Collateralized loan obligation equity stands to gain as much as 15% this year, according to Tetragon Credit Partners. “It’s teens returns, high current cash flows and diversification,” said Dagmara Michalczuk, co-chief investment officer at the firm, which specializes in the riskiest part of the CLO market. “We are in vanilla corporate America, just using a little bit of leverage in financial engineering to generate those returns,” she tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Mike Campellone in the latest Credit Edge podcast. Michalczuk and Campellone also discuss the risk of loss from liability-management exercises, private debt valuations, loan defaults and relative value in European CLOs.

Collateralized loan obligation equity stands to gain as much as 15% this year, according to Tetragon Credit Partners. &ldquo;It&rsquo;s teens returns, high current cash flows and diversification,&rdquo; said Dagmara Michalczuk, co-chief investment officer at the firm, which specializes in the riskiest part of the CLO market. &ldquo;We are in vanilla corporate America, just using a little bit of leverage in financial engineering to generate those returns,&rdquo; she tells Bloomberg News&rsquo; James Crombie and Bloomberg Intelligence&rsquo;s Mike Campellone in the latest Credit Edge podcast. Michalczuk and Campellone also discuss the risk of loss from liability-management exercises, private debt valuations, loan defaults and relative value in European CLOs.

The Credit Edge reviews the top credit news of the week and looks at the week ahead, with in-depth research of the most important corporate sectors, trends and themes. Analysis of specific corporate bonds and credit default swaps is backed by Bloomberg Intelligence's robust data sets and indexes.

The Credit Edge reviews the top credit news of the week and looks at the week ahead, with in-depth research of the most important corporate sectors, trends and themes. Analysis of specific corporate bonds and credit default swaps is backed by Bloomberg Intelligence's robust data sets and indexes.

The Credit Edge by Bloomberg Intelligence

Tetragon Sees Midteens Gain in Riskiest CLO Tranche

https://api.omny.fm/orgs/e73c998e-6e60-432f-8610-ae210140c5b1/clips/49cdbbe6-4923-4abf-8fc9-b3400149282d/transcript

Blue-chip companies, including hyperscalers, may be jeopardizing their credit ratings by piling on debt, according to Principal Asset Management. “We have seen some downgrades, and I would expect that that would continue as borrowing ramps up,” Mike Goosay, the $600 billion manager’s global head of fixed income, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Julie Hung on the latest Credit Edge podcast. “I don’t think that’ll have a behavioral effect on the way that investors look at the market, nor does it — to date, anyway — change the borrowing costs of those corporates,” he adds. They also discuss the artificial-intelligence funding frenzy, why junk bonds are attractive despite macroeconomic risks and how global government-bond volatility affects demand for credit.

Blue-chip companies, including hyperscalers, may be jeopardizing their credit ratings by piling on debt, according to Principal Asset Management. &ldquo;We have seen some downgrades, and I would expect that that would continue as borrowing ramps up,&rdquo; Mike Goosay, the $600 billion manager&rsquo;s global head of fixed income, tells Bloomberg News&rsquo; James Crombie and Bloomberg Intelligence&rsquo;s Julie Hung on the latest Credit Edge podcast. &ldquo;I don&rsquo;t think that&rsquo;ll have a behavioral effect on the way that investors look at the market, nor does it &mdash; to date, anyway &mdash; change the borrowing costs of those corporates,&rdquo; he adds. They also discuss the artificial-intelligence funding frenzy, why junk bonds are attractive despite macroeconomic risks and how global government-bond volatility affects demand for credit.

Principal Sees High-Grade Downgrade Risk as Issuance Ramps Up

https://api.omny.fm/orgs/e73c998e-6e60-432f-8610-ae210140c5b1/clips/8ab98bd7-6b94-4bff-9401-b450015aad76/transcript

Loose underwriting standards are increasingly troubling for private credit market participants, according to Bloomberg Intelligence. “This concern has been growing for a period of time,” David Havens, BI’s senior analyst for private credit, tells Bloomberg News’ James Crombie in this special episode of the Credit Edge podcast. Weak underwriting discipline was flagged by private debt market participants in a recent global BI survey, rising in prominence compared with a poll conducted in September. In addition, direct lenders face lingering pressure from retail redemptions at business development companies. “Headlines are still going to be negative, focused on that very small portion of the market — it’s becoming slightly infectious and weighing on the wealth side of the business,” says Paul Gulberg, a senior analyst who covers global banks and asset managers. The trio also discuss the drivers of private credit growth, loan valuations, the liquidity premium and fund fees.

Loose underwriting standards are increasingly troubling for private credit market participants, according to Bloomberg Intelligence. &ldquo;This concern has been growing for a period of time,&rdquo; David Havens, BI&rsquo;s senior analyst for private credit, tells Bloomberg News&rsquo; James Crombie in this special episode of the Credit Edge podcast. Weak underwriting discipline was flagged by private debt market participants in a recent global BI survey, rising in prominence compared with a poll conducted in September. In addition, direct lenders face lingering pressure from retail redemptions at business development companies. &ldquo;Headlines are still going to be negative, focused on that very small portion of the market &mdash; it&rsquo;s becoming slightly infectious and weighing on the wealth side of the business,&rdquo; says Paul Gulberg, a senior analyst who covers global banks and asset managers. The trio also discuss the drivers of private credit growth, loan valuations, the liquidity premium and fund fees.

Private Credit Has a Weak Underwriting Discipline Problem

https://api.omny.fm/orgs/e73c998e-6e60-432f-8610-ae210140c5b1/clips/c2bf6a52-8d14-4dc2-b017-b44f010596ca/transcript

JPMorgan Asset Management sees value in the debt of companies building out AI, but it’s keeping a close eye on how much more they plan to spend next year. “If we’re seeing capex increase at the same rate that we saw 2025 to 2026, I think that’s probably a little bit of a red flag,” Stephanie Doyle, a portfolio manager at the $4.3 trillion firm, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Arnold Kakuda in this episode of the Credit Edge podcast. “I think the issuance is an opportunity,” said Doyle, who’s part of the money manager’s global fixed income, currency and commodities team. They also discuss the potential for credit spreads to tighten, rising net new bond issuance, the earnings outlook and growing macro risks.

JPMorgan Asset Management sees value in the debt of companies building out AI, but it&rsquo;s keeping a close eye on how much more they plan to spend next year. &ldquo;If we&rsquo;re seeing capex increase at the same rate that we saw 2025 to 2026, I think that&rsquo;s probably a little bit of a red flag,&rdquo; Stephanie Doyle, a portfolio manager at the $4.3 trillion firm, tells Bloomberg News&rsquo; James Crombie and Bloomberg Intelligence&rsquo;s Arnold Kakuda in this episode of the Credit Edge podcast. &ldquo;I think the issuance is an opportunity,&rdquo; said Doyle, who&rsquo;s part of the money manager&rsquo;s global fixed income, currency and commodities team. They also discuss the potential for credit spreads to tighten, rising net new bond issuance, the earnings outlook and growing macro risks.

JPMorgan Is Wary of Another Big Leap in AI-Related Spending 

https://api.omny.fm/orgs/e73c998e-6e60-432f-8610-ae210140c5b1/clips/34d6543e-8037-4446-a645-b44a01441080/transcript

Tetragon Sees Midteens Gain in Riskiest CLO Tranche

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