Pvtcreditguy
@pvtcreditguy
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Parody acct. PM at institutional investor. Personal wealth invested in projects that I also manage w/ “family & friends”
Joined March 2023
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Hearing LA Dodgers have sold the liability in a syndicated deal to Ares and Golub. HPS also trying to bid it late. Discounting it at SOFR + 450 covenant lite. Think of it as an NAV loan so interest PIKS
Shohei Ohtani's $700 million contract calls for him to be paid only $2 million a year for the next 10 seasons, with $680 million deferred until the end of the deal, sources confirm to ESPN.
The CBT hit on the contract is going to be around $46 million, a huge discount for L.A.
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Now that I am fully back and caught up from the Ares conference in hot as fuck Phoenix, Arizona lets debrief. Ares is clearly a world leader in credit and also dabbles in real estate and private equity. The conference probably had 1500+ total people. Sheryl Crowe headliner (lol)
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How else are we supposed to get SOFR + 675
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People who are unknowledgeable will read this and think it’s because they are “proceeding with caution”. However, Barings just lost their whole PC team to a competitor so have 2.5 warm bodies left lol.
*BARINGS IS PAUSING NEW INVESTMENTS IN PRIVATE CREDIT FUNDS
so many bubbles out there
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Each month I will profile a Private Credit Manager that I am familiar with (but might not be invested in). Hopefully this will give my few followers one or two facts or more DD into some of the names in the PC universe that I talk with
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HPS was founded in 2007 and as of 2023 has ~101bn AUM. They have over 15 offices and consider themselves non-investment grade focused but the ability to lend across the middle market to UMM scale while also investing in multiple different credit strategies.
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Yes, our portfolio is holding up well. We here at Cerberus are constantly talking with our Borrowers. Debt service has only decreased from 3x to 1.35x over LTM. We wanted to see if you are okay with us offering PIK to majority of the portfolio. Only 19 names on watchlist rn.
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Venture lending is wild. "Hey Borrower, here is our term sheet. 16% cash pay or 18% PIK. We want warrants too. By the way our covenants include 2 years of liquidity at all times on the balance sheet. Let's throw in a fund guaranty as well".
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He looked me right in the eye:
“So you use the pension’s money and invest it with shit managers and then they lend it in secured positions to shitco’s…
And then you call it private credit instead of leveraged loans??!!!”
You will be missed,
Charlie.
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Someone smarter than me (preferably an Ivy leaguer since I’m a state school kid), please explain to me how buying student loan pools is “Asset Backed Finance”
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Trying not to be biased but KKR's asset backed finance team and the platforms they use to originate are very impressive. Pathlight seems impressive as well. Oaktree's ABF presentation less so. Still getting my thoughts on Carlyle and NB's.
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I was at a couple of investor manager conferences this week and the overall sentiment continues to ring: you can get equity like returns right now in senior secured lending positions
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6/30 direct lending returns are coming in and clearly some write downs for the direct lending credit managers who are writing larger sized checks
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The January profile will be on HPS. Hopefully I share some insights (good, bad or indifferent) that your consultants don't tell you in their 75k DD reports!
Each month I will profile a Private Credit Manager that I am familiar with (but might not be invested in). Hopefully this will give my few followers one or two facts or more DD into some of the names in the PC universe that I talk with
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Always interesting to read Pioneering Portfolio Management by David Swensen every other year and wondering why he forgot to include multiple chapters on the most prestigious, high return, low volatility asset class in the world - private credit
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You have been trapped in a White Oak commingled debt fund since 2010 and the investment period ended years ago but there’s still multiple positions with no end in sight.
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Ah this sounds like the endowments with very little private credit allocation trying to add to it who are selling their LP PE interests on the secondary market for 40centa to join the fun, get frisky, and give Ares/Apollo/KKR direct lending commitments
Was pitched industrial JV opp with a 23% IRR base case and alleged reason why seller selling is because seller believes now a great time to buy value add assets and wants liquidity……so is selling a vacant bldg today for 50% prem to 2021 acq price, passing on the 23% themselves
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This week my team and I had a meeting with a Federal Reserve Bank regarding our Private Credit partnerships. It was a meeting where they asked many questions regarding the asset class and what our partnerships held. If I had to guess, regulation is coming.
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You know quarterly returns are going to be bad when the manager out of the blue offers to reduce management fees by 30bps out of the kindness of their heart.
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We are getting asked left and right to extend investment periods for 6 months because the PIMCO's first close on their newest funds are way behind on first close dates. The assets that the PIMCO's were lining up have no where to go so current fund vehicles need LPAC extensions.
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Let's talk about Neuberger Berman Private Credit next (as a shop). Hope you all will find out one or two things that might make you want to inquire with them or shy away.
