The Credit Edge by Bloomberg Intelligence

Corporate loans signed when rates were low are increasingly hitting a wall as they come due, according to H.I.G Bayside. “There’s a level of discount in these stressed credits that we haven’t seen for a number of years,” Jackson Craig, who co-heads the credit-focused arm of H.I.G. Capital, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Tim Rimi...

Investors underestimate the hazards in private debt, according to Pacific Investment Management Co. “There’s a lot of additional credit risk that people are often taking in some of these private situations that you kind of turn a blind eye to,” Christian Stracke, the $2.3 trillion asset manager’s president, tells Bloomberg News’ James Crombie and Bloomberg Intelligenc...

Pressure on highly-indebted companies will intensify as interest rates remain elevated, according to Seix Investment Advisors. “We have a lot of credit zombies — B3/B minus or CCC rated credits — that still have very weak interest coverage, generating zero free cash flow,” George Goudelias, chief investment officer of the firm’s leveraged finance platform, tells Bloom...

Despite all the negative headlines around private credit, Neuberger Berman says direct loans pay a lot more than traded debt and barely make a loss. “We pretty consistently see a 200 basis point differential,” Susan Kasser, the gobal investment management firm’s head of private debt, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s David Havens in this...

Venezuela debt holders will likely have to wait years to get their money back after regime change in the oil-rich nation, according to Bloomberg Intelligence. “The near-term challenges are nothing short of massive,” says Damian Sassower, chief emerging-markets credit strategist, in this special episode of the Credit Edge podcast. “I think the rest of this year is spent trying to...

Credit is one of many overvalued markets and the technology sector is particularly risky, according to Richard Bernstein Advisors. “We’re kind of in an everything bubble at the moment,” Mike Contopoulos, the firm’s deputy chief investment officer, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Robert Schiffman in the latest Credit Edge podcast....

Long-term debt bets on technology companies that are borrowing heavily for AI may end in tears, according to Newfleet Asset Management. “It’s one of the biggest risks out there,” said Dave Albrycht, the multi-sector fixed income manager’s president and chief investment officer. “There’s no free lunch in the bond market,” he tells Bloomberg News’ Jame...

KKR is looking to Europe and Japan for yield as US debt spreads grind tighter. “Investors are very focused on relative value in a market where there’s not a lot,” Tal Reback, global investment strategist for the firm’s credit and markets business, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s David Havens in this episode of the Credit Edge pod...

The technology-funding frenzy could become a bust for credit markets if AI falls short of lofty expectations, according to Barclays. “If we get to a point where we see a lot of this issuance coming to the market — and then there’s some changes, where maybe certain things are a little bit less viable or a little bit less attractive — that leads to some downside risks,”...

Global investors are looking more at European private credit as US returns get squeezed, according to London-based hedge fund Arini. “They want to focus on a place where they think there’s rule of law, where they think there’s opportunity set — and that’s really been Europe,” Mathew Cestar, the firm’s president, tells Bloomberg News’ James Crombie an...

Vanguard Group, the world’s second-largest money manager, is wary of junk bonds given how expensive they’ve become. “Where the market is today doesn’t leave a lot of room for negative surprises,” Michael Chang, head of high-yield corporate credit at the $11 trillion asset manager, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Matthew Geu...

Lack of discipline is a concern for credit markets as investors rush to fund artificial intelligence, according to Oaktree Capital Management. “Just how much money is chasing deals — I think you need to be mindful of that,” Danielle Poli, a portfolio manager for the firm’s global credit strategy, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s P...

Credit investors should be careful about participating in the artificial intelligence boom, according to DoubleLine Capital. “You have to be not only cautious about the tech sector, but the tangential related sectors that are providing support for these new projects,” Robert Cohen, the firm’s director of global developed credit, tells Bloomberg News’ James Crombie and Bloom...

Investors are too sanguine after shrugging off recent debt-market distress, according to Crossmark Global Investments. “My key concern is the complacency,” Victoria Fernandez, the firm’s chief market strategist, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Jean-Yves Coupin in the latest episode of the Credit Edge podcast. “Jamie Dimon talks a...

Corporate collapse and allegations of fraud hog the headlines, but a slumping US economy is much more troubling for debt markets, according to Monarch Alternative Capital. “There are large portions of the economy that are hurting,” Adam Sklar, the firm’s co-chief investment officer, tells Bloomberg News’ Irene Garcia Perez and Bloomberg Intelligence’s Negisa Balluku i...

Private credit is better placed than public to avoid blowups being seen in liquid debt, according to Ares Management Corp. “The level and amount of work you can do from a diligence standpoint is dramatically more extensive,” Joel Holsinger, partner and co-head of alternative credit at the company, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s David Havens...

More highly indebted companies will slip into distress as the US economy slows and earnings suffer, according to Aegon Asset Management. “I am bracing for a little more trouble ahead,” Jim Schaeffer, the $380 billion manager’s global head of leveraged finance, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Julie Hung in the latest Credit Edge podcast...

Collateralized loan obligations, particularly those backed by middle-market borrowers, are a growing opportunity for investors, according to Crescent Capital Group. “You have to work really hard to blow those structures up,” said John Fekete, the company’s head of tradeable credit, speaking of CLOs generally. Middle-market deals will make up a “larger and larger percentage...

There’s opportunity in collateralized loan obligations, according to BlackRock, the world’s largest money manager. “CLO tranches are probably one of the best relative value picks within the credit markets,” James Turner, the firm’s co-head of European fundamental fixed income investment, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Tim...

Razor-thin debt spreads underpin the global investor push into private markets, which can pay significantly more, according to Blackstone. “We see excess spread in private credit,” Michael Zawadzki, chief investment officer of Blackstone Credit & Insurance, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s David Havens in the latest Credit Edge podcast. &...

Distressed debt exchanges in the form of liability-management exercises are set to take off in Europe, according to Gibson Dunn, the US-based law firm. “You’re getting the same lawyers and bankers hired in Europe for deals that they do here — it’s not surprising that they would potentially roll out a playbook that’s worked,” Scott Greenberg, the firm’s glo...

Traded corporate debt is much more attractive than private credit, according to RBC BlueBay Asset Management. “Public credit is far superior,” Tom Moulds, senior portfolio manager for investment-grade fixed income at the $534 billion firm, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Tolu Alamutu in the latest Credit Edge podcast. “There’ll p...

Leveraged buyouts are poised for a revival, albeit less aggressively structured than in the last wave, according to Moody’s Ratings. “Ultimately everyone will need to adjust to the new environment and you will see deal flow come back,” Christina Padgett, the firm’s head of leveraged finance and private credit research, tells Bloomberg News’ James Crombie and Bloomberg...

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 le...

More companies will fail to repay debt as funding costs stay high, according to Mudrick Capital Management. “What we’re getting is just elevated defaults every year, we think for the next five to seven years,” Jason Mudrick, the distressed debt fund’s founder and chief investment officer, tells Bloomberg News’ Irene Garcia Perez and Bloomberg Intelligence’s Mike...