access to capital.

In Europe, but any you like.

In Europe, but any you like.

I mean, we did a really interesting deal in Denmark. We did another interesting deal in Scandinavia as well, where just the access to capitals not what companies have here. The family owned business who want to buye oys brother the company does online. It's basically an online auto platform. So when Mercedes and BMW and others get their cars back, you know, they distribute them to dealers and these guys are kind of the technology company in the middle of that, and they get a fixed feedb er car.

I mean, we did a really interesting deal in Denmark. We did another interesting deal in Scandinavia as well, where just the access to capitals not what companies have here. The family owned business who want to buye oys brother the company does online. It's basically an online auto platform. So when Mercedes and BMW and others get their cars back, you know, they distribute them to dealers and these guys are kind of the technology company in the middle of that, and they get a fixed feedb er car.

So that's just a kandom example.

So that's just a kandom example.

Are you finding them cheaper in the US because of the lack of competition, relativity.

Are you finding them cheaper in the US because of the lack of competition, relativity.

Just less less like less people who do what we do, which is like fill that gap between bank lending and private equity.

Just less less like less people who do what we do, which is like fill that gap between bank lending and private equity.

And the scenes were as seeing more payment in kind, amendments, extensions, all that stuff, you know, which is pointing to stress in private credit. Right, do you expect more of that? I mean if we get this whole volatility extends. You know, people worried about recession now stackflation, you know, a scary words being batted around.

And the scenes were as seeing more payment in kind, amendments, extensions, all that stuff, you know, which is pointing to stress in private credit. Right, do you expect more of that? I mean if we get this whole volatility extends. You know, people worried about recession now stackflation, you know, a scary words being batted around.

Yeah, I mean the challenge with our investors is a lot of folks on pick income. Now, remember not all pick income is created equal. So like to your point, if there's a restructuring and you start picking some interests, the company can kind of get through whatever is impacting their business.

Yeah, I mean the challenge with our investors is a lot of folks on pick income. Now, remember not all pick income is created equal. So like to your point, if there's a restructuring and you start picking some interests, the company can kind of get through whatever is impacting their business.

That's one thing. It's another thing, like.

That's one thing. It's another thing, like.

You know, there's a pretty common feature now in most private credit and this is brand new by the way, in the first two years they have the option to pick half the spread. So even though the company's doing fine, that shows up as potentially pick income and that's not bad. Or when we do nav lending, you know, when we lend against a private equity fund, there's no cash flow in that fund, so that shows up as a picklan. So the problem with our investors is they can't tell when they go through all the LANs, they can't tell what's what. So just assume pick income bed and not all pin cup and good is bad. Like it's to your point. If there's a restructuring, sometimes we you know, change cash to pick. But I remember we do a lot of nave lending and it's all that's pick. So I have to be very transparent and communicate with my investors. But like, what what's like good pick and bad pick? If that makes sense to you, and our investors are super smart, Like it's not. What I'm saying is that the investors just don't have all the like when you look at our public company, they don't have all the information on ibit dad and what's going on behind the scenes, so that like they just have to default to two things pick bed and subordinated bed. So like, you know, we're in positions where we have one turn of bank dead and we're like three times through a second lane. But because the second lane people viewed as bad, there's other situations where you know, we're now levered like nine times in the first lane, and people view that first lean safe is good.

You know, there's a pretty common feature now in most private credit and this is brand new by the way, in the first two years they have the option to pick half the spread. So even though the company's doing fine, that shows up as potentially pick income and that's not bad. Or when we do nav lending, you know, when we lend against a private equity fund, there's no cash flow in that fund, so that shows up as a picklan. So the problem with our investors is they can't tell when they go through all the LANs, they can't tell what's what. So just assume pick income bed and not all pin cup and good is bad. Like it's to your point. If there's a restructuring, sometimes we you know, change cash to pick. But I remember we do a lot of nave lending and it's all that's pick. So I have to be very transparent and communicate with my investors. But like, what what's like good pick and bad pick? If that makes sense to you, and our investors are super smart, Like it's not. What I'm saying is that the investors just don't have all the like when you look at our public company, they don't have all the information on ibit dad and what's going on behind the scenes, so that like they just have to default to two things pick bed and subordinated bed. So like, you know, we're in positions where we have one turn of bank dead and we're like three times through a second lane. But because the second lane people viewed as bad, there's other situations where you know, we're now levered like nine times in the first lane, and people view that first lean safe is good.

So like you know, you know what I mean, Like, so like there's a there's a knee.

So like you know, you know what I mean, Like, so like there's a there's a knee.

Jerk reaction always that pick bad junior bed and generally speaking it is or more risky, I would say, But again, like the example, I use a real example, like you know a lot of a lot of entrepreneurs don't want to take on debt, so they take on a piece of preferred or something. Yeah, that's pick and it's like two times levered. And you know, from our perspective, very safe, right, doesn't mean it's like a NPL.

Jerk reaction always that pick bad junior bed and generally speaking it is or more risky, I would say, But again, like the example, I use a real example, like you know a lot of a lot of entrepreneurs don't want to take on debt, so they take on a piece of preferred or something. Yeah, that's pick and it's like two times levered. And you know, from our perspective, very safe, right, doesn't mean it's like a NPL.

Yeah, yeah, sorry, lot.

Yeah, yeah, sorry, lot.

So how are those trends trending right now? I guess you know, we when my colleagues covers Prospect Capital and I guess they got kind of you know a lot of pick income rising over there. So how how is the pick trend going on at the BC Partner's credit portfolio? Good pick and bag pick?