How Oaktree's Head of Sourcing Finds the Next Great Deal

When it comes to credit investing (or really any investing), there's an analytic art in deciding the right price to pay for a security. But often that's only part of the challenge. First you need someone to want to sell it to you. In something like public-market equity, this usually isn't hard. Liquidity is deep, and the "ask" price is well known. In something like private credit, it's much trickier. Someone has to sell you the deal. Someone has to call you about it and tell you about it. So how do you get the call? And how do you know when to say yes? On this episode, we speak with Milwood Hobbs, the Managing Director and Head of Sourcing & Origination at Oaktree. Prior to this role, he was at Goldman Sachs, also in leveraged finance origination and sales. So he's been involved in numerous credit deals in his career. On this episode, he talks us through his role, what's involved in it, how he gets offered deals, and how he determines what opportunities are better or worse. Become a Bloomberg.com subscriber using our special intro offer at bloomberg.com/podcastoffer. You’ll get episodes of this podcast ad-free and exclusive access to our daily Odd Lots newsletter. Already a subscriber? Connect your account on the Bloomberg channel page in Apple Podcasts to listen ad-free. See omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

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• 1:01Tracy Alloway?

  Hello and welcome to another episode of the All Thoughts Podcast. I'm Tracy Alloway.

• 1:05Joe Weisenthal?

  And I'm Joe Weisenthal.

• 1:07Tracy Alloway?

  Joe, do you remember Deal Toys? Did you ever see those?

• 1:10Joe Weisenthal?

  I never got a deal. I never, I do know what they exist.

• 1:14Tracy Alloway?

  You wouldn't get a Deal Toy unless you were working on something.

• 1:16Joe Weisenthal?

  So I'm aware that they existed, but I don't, I never had one. I never saw one.

• 1:21Tracy Alloway?

  I used to be slightly obsessed with them.

• 1:23Joe Weisenthal?

  So were they toys like, or were they like, like, or were they those sort of lucite?

• 1:28Tracy Alloway?

  Yeah, that's pretty much it. So if you are working in capital markets or in mergers and acquisitions and you completed a deal, you would mark the end of that transaction by, you know, getting some sort of swag, I guess. And it could be really boring. It could just be a lucite block or something like that. But some of them were really interesting and fun. And one of the ones I remember seeing was someone, it must've been working in like capital markets. It was a little toggle, like an actual, like, think of like a railway kind of toggle.

• 2:00Joe Weisenthal?

  I know where you're coming from.

• 2:01Tracy Alloway?

  And it was to celebrate the first ever pick toggle transaction.

• 2:06Joe Weisenthal?

  So can I say something? You know, we talked to, first of all, it's amazing. Second of all, you know, we talked to a lot of investors on the podcast. We talked to a lot of people whose job in some way resembles our job, which is looking at screens all day, or maybe looking at data. I think if I ever had gone into finance, I would have some job that looked involved a lot of looking at screens and a lot of maybe looking at data, but mostly just looking at screens. We don't often talk, talk to a lot of people who are in the world of actually talking to other people about making things happen. I never think I'd be good at that. No one wants to hang out with me, you know, stuff like that. And so I want to learn and talk to more people about how actually things in finance, whether

• 2:51Joe Weisenthal?

  we're talking about a deal, whether we're talking about a new issuance, et cetera, how that actually happens, how an instrument or security actually comes into the world.

• 2:59Tracy Alloway?

  Well, I am very pleased to say, Joe, that we do in fact have the perfect guest for this topic. We're going to be speaking to someone whose day to day business is talking to people, sourcing and finding deals.

• 3:10Joe Weisenthal?

  Bringing things into the world.

• 3:10Tracy Alloway?

  And someone who also knows exactly about that pick toggle deal toy that I mentioned earlier. So I'm very excited. We're going to be talking, we're going to try to thread the needle between sourcing deals and also something else we've been interested in lately, which is private credit.

• 3:26Joe Weisenthal?

  That's right.

• 3:26Tracy Alloway?

  All right. So without further ado, we're speaking with Millwood Hobbs. He leads Oaktree's sourcing and originations group. So really, again, the perfect person. Millwood, thank you so much for coming on All Thoughts.

• 3:39Speaker 04

  Thank you for having me.

• 3:40Tracy Alloway?

  So I'm right, right?

• 3:41Speaker 04

  Oh, yeah.

• 3:41Tracy Alloway?

  About the pick toggle toy. You've seen this toy.