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I had a first this past Friday. Someone came into our shop to pitch us on a great strategy that we liked. And they said “we know you like investing $500mm per fund, but would you be okay just doing $200 as we don’t want to over raise”, I appreciate that.
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I just finished reading All Public Writings of Warren Buffett.
It took me 69 reading hours
I summarized everything in a 1 sentence tweet for you.
Here's what I learned:
• We are in the Golden Age of Private Credit
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There’s a chief credit officer I know at a super regional who wants my help starting a credit fund that he heads. What’s the best advice I can give him? Obviously no institutional pension will back him. Tell him try to do a side hustle F&F fund first, RIA’s, move to debt fund?
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Back to transparency reports, it is always interesting how some managers will give detailed loan level info and some won’t. I guess it’s because Blue Owl or OwlRock or whatever they are called doesn’t want me telling HPS that they financed a private shitco at sofr+450
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Sometimes I wonder if any direct lending fund that was born in the last 10 years has anyone - one single person at their shop - who has been involved in a BK restructuring case.
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Instead of my normal cold shower routine, I switched things up today
@huntercoldcalls
and jumped in the pacific ocean (my third house is on the boardwalk in Newport, zestimate $56mm). It was TOO WARM. I immediately turned around and went back to my 500sqft cold shower room
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Blue Owl when I respond to one of their emails asking me if they can have a courtesy meeting with me while they are in town visiting
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The only way to get alpha with direct lending credit funds is to have the best fee arrangements. All direct lenders invest in pretty much the same type of companies and syndications of deals. I am sure there are some outstanding credit underwriting teams out there.
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Looking forward to sharing the best and worst returns for the previous quarter in the coming days, as well as credit manager and strategy info.
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If anyone is interested in a CLO 101 primer, the new Animal Spirits podcast is worth the listen just sharing as an FYI)
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But Mr. Top Quartile Manager Sir, why are my 6/30 quarter returns dipping even though you told me it’s a “Golden Age for Private Credit” and we are in a rising interest rate environment?
Well Mr. PM at Institutional, we didn’t tell you about maybe increased default rates
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Can’t wait til Monish starts a private credit fund so I can invest with another bottom quartile performing manager
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‘‘Twas the night before Christmas, when all through the night, were Private credit managers everywhere, CLO club loans in sight. The bank loans were hung by BofA with care, with hopes that HPS would soon be there. The Ares analysts were drunk all in their hometowns, while Apollo
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Investor Relations folks who cold email me always take a lot longer to get back to me after I respond “we can schedule an intro call if you can beat a 50bps management fee, 8% pref, no catch up, 82/18 split, which are close to the terms of the last partnership we signed up”
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I should have clarified, the loans these ABF funds are purchasing are NOT in a securitization and NOT government backed. They are being bought from private lender originators off a data tape. If the Borrower defaults, the recovery rate is pennies. Doesn't scream "asset backed"
Someone smarter than me (preferably an Ivy leaguer since I’m a state school kid), please explain to me how buying student loan pools is “Asset Backed Finance”
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We will not mark down our loans at 1x DSCR this quarter we are in the market with a new fund.
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Buffett/Munger both in their 90’s and is/were still incredibly sharp. Not many signs of cognitive lapse. Hard for me to believe that isn’t from their constant learning, reading, math, brain work. Keep the brain active and better chance to avoid cognitive decline?
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BBG: Real Madrid to borrow $390mm in Private Debt Markets
Imagine the sick tickets and meet and greets that Ares and Cerberus are going to get from doing this deal with my portfolio's LP money.
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Ares picking Phoenix for their AGM in mid May because we are in the golden era of not understanding what the normal temperatures in Arizona are this time of the year.
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No bigger waste of time then spending hours putting together board materials for your board members (who shuffle in and out as they are 2 year appointments). Maybe 2 out of the 8 understand more than just the high level slides. Time suck. Make consultants do it for your team.
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Happy 4th. Let’s finance our presidential candidates campaigns with a SOFR + 625 covenant lite loan and get this bread
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What is the difference between a BSL analyst at a bank and a private credit analyst at Cerberus? A leopard never changes its spots
as a Private Credit Analyst i’m tired of this ignorant idea that what i do is “fake”
i have responsibilities a civilian could never understand: to my LPs, to my MDs, and most importantly to the Sponsors who count on me to cave to their every demand.
does that sound fake to you?
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Knowing the amount of slave hours A&M employees are working on private credit restructurings, UAE jail doesn’t feel like it would be all that bad right now to be honest
“I joined restructuring to make a difference and help companies get healthier, fix corporate governance, and create value”
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Every private credit fund manager is telling us the same thing - this year and next year vintages will be the best risk / return funds seen in a decade +. I think I agree with them, considering direct lending funds are quoting + 650-750 spreads for down the fairway deals
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So happy one of our credit managers extended the credit to Inter Miami to get Messi to the MLS. He is worth it. Great collateral.
