Special Situations & Distressed Debt: A Halcyon Period for Investors | Global Alts 2023
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- čas přidán 8. 09. 2024
- In this panel discussion, Mike Arougheti, Joshua Friedman, Marc Lasry , John Zito and J. Jeffrey Assaf discuss their views on the current state of "special situations" investing and some of the unique challenges facing investors right now. The panelists discuss how they approach investing in distressed debt as well as how they view the wider economy.
The discussion touches on the possibility of a debt ceiling default. What are some of the perils of credit investing in this environment? Are pension plans getting overpaid for their risk? How can we get back to where we were before covid-19? Where are the opportunities in the world of private credit? What’s going to happen to interest rates in the next six months to a year?
Mike Arougheti, Co-Founder, CEO and President, Ares Management Corporation
Joshua Friedman, Co-Founder, Co-Chairman and Co-CEO, Canyon Partners LLC
Marc Lasry, Chairman, CEO and Co-Founder, Avenue Capital Group
John Zito, Deputy CIO, Apollo Global Management
J. Jeffrey Assaf, Senior Managing Director and CIO, ICG Advisors
This panel was held at iConnections' Global Alts Conference at the iconic Fontainebleau Miami Beach. The annual event is the largest cap intro event in the world where attendees learn from investment, finance, and economics speakers, and get access to an exclusive alternative investment community.
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Amazing
This in London? Meeting via internet
Can anybody help me put the line "using the excess liquidity to buy down basis" into context? This was mentioned by John Zito around 12:29.
yeah so excess liquidity is just the abnormal returns they are getting (lending at 8-15% and pensions who are there main clients are fine with less than before). And basis is the original cost of an asset typically an asset bought with debt. So with more money they are able to pay down their liabilities much quicker than before.
Their clients are typically in balance sheet trouble, and these executives are in the business of helping their clients get right and making a profit while doing so. "To buy" refers to the lenders using their available cash or other liquid assets to purchase distressed debt or assets from the troubled client at a lower price than their face value. They buy their distressed debt and take it off their balance sheet. This would be one prong of a custom designed package to completely address their clients' balance sheet distress. The buying of their bad debt from them on terms that are very favorable to themselves is a way for the lender to hedge the risk they are taking with the other components of their package, which would include lending the client more money on favorable terms to themselves, to tide the client through their difficulties. To buy "down basis" -- I think basis refers either to the par value of the bad loans they offer to buy, or it refers to the what the lender's see is their risk basis in dealing with particular clients. They buy down their risk basis by offering to purchase some of the client's too-expensive loans on terms that improve the lender's outcome of the deal, and thus lower their risk.
moderator talked way too much
Minute 24:30: the Fed lowered rates to stimulate lending, to push people into real estate debt and juice the real estate sector. They got exactly what they wanted, BofA sits on a big book of long duration mortgage loans, the Fed proceeded to raise rates and the inevitable has happened to the banks. The Fed seems to bounce from remediating one adverse situation of its own making to the next.
Four top notch professionals and a rather sub-par moderator who has some skewed preconceptions and more than once promoted a doomsday-in-American-finance outlook that all of the guest speakers dismissed in turn.