• 3:44Speaker 04

  Yes, I've seen it. My favorite deal toys, there's two that stick out. When Ford spun out Hertz in 2005, I was part of that transaction. And so I have a set of car keys and there's a track.

• 3:58Joe Weisenthal?

  Oh, amazing.

• 3:59Speaker 04

  Yeah, from Hertz and it's, it's, they're called Lucites.

• 4:02Joe Weisenthal?

  Yeah.

• 4:02Speaker 04

  And then the other one, which was pretty cool, I did the Mars Wrigley deal with Byron Trot, and so I have two M and M.

• 4:08Joe Weisenthal?

  Amazing.

• 4:09Speaker 04

  Guys that sort of, they, they lay out the transaction.

• 4:11Joe Weisenthal?

  Do you have a room in your house that's sort of like, I'm imagining high school athletes with all their trophies? It's sort of, do you get them all together?

• 4:16Speaker 04

  So, so, you know, I have, I, you know, we moved during COVID in 2020 and we bought a house and I have like a real library. And in that library, there are two things from investment banking that I have. I have bank books from deals. We used to, we used to go to a printer and we used to draft.

• 4:34Tracy Alloway?

  Oh, like the pitch deck kind of?

• 4:35Speaker 04

  Well, it's like a, it's like a actual, it's a glossy picture book of the, of the deal, the transaction. It goes through transaction overview, it goes through company, it goes through business. And that was what folks used to actually underwrite deals back in early 2000. Yeah. And then I have Lucite. So I have a lot of Lucite.

• 4:55Tracy Alloway?

  So the unit that you're leading at Oaktree,

• 4:58Speaker 04

  Yes.

• 4:59Tracy Alloway?

  That was created, I, I think relatively recently in like 2020.

• 5:03Speaker 04

  2020.

• 5:03Tracy Alloway?

  What was the thinking behind that?

• 5:05Speaker 04

  So the, the market, private credit and, and origination and financing of deals has evolved quite a bit. If you just go back to kind of pre Dodd-Frank, most private equity firms didn't have what we call capital markets professionals. And post Dodd-Frank and the migration and creation of, of a robust private credit market, most of the private equity firms have capital markets professionals who really spend time drafting, creating, structuring financings for the private equity buyouts. And what we figured out, Oaktree, we were founded in 1995, we managed a couple hundred billion dollars. What we were figuring out when I first started in 2013, every strategy within Oaktree kind of did its own thing.

• 5:48Speaker 04

  So if a deal came into one strategy and it didn't work, it just kind of died in that, in that strategy. So we, what we decided as the market evolved and moved towards capital solution provider versus this fund does this and this fund does that. We created my group with the real purpose of a couple of things. Number one is making sure we were focused on providing capital solutions versus trying to figure out what fit a particular strategy.

• 6:13Joe Weisenthal?

  Oh, I see.

• 6:13Speaker 04

  Yeah. And then the second reason we really did it is that, you know, capital is the commodity in our business. Everyone has a lot of money. But how do you get the first call and the last call? And that's the relationship. So my team is meant to really spend time and develop relationships with the counterparties. Because, look, the reality of it is, we shouldn't, we're not agreeing on, we have different investors. So a private equity firm has a different investor base than we have. And so the goal in my group is to, one, make sure the entire firm sees a transaction. And two, we're involved in the art of the deal, right? And so the goal is, no one really should win. Both parties should be just mildly annoyed. And how do you do that? How do you do that? In a way, you do it through a relationship.

• 6:58Tracy Alloway?

  That's funny, because we say that in journalism sometimes, like, the goal is for everyone to be, like, slightly dissatisfied with the story. Right? Because if everyone's happy, then you basically put out a press release.

• 7:09Speaker 04

  Somebody's wrong. If one side is really happy, the other side's probably wrong.

• 7:14Joe Weisenthal?

  I know Tracy already more or less asked this question, but I'll just put it in a different way. Why don't you just give us a sort of brief overview? If someone says, what do you do and how'd you get here?

• 7:22Speaker 04

  Yeah.

• 7:23Joe Weisenthal?

  What'd you do and how you get here?

• 7:24Speaker 04

  Yeah, so you don't want, you don't want my full, full background, do you?

• 7:27Tracy Alloway?

  Oh, I actually do, because you've been in the market for a really long time.

• 7:31Joe Weisenthal?

  Yeah, you don't have to take us from childhood, but...

• 7:33Speaker 04

  Okay, okay, I'll start from, I'll start from, so, so, look, my, uh, my dad was in public accounting. And originally, so I got a full academic scholarship to Rutgers to go to law school.