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Cerberus performing asset management on loans in workout aka making LPs pay A&M millions in consulting fees
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If you want to be good at being an institutional LP, learn to love reading legal agreements. LPA's, side letters, amendments, subscription agreements, etc. And then learn its OK to have awkwardness during negotiation. Negotiation is a sport.
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Starting to feel like 13%+ net IRRs are becoming the norm for the pitch right now. How things have changed so fast. Basically a 50% increase in returns being sought for private credit over 12 months
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We are too large to invest with smaller credit managers (think less than $1bn AUM funds), but are exploring a way to invest with a fund of funds who seeds these credit investors. Yes, we would get double fee’d but smaller managers produce higher returns
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Best overall returns for Q1 2024 for direct lending: HPS funds (Direct Lending Fund, SLF, AP Mezz, etc)
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Risk Sharing Transactions are the new buzzword in Private Credit. And as they should be - the risk/return from this niche asset class if above all else in the creditsphere. Spreads from +600-+1150 depending on the underlying.
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Atalaya explaining the Blue Owl acquisition means the Golden Age of Asset Based Credit
Me at the function explaining how we’re actually in the Golden Age of Opportunsitic Credit
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Just wait until people find out about what NAV financing does. AKA more leverage
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Fundraising has got to be tough times right now when top quartile managers are offering 35bps management fees, 8.5% hurdle, 12.5% carry, no catch up
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Hoping Apollo will finance this business at SOFR+550
@sweatystartup
My biz: convince
@SecYellen
start OnlyFans where I’m lead simp & take 1% cut
Content ideas:
- she teaches Econ 101 but I’m dyslexic so she sits on my face
- inflatable bull costume that inflates/deflates as she whips me
- Xi Jinping costume she pegs me in when i dump products
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Bond King currently on Bloomberg MEDI if anyone wants to be able to sound smart to their CIO's later today.
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One of the most annoying things for a long term institutional investor in the private credit space is when a junior tranche thinly traded CLO position is a forced sale and the marks that come with that to your position(s)
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Thread for people fundraising and targeting institutional money (this thread is highly subjective): for a PM at an institutional shop, I think most prefer an email over a call / voicemail. In the intro email, it would be a pleasant surprise for it to be a hello email rather
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@HighyieldHarry
This is like Apollo vs Marathon during creditor on creditor restructuring violence
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Mostly done with manager calls for the 9/30 quarter. Overall, some lower than expected returns (still positive in the .5-1.5% quarterly performance range) in the direct lending space. Unique credit strategies (think risk sharing, aviation leasing, life insurance) killed it
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Also, the culture clearly stems from Tony and Mike. These guys know how to keep talent, incentivize appropriately, relationship manage, and become billionaires that anyone can approach.
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$FRC has a huge portfolio of IO loans with wealthy borrowers/guarantors and backed by what I presume is CRE that is easy to underwrite. If $FRC is needing to fire sell some loan books right now, could this be a great buying opportunity for private credit funds?
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I have been asked to help write the 17th edition of the book to add in a private credit section by the publishers
Always interesting to read Pioneering Portfolio Management by David Swensen every other year and wondering why he forgot to include multiple chapters on the most prestigious, high return, low volatility asset class in the world - private credit
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@HighyieldHarry
@junkbondinvest
Every Ares MD and Director last week at their conference in NY 🤣
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Great thread and article
This 9 part🧵about the private debt markets is written by one of the people I most respect in credit.
@kieranwgoodwin
was my biggest competitor during the foundational years when CDS was created. After that, he was the partner at King Street who made their ‘08 into a positive
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We just out here trying to make 7% yo, it’s an honest life. Just give me a gross 10 net 8 and let me collect that sweet sweet pension for working 10 hours a week and having multiple other businesses and f/f funds.
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This deal got done at SOFR+400 by the way. Covenant-lite. Ha - thanks Paul Weiss
So happy one of our credit managers extended the credit to Inter Miami to get Messi to the MLS. He is worth it. Great collateral.
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TERMS RELEASED: SOFR minus 350
Covenant lite deal, Paul Weiss to represent borrowers
85 OID if rates go up (but not down)
Rory and Tiger to golf with Blue Owl I mean Owl Rock execs once a month, DJ and Paulina to do their thing with Cerb exec team
BREAKING: LIV and PGA looking for syndicated loan to fund merger. Paging Dr Owl Rock
Paging Dr Cerberus
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And the movie sequel is how the credit shop is now a PE shop since they took the equity of all the loans in workout. Let’s get
@_NicholasCage_
on the line
Movie idea: Margin Call but it’s a direct lender realizing all their loans are heading to workout.
