FICC Focus

“I’ve been shocked by the attention the issue as far as my mediating cases that are before me has gotten because in my view it’s just a label,” US Bankruptcy Judge Michael Kaplan said, addressing the scrutiny surrounding his role as a mediator in cases pending before him. Bankruptcy judges “have always brought parties into chambers in an effort to settle matters when it’s consensual.” In a conversation with Bloomberg Intelligence’s Negisa Balluku at the Beard Group’s Distressed Investing Media Night on May 19, Judge Kaplan framed bankruptcy judges as trial-level problem solvers, discussed his Multi-Color venue opinion, and raised concerns about the speed and cost of Chapter 11, as well as the weakening effect that liability management exercises can have on future debtors.

“You have a refinancing problem; that’s the dynamic that we’re in today. With the covenant-lite nature of the loan market, most of these better-quality businesses can orchestrate an extension one time,” said Jason Mudrick, founder and chief investment officer of Mudrick Capital Management. “The problem is when you get to that new post-LME maturity wall, it’s going to be much more challenging if we did our jobs right to do another LME.” Bloomberg Intelligence’s Phil Brendel and Negisa Balluku sat down with Mudrick at the Beard Group Distressed Investing Media Night on May 19 to discuss the evolving landscape for liability management exercises (LMEs). Mudrick shared his perspective on navigating complex restructurings, the strategic role of litigation and how changing legal loopholes and market dynamics are shifting tactics for distressed investors. He also reflects on high-profile past cases like AMC Entertainment and Party City, detailing how “irrationally high” market caps and management relationships affect investment outcomes.

Rising Treasury yields, war-driven inflation concerns and uncertainty over the Federal Reserve are reshaping the fixed-income outlook. George Catrambone, head of fixed income for the Americas at DWS Group, joins Ira Jersey, Bloomberg Intelligence chief US interest-rate strategist, on this Macro Matters edition of the FICC Focus podcast. Catrambone discusses why the move higher in long-end Treasury yields has been driven more by oil, inflation expectations and fiscal concerns than by growth, and why he sees the most compelling opportunity in owning the front end of the curve. The two examine Kevin Warsh’s arrival as Fed chair, how the balance of hawks and doves on the FOMC could shape the path for rate cuts and whether changes to the Fed’s communication framework -- including the future of the dot plot -- are likely. They also discuss how higher deficits, rising debt-service costs and growing bill supply could pressure Treasury issuance and long-dated yields.

“The key to longevity in lending is really avoiding principal loss, minimizing principal loss,” says Richard Miller, chief investment officer of TCW’s Private Credit Group. Reduced distress has led to less demand for restructuring and recovery-optimization skill sets in recent years, but “it really feels like in the next four or five [years]... those characteristics are going to be important for performance in this space,” according to Miller. He joins Bloomberg Intelligence’s Noel Hebert on this episode of the Credit Crunch podcast to discuss TCW’s suite across direct lending and rescue capital, as well as its strategic partnership with PNC. They also explore appropriate leverage profiles, whether software is uninvestable, having flexibility beyond sponsor-led deals and why newer-vintage direct-lending offerings might be better positioned.

Heightened geopolitical risk is driving asset price fluctuations, as inflation and interest rate uncertainty demands increased focus on risk management and liquidity. Andrew Jackson, head of investments at Vontobel, joins Damian Sassower, Bloomberg Intelligence’s chief EM fixed income strategist, to assess portfolio exposure and investor sentiment across emerging market debt, as the asset class is well positioned to rebound when tensions de-escalate. Jackson and Sassower touch on inflation expectations, credit fundamentals and the policy outlook across EM following the surge in global energy prices.

Listen to this episode on Apple Podcasts and Spotify.

“In the past, I think a lot of times [sponsors] just handed the keys over if they were hopelessly insolvent,” industry veteran David Trucano says. “Now [the market has] basically written, through credit agreements, a call to the equity such that they can extract additional value through the capital structure and preserve value for themselves. And as a fiduciary, they’re required to do it.” Bloomberg Intelligence’s Phil Brendel and Noel Hebert sit down with Trucano (formerly of BlackRock, Centerbridge, Goldman Sachs SSG and Houlihan Lokey) to trace the trajectory of the distressed debt and restructuring markets over the last 25 years (7:40). From the dot-com bust and the WorldCom fraud to the rise of private credit and modern “creditor-on-creditor violence,” the conversation explores how liability management exercises have evolved and where the next distress cycle is brewing. The podcast concludes (1:19:05) with BI’s Negisa Balluku joining Noel and Phil to discuss the latest developments in Spirit Airlines, Telesat, Multi-Color Corp. Ardagh Group, and QVC Group.

Stephen Douglass, chief economist and a member of NISA Investment Advisors’ global investment committee, explains why he still sees the US economy as broadly consistent with a soft-landing path once the current oil shock fades, even though the war has complicated the timing of Fed rate cuts. He joined Ira Jersey, Bloomberg Intelligence’s chief US interest-rate strategist on this edition of Macro Matters. The two discuss Kevin Warsh’s arrival as Fed chair, why Douglass expects more incremental than revolutionary change at the central bank and why he thinks any attempt to pair balance-sheet reduction with lower policy rates would be difficult to execute. They also examine NISA’s preference for front-end Treasury steepeners over tight credit spreads, the risks posed by higher oil prices, the warning signs coming from the UK gilt market and why the Treasury Department is likely to keep leaning on bill issuance rather than meaningfully increasing coupon supply.

The UK is at the forefront of market headlines amid a political crisis and record gilt yields. In this episode of the Credit Crunch podcast, host Mahesh Bhimalingam, Bloomberg Intelligence’s global head of credit strategy, discusses how credit remains a safe haven in every crisis with Boris Okuliar, chief strategy officer and head of global diversified credit at Corinthia Global Management. They dig deep into the middle-market and private credit universe, covering deal profiles, spread premiums, typical leverage structures, fees and expected investor returns. They also discuss deal quality, expected holding periods, exit strategies and the role of traded credit within portfolios.

In this episode of FX Moment, Bloomberg Intelligence Chief FX Strategist Audrey Childe-Freeman and Jordan Rochester, head of FICC strategy for EMEA at Mizuho Bank, discuss how the evolving UK political dynamics leave sterling exposed in the near term via the potential revival of a negative fiscal premium. Jordan and Audrey also revisit the dollar-yen outlook following the recent Ministry of Finance/Bank of Japan FX intervention and discuss what scenarios could take the pair out of the 155.00-160.00 trading range, with a broadly weaker dollar outlook and/or joint FX intervention — with the US — the best contenders to trigger a sustainable push lower in the currency pair.

Bloomberg Intelligence’s chief US interest-rate strategist Ira Jersey lays out his latest views on the Federal Reserve and the US Treasury market in this solo Macro Matters edition of the FICC Focus podcast. Jersey discusses why he expects the Fed to remain on hold for at least the next several months, even after Jay Powell’s departure and Kevin Warsh’s expected arrival as chair. He examines the significance of recent FOMC dissents, the challenges Warsh may face in building support for rate cuts, and why shrinking the balance sheet while easing policy could prove difficult without broader changes to bank regulation. Jersey also explains how uneven job growth, inflation expectations and developments in oil prices could shape the path of policy and rates. He reviews his outlook for the Treasury curve, including why he expects the long end to remain rangebound and the front end to be driven by inflation breakevens and Fed expectations. Jersey closes with his view that Treasury coupon issuance will remain manageable through continued reliance on Treasury bills.