• 7:43Joe Weisenthal?

  Alright.

• 7:43Speaker 04

  I sat in political science, and I, I would fall asleep and wake up, and they were talking about the same thing. So I said, I don't think I can do four years of political science. So I switched to accounting, because my generation, you did what the adults said to do.

• 7:56Joe Weisenthal?

  Yeah.

• 7:56Speaker 04

  Um, and so I switched to public, into accounting. And my dad said, don't do public accounting, do banking. So I started out at a firm called Nations Bank, which, which is now, is a predecessor to Bank of America. And the most interesting job I had at Nations Bank, I was a controller for leveraged finance. I was the controller and the youngest controller in the firm. And I said, I want to be a leveraged finance banker, you know, and the reason why it's, it sounds silly when you're at my age, but they wore, they wore the nice ties, they wore the nice shoes. They were in big in finance. And at that time, Nations Bank was a pretty big term loan B lender. And so the head of the group basically said, look, right now you're just an accountant.

• 8:39Speaker 04

  He said, go get a sales job and then go to business school. So again, I went to GE Capital and I financed commercial equipment. So rolling stock assets, cars, trucks, forklifts, did that for one year to today and then went to Columbia Business School. I summered at First Boston and I summered in asset backed and leveraged finance and then joined Deutsche Bank in 2000 full time. And during that time period, I structured a lot of LBOs, Sun Guard, Neiman Marcus, US Foods, Ceridian, First.

• 9:08Tracy Alloway?

  Neiman Marcus being the first ever Pictau deal.

• 9:11Speaker 04

  Yes.

• 9:11Tracy Alloway?

  And so you had that deal toy.

• 9:13Speaker 04

  I have it. I, you know, I'll be honest with you. I think I gave it to someone more senior.

• 9:17Joe Weisenthal?

  Oh.

• 9:18Tracy Alloway?

  Oh, should have given it to me. I would appreciate it.

• 9:20Speaker 04

  I know somebody who has one. And then in 2007, I left Deutsche Bank and really that you sort of say, why would you leave Deutsche Bank? If you go back to 2007, the market was very concentrated. So versus today, there were eight underwriters who owned all the leveraged finance risk, right? So you could see the market, you know, when I got a call to say, hey, what leverage would you provide on a deal? I'd ask the private equity firm, well, what do you think the business worth? And they'd say, well, it's based on, you know, leverage. And so you could see that coming to a hedge. So in 2007, I went to Goldman Sachs. I did LBOs at Goldman Sachs and also did high yield sales and joined Oak Tree in 2013.

• 10:02Joe Weisenthal?

  It's always interesting to hear someone's background, but I like how this dovetails with the actual development of the industry itself.

• 10:08Tracy Alloway?

  Absolutely.

• 10:08Joe Weisenthal?

  And this idea that at one point there were just a handful of very small, or a handful of banks that ran leveraged finance. And then of course, we know about the proliferation of all that. So it was very useful to get that background.

• 10:19Tracy Alloway?

  Well, why don't we dive into that a little bit more? So talk to us about how the credit market, the capital market has evolved over the course of your career.

• 10:27Speaker 04

  Yeah. So, look, when I first started.

• 10:31Speaker 04

  Covenants were pretty standard. Amendments to deals were actually fairly standard. And as you moved forward by 2007, the majority of market was covered light. The one interesting thing about pre Dodd-Frank was in the credit agreement, which is a document that sort of governs the loan, if you will. You had to hedge 50% of your floating rate risk. And so going into the cycle, two things that made sense then is, one, folks were hedged 50%. And then the other thing is LIBOR, if you remember, back in 2007 was at 5%. So the spread to deals was 200 to 50 to get to that 7.5% average LBO.

• 11:13Speaker 04

  Well, what happened when Dodd-Frank, when the markets cried the world, the global financial crisis, rates went to zero, right? So companies actually generated cash flow in that cycle. The challenge or difference we have today is we've been in a no rate environment. So no one really hedged, one. And then, two, because there was 0% base rates, the spread on deals was much higher. Instead of 200 to 50, you had 450, 500, 600. So when 22, when rates started to move up, you actually had a situation where a lot of companies couldn't support the cash flows because no one predicted that rates would move.

• 11:57Speaker 04

  And most folks were not hedged like they were in 2007.

• 12:16Speaker 00

  What's next for virtual assets? I'm Jacob Grease, host of Economy Scale, a series exploring growth in key global sectors. And in this episode, we're diving into the digital forces shaping finance. Sean McHugh from Dubai-based Virtual Assets Regulatory Authority has this to say.

