More corporate debt will plunge into distress when the US economy tanks, Marty Fridson, chief executive officer of Fridson Vision High Yield Strategy. “I have high confidence that we will get back to 1,000 basis points on the high-yield index as a whole at the worst point of the next recession,” the veteran credit strategist tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Spencer Cutter in the latest Credit Edge podcast. Corporate bonds trading at 1,000 basis points over Treasuries are usually seen by markets as being in distress, with a high likelihood of default. Fridson and Cutter also discuss energy sector bond opportunities, corporate bond default rates, ratings trends, the Federal Reserve put and liability management.

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Risky corporate debt markets have room to fall further to reflect the damage of ongoing trade wars, according to BlackRock, the $11.6 trillion money manager. “We’re likely to see spreads widen from here as we see further deterioration in risk assets,” Mitch Garfin, the firm’s co-head of leveraged finance, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Robert Schiffman in the latest Credit Edge podcast. “If this uncertainty continues for another quarter, two quarters, three quarters — that could lead to a more significant downturn.” Garfin and Schiffman also discuss private credit relative value, distressed exchanges, technology sector opportunities, portfolio trading and auto sector risk.

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Tariff chaos has tossed retailers into a crisis similar to Covid in 2020, leaving them unable to plan ahead, according to AlixPartners, the financial advisory and global consulting firm. “It’s a little crazy and retailers are canceling orders,” Holly Etlin, a partner at the firm and restructuring veteran, tells Bloomberg News’ Reshmi Basu and Bloomberg Intelligence’s Stephen Flynn in the latest Credit Edge podcast. There’s a “real crisis, everybody going nuts,” she added, referring to pricing, inventory and shipping decisions that retailers are trying to make. Etlin also discusses the impact of elevated bankruptcy costs, the outlook for more coercive liability management exercises, how retailers are using asset-based loans as a lifeline and the turnaround of Tailored Brands.

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Global market turmoil opens a window for credit investors in companies with too much debt, according to London-based Aptior Capital, which specializes in distressed debt and rescue finance. “All this volatility, it throws up even more opportunities,” founder Rudi Singh tells Bloomberg News’ Giulia Morpurgo and Bloomberg Intelligence’s Tolu Alamutu in the latest Credit Edge podcast. “These are very good businesses and it really has been the old adage of good company, bad cap structure.” Morpurgo and Alamutu also discuss the firm’s target of 20% returns, a shift to Europe by US investors, liability management, real estate and auto sector stress. This episode was recorded on April 2.

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Retail investors aren’t yet ready to jump on the private credit bandwagon, according to Janus Henderson. “The skepticism there should be real,” John Kerschner, the firm’s head of US securitized products, talking about exchange-traded funds focused on direct lending. “The underlying isn’t nearly as liquid and hasn’t really been tested throughout a real dislocation credit cycle,” Kerschner tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Spencer Cutter in the latest Credit Edge podcast. Kerschner and Cutter also discuss the outlook for the US economy and consumers, collateralized loan obligations, relative value in securitized credit and fund flows.

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Fundamental and technical pressures on credit markets are growing as trade wars escalate, according to JPMorgan Asset Management. “We just need to be paid a little bit more for the uncertainty risk now in the market,” says Lisa Coleman, the firm’s head of global investment-grade corporate credit. “The technicals from where we were at the beginning of the year have deteriorated,” Coleman, who manages $73 billion in assets, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Jody Lurie in the latest Credit Edge podcast. Coleman and Lurie also discuss the earnings outlook for US companies, opportunities in consumer, health care and bank debt and fund flows.

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Global portfolio managers are seeking debt investment alternatives in China and Europe amid mounting volatility in America, according to CreditSights. “The US seems to be sneezing an awful lot lately and the rest of the world is saying, ‘Well how do we mask up and try to defend ourselves against this?” said Winnie Cisar, the firm’s global head of strategy. “If US exceptionalism is not on the table, then we’re going to have to go other places to look for opportunity,” Cisar tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Matthew Geudtner in the latest Credit Edge podcast. Cisar and Geudtner also discuss the impact on US borrowers of trade wars, the growing risk of stagflation and opportunities in the industrial sector, including Boeing bonds.

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Amid heightened volatility in American capital markets, there are more attractive private debt options elsewhere, according to alternative investment manager BC Partners. “In 25 years of doing this, it’s probably the first time we’re seeing actually decent relative value in Europe,” said Ted Goldthorpe, the firm’s head of credit. “The US has always provided better relative value in every environment — that’s kind of changed,” Goldthorpe tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Arnold Kakuda in the latest Credit Edge podcast. Besides specific European opportunities, Goldthorpe and Kakuda also discuss sports lending, the impact of tariffs on US mid-market borrowers, private loan valuations and the pipeline for acquisitions.

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Private credit is getting squeezed by excess demand for limited deals, but AllianceBernstein says it will continue to pay more than publicly traded debt. “Even as base rates have come in, that premium remains fairly persistent,” said Matthew Bass, the firm’s head of private alternatives. “If the premium gets too small, then as an investor, you’re going to start to question: ‘Why am I locking my capital up?’,” Bass tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Tolu Alamutu in the latest Credit Edge podcast. Bass and Alamutu also discuss recovery in commercial real estate, asset-based finance opportunities by sector and the advent of exchange-traded funds for private debt.

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The best credit opportunity lies in middle-market collateralized loan obligation equity, according to Carlyle. “It is a newer market and not everyone’s investing and chasing that asset class,” said Lauren Basmadjian, the firm’s global head of liquid credit. “We’re seeing mid-to-high teens IRRs,” Basmadjian tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Mike Campellone in the latest Credit Edge podcast. That compares to 12%-13% internal rates of return from CLOs backed by broadly syndicated loans, she adds. Basmadjian and Campellone also discuss growing risk from liability management exercises, private/public debt convergence, default rates, M&A and European leveraged loan market opportunities.

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