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Pretty much especially now that theNSL market is open and there is so much private credit competition
Private Credit = Public Credit
The only thing that makes it “private” is the number of people in the deal. Wait until the next drop down. Oh, and the restructuring.
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BDC Shitcos gaining traction
Institutional investors eager to partake of the $1.5B private credit market increasingly are turning to non-traded BDCs (business development companies), entities originally aimed at retail investors via BBG
#leveragedloan
@PitchBook
#PrivateEquity
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Throughout the last 5 and 10 year periods, their funds have consistently produced double digit net returns while recycling/returning capital to the investor. The one fund that lacks in returns is their asset backed fund but it is a diverse fund that has low volatility.
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If (big if) there is no deposit run at $pacw and $wal, they will survive. Tangible equity seems to be positive. $wal put out a post yesterday that deposits have remained basically level the last couple of days. Shorts hammering the stock price.
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CLO equity producing 15%+ IRRs. B and BBs also with huge yields and loan pricing in the 80s. Even on AAs large institutions can get close to their 7% yield needs.
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Nothing like a fund that has been out of its reinvestment period for years yet still has 30 names (some where sponsor owns the equity). Just get me out of these positions so I never have to talk to you again please
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I always enjoy when another institutional or pension fund reaches out to schedule a call just to talk about our respective private credit books. I get to hear some of the LPA/side letter terms they find important. We also get to lol about bottom quartile managers
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Meeting with Manager’s later this week. What questions should I ask them that would be worthwhile to share answers?
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I just finished The Bond King by
@mdc
. I highly recommend!
@real_bill_gross
is a beast. Work harder, no excuses
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Some really good BBG and FT articles on Private Credit this AM. Can anyone guess what the title topics mention?
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@for_yield
I own two airbnbs in Phoenix and instead of the lender foreclosing on me since I’m down -6901% in revenue for 2023 (and obviously went with a hard money floating rate loan) they just chopped off my left leg instead
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My fund’s master cash account is yielding almost 5.25%. Why wouldn’t we lock in the equity rally gains so far this year and let our investment net cash flows sit in cash?
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Spreads have continued to widen and loan quotes continue to be at some of their highest peaks. I am talking 12% unlevered returns just from interest income.
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Lets talk about culture. Ares employees are as easy going as the fellas hanging out at the lake during the summer drinking beers. Compared to the cultures at KKR, Apollo, Cerberus, Ares employees (TO ME) are much "chiller" (lol) but just something I wanted to point out.
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Confirmed - The Private Credit Golden Age has moved to Australia/India. SOURCE: Ares. Talk your book!
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Soho House
Himalayan Marching Powder
Country Club
Equinox plus some stupid ClassPass supplemental fitness subscription
More than Strippies less than Hookies
UberX
10k/month right there
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Ares is the market leader in Europe and its not even close. Especially with Barings get ravaged by whatever firm that was. Ares sees every direct lending deal in the Euro marketplace. The spreads in Euro right now are +100 compared to US direct lending deals of similar type.
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Lowest returning managers in direct lending for the quarter after looking at our book and talking with other colleagues: Cerberus and Oaktree. Still positive quarterly returns though, just lower than the rest.
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If this tweet gets 2 likes from my 9 followers I will share the top 5 worst managers (with regards to performance) of a $100bn total fund pension plan.
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So many PE continuation firms being raised. Instead, should try to reduce PE exposure the next 12-24 months and allocate to private credit. Can get double digit returns as a pension and higher up the capital stack. I lol everytime a PE continuation fund is pitched
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"Our thoughts are with the people of Israel and all the bad things happening there, but by the way we only have exposure to one name in Israel and we are monitoring the situation"
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Overall credit and health of portfolios continues to act normal, but they are paying more attention to watch list borrowers. Nothing alarming so far with regards to potential for credit defaults / workouts
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Any bidders yet for Medimpact Healthcare's leveraged loan? BofA is being hung out. Private credit shops are going to be able to buy that hung loan in the 80s directly from the BofA led group.
The loan docs originally negotiated must be awful. Spread increased already too.
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Yeah, my Private Credit volatility/standard deviation for Inception to Date is around 1% vol. But Mr. Private Credit Guy, ITD started in during a benign credit market, isn't it possible that returns could change with a pick up in defaults? Nah - I do not know what that word is.
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Mr Pvtcreditguy, who are these bottom quartile managers?!? Well sir, one of them rhymes with Rulptor and another with TIM
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We recently told a current manager that we will be allocating to another manager in their direct space. Should have seen his face when we told him the news.
What we explained to him is that his firm has opened our eyes on this niche space (growing space).
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