• 12:32Speaker 05

  We're seeing a lot of institutional players come in, digital asset dedicated hedge funds, high-frequency traders and that sort of thing, and folks who service institutional clients.

• 12:41Speaker 00

  As more capital enters the market, adaptive regulation is likely to become increasingly key. Reece Merrick of Ripple says.

• 12:49Speaker 06

  A lot of regulators globally would like to keep the industry at arm's length. That's the opposite here. I think also what you'll find is that regulation and frameworks can come out, but some of them are maybe a slight iteration on some 80 year old policy and not actually in line with what the technology can do and offer. And again, that's very different in Dubai.

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• 13:54Joe Weisenthal?

  Can you talk a little bit, you know, it's a theme that obviously comes up in every private credit, but also other episodes as well. Talk to us a little bit more about like the post, the immediate, the, the passage of Dodd-Frank and how it's set in to people's brains. That this is going to restructure the financial industry, that there are going to be various activities, whether we're talking about trading, whether we're talking about lending, et cetera.

• 14:17Speaker 04

  Right.

• 14:17Joe Weisenthal?

  These are not going to be part of the, the banks anymore.

• 14:20Speaker 04

  Right.

• 14:21Joe Weisenthal?

  Talk to us a little bit about those sort of early post, you know, and they were talking 2009, 2010, those initial conversations that people were having about, oh, something, new, new opportunities are going to emerge from this.

• 14:32Speaker 04

  Right, well, well, if you go back to 2007.

• 14:37Speaker 04

  When a portfolio manager on a public side was selling risk in the market, the banks were the shock absorbers to that risk.

• 14:45Joe Weisenthal?

  Yeah.

• 14:46Speaker 04

  Right? So, you know, when I was sitting at Goldman Sachs, it wasn't unusual for us to buy $200 million of an issue.

• 14:54Joe Weisenthal?

  And it would be on your balance sheet.

• 14:54Speaker 04

  And it'd be on our balance sheet, right? Post what Dodd-Frank did effectively said, okay, if you go back to the leverage, and I hope I'm not being too technical, but

• 15:03Joe Weisenthal?

  No, that's great.

• 15:04Speaker 04

  Banks were levered roughly 30 times pre-global financial crisis. Post, they're 15 times levered, right? So, once you shrunk that liquidity or capital out of the banks, they can no longer absorb the deals. And so what happens is, and this is why liquidity is really an important phenomenon. So when a PM calls the desk and says, hey, I have to move 5, 10, 15 million, you're not really sure what their real size is because they know the market's not liquid. When I was in sales and trading, PIMCO or somebody would call and say, hey, I've got several million to move. And I'd say, well, this is your first call or last call. And they laugh and they say, why? I said, because I give you two different prices.

• 15:47Speaker 04

  And so what happens in a market that's less liquid is as they're trying to sell, they call different banks. And every time they make a call, a bank then assumes that there's more behind that to go. And so they re-rack the pricing. And so in a public security, which is different than private, a public security can actually move, pricing-wise, without anything really trading, but on the anticipation that there's their supply out there. And so that created, you know, and if you go back to 2009, private credit market was like $300 billion, right? Most of that was more mezz or off the run, not what we call our regular way, direct lending, private credit,

• 16:31Speaker 04

  which we were active in, but we're doing it more on the distress or opportunistic credit side. And over time, because of the liquidity and capital requirements of banks, More of that has just migrated to the private credit market, supplemented by the fact that there are these private equity professionals who are very efficient at looking at both markets and figuring out where they should play or where they should place their credit or their deals.

• 16:59Tracy Alloway?

  I'm getting a lot of flashbacks to writing about corporate bond inventories at the dealers, like around 2012. So just on this note, is the pitch from private credit, is it basically execution? Like, you don't need to worry about us actually being able to do or complete this deal. Whereas at a bank, you know, they're taking into account leverage considerations, regulatory requirements and all of that.

• 17:24Speaker 04

  Right, right. So what a proper deal should be, right? If you're sitting in private equity, your job is to find the most efficient, best-priced capital for your deal, right? The public market, what they're very good at doing is saying, here is the indicative rate for a deal. And let's just say the indicative on a term loan is so far plus 400, right? Then the private equity firm comes to us and says, where will you actually own that risk? Right? So they get a level where we're owning, which won't be the indicative, because remember the banks are marketing, hey, we can get you the best rate and best execution. We're in the storage business, the banks are in the moving business. So they're trying to move the risk and we own the risk.

• 18:08Speaker 04

  And so we price the risk where we'll hold it. And if those two are not aligned, what then and then what you add to that 400 is you add what we call flex. So if you take the indicative plus flex, that gives you an idea of what the banks are willing to say that this debt will price. So let's say the flex is 150 basis points. So they know, on the private equity side, they know, worst case, the banks will own it at so far 550, which the banks have gotten that sort of flex number based on their discussions with us to know where we would actually own that risk.

• 18:43Tracy Alloway?

  I see.

• 18:44Speaker 04

  Yeah. So the process is how do you create an efficient auction to have the debt in the right market at the right pricing with the right structure?

• 18:53Tracy Alloway?

  Okay, so here's my other question. When you are about to do a deal, or when you find a deal, who are you actually talking to? Is it the banks? Or is it like the companies that are borrowing in the market?

• 19:05Speaker 04

  So generally, in a

• 19:08Joe Weisenthal?

  Who are most your meetings with?

• 19:09Tracy Alloway?

  Yeah.

• 19:10Speaker 04

  Oh, wow.

• 19:11Joe Weisenthal?

  Sorry, answer Tracy's question, but I'm just sort of like, how I would have phrased the question.

• 19:15Speaker 04

  I'm talking to both, right?

• 19:17Joe Weisenthal?

  Okay, okay.

• 19:18Speaker 04

  Everyone's my friend. And the goal is, the more conversations I have, the more informed I am of where the market is, right? You know, the interesting thing about public markets is that market reprices risk faster than private credit. Because there's a secondary market. Private credit doesn't really have a secondary market. So, what we're always trying to make sure we're understanding is relative value between public and private. And so my conversation, let's say XYZ sponsor wants to buy a business, right? And let's say it's a public company. The first call I'll get is from that sponsor and say, "Hey, Millwood, we'd like you guys to look at a financing opportunity for a public company we're looking to buy." I'm like, "Great." I say, "Look, I'll put my compliance on the email

• 20:02Speaker 04

  and we'll do a conflicts checks on that business." Because we don't know if we own the stock or there's existing debt outstanding. So it goes through a process where that company is actually vetted from a conflicts perspective. Once it's vetted and that clears the process, then we get initial information on an LBO. And that information could be a selling memoranda. It could be an initial model. And so then we start the process. And what the sponsor wants to be able to do is from the preliminary information, is get a sense for, "Do you want, do you like the asset or not? Do you want to finance it? Where do you want to finance it at? And what's your leverage and what's your pricing?" So there's some high level indication that they get from us to determine if they, if we should move forward

• 20:47Speaker 04

  with a more robust diligence process. So that's, that's how it starts. And then at that point, we do a due diligence process on the asset, right? So we may have, we may call third-party consultants. We may do some background on it. We have a call with the sponsor. We understand their investment thesis. Like, why are they, why are they making the investment? And then we talk internally and we have an investment committee and we discuss it. And then we'll iterate with the sponsor on diligence questions. And then at that point, it becomes, "Are you in, are you out?" And so then, once the sponsor kind of has a sense for who's in and who's out, now their goal is to get the right terms. And so there's a process around sending us their thoughts on the terms, right?

• 21:32Speaker 04

  And our job is to figure out which of those we want to negotiate and which are we fine with.

• 21:37Joe Weisenthal?

  First of all, this is fantastic stuff. I want to talk more about, you know, what, or get to what it takes, what it takes to be the first call. Cause you said that's, that's important and I'm like curious, like, you know, Tracy and I are competitors. How does one of us get the first call or not? But, but even before we get into that question, and it occurs to me that, you know, because you work for Oaktree and there are multiple strategies within it. And you work, I assume with like different people on different committees and different funds, et cetera. Is there ever tension that arises between your recognition of the need to make the, get that first call? Versus what people on investment committees see as the fair price, right?

• 22:21Joe Weisenthal?

  Because if the investor is always trying to get every penny, right? Then at some point I'm going to stop calling Millwood.

• 22:28Speaker 04

  A hundred percent.

• 22:29Joe Weisenthal?

  Talk to us about reconciling that. And I also have to imagine, just to sort of add on a part, be to this question. You know, it'd be one thing if like it was a small shop and one strategy. But you're looking at this holistically. Whereas the investor who's running a specific fund, there cares about their returns and doesn't care so much about the returns of the other fund or just the general. So talk to us about reconciling some of these tensions.

• 22:51Speaker 04

  Right. So, so the biggest tension is, like I said earlier, we don't necessarily agree on price, structure, leverage, right? But what, what we're doing is I'm talking to that sponsor or that client or that company all the time. Hey, how's your family? I know where they go to school. I may do Zooms with their kids. Hey, Millwood.

• 23:15Joe Weisenthal?

  So there really is a part of my being a nice guy to talk to.

• 23:18Speaker 04

  Hey, Millwood, I want to, I want to go to Ocean Prime. I know you know the manager. I'm bringing my family. Oh, so this is real stuff. Yeah. So, yeah, so we, we are full service here. And again, like I said, the relationship. Ship is getting the first call and last call. And by the way, out of 20 deals, I only care about the last two. So how do I pass 18 times?

• 23:36Joe Weisenthal?

  Yeah.

• 23:36Speaker 04

  So I can see the last two. So it it really is a form of art, if you will. And what we're trying to do is demystify the negotiation. And we're institutionalizing relationships. So if XYZ sponsors in LA, they'll call me and say, hey, Millard, who should I talk to? Okay, let me give you a list of folks. Because the more that that private equity firm or that sponsor or whatever client is, feels like they understand our firm, the better the relationship. So we spend time making sure that they know who our CEO Armin is or Bob O'Leary, that they know the PMs at the different strategies. So it's not a scary monster. You know, when I, when I joined in originally Oaktree, remember we were more opportunistic.

• 24:20Speaker 04

  And as the market has evolved and as we have evolved as a firm, we're sort of private credit and opportunistic. And by the way, the client will say, Millard, I don't really care about one side of the house versus the other. You're Oaktree.

• 24:34Joe Weisenthal?

  Right, right, right.

• 24:34Speaker 04

  Right, so we have to sort of.

• 24:35Joe Weisenthal?

  And you're Oaktree.

• 24:36Speaker 04

  I'm Oaktree, right? And and so I have to go to the market as one, as one firm.

• 24:43Tracy Alloway?

  Wait, talk to us a little bit more about what negotiations are actually like. Because I, I will say, we just had Sujit Indap on, uh, who wrote a great book about the Caesar's Palace, um, LBO.

• 24:55Speaker 04

  Yeah, we're in that, we're in that.

• 24:56Tracy Alloway?

  Yeah, you're in that.

• 24:57Speaker 04

  Yeah, I know it's not.

• 24:58Tracy Alloway?

  Not, not you specifically, but Oaktree certainly is. And there's certainly like, there are some very dramatic negotiations that take place in that.

• 25:05Speaker 04

  Sure, oh, yeah. I mean, well, look, sometimes you just, you get up, you throw your pencil in there and you walk out of the room. And sometimes, you know, so, you know, at the art of negotiation is, what I say to, what I say to my team is, it's not the negotiating point you're discussing at the moment. It's the points that are coming two points later, right? You're always thinking ahead on the negotiation. You know, we did a deal for a business that wasn't really loved in the leveraged finance market. Um, and I knew that the type of business because I had done an LBO and the market really didn't understand it, but it was a great management team. Sometimes, sometimes deals do well because the management team is very good and very articulate. And I knew this deal would struggle at a bank.

• 25:48Speaker 04

  And so when it was hung, which means the bank had to fund it.

• 25:52Tracy Alloway?

  They got stuck with it.

• 25:52Speaker 04

  They got stuck with it. I called in and I said, hey, um, sorry, um, but I'll buy 50 million at 90.

• 26:00Joe Weisenthal?

  Okay.

• 26:00Speaker 04

  Right? Oh, gosh, what 90? Wow, that's, that's a deep discount, da, da, da, da, da. I said, well, you know, I think as you now realize that business is, is not, it's a little tricky business. And it was a public to a private. So a private equity firm was taking a public company and making it private. And even though it was a declining margin business, there was a view that the public company expenses were high. So you could sort of map us, you can map a scenario where over 12 months, they were going to cut some of the public company costs and create a more efficient, which would create more EBITDA.

• 26:35Joe Weisenthal?

  Yep.

• 26:36Speaker 04

  Right? So they sold it to us. So now I'm a top five lender, right? With the right sponsor, you have the right relationship, right? Well, sponsor, which, you know, they're, they're meant to be opportunistic too. Cap structure, EBITDA grew, cap structure looked good. So they wanted to do a dividend. Now, again, in a negotiation, if you're doing a dividend, that means you're putting more debt on my capital structure.

• 27:00Joe Weisenthal?

  Yeah.

• 27:01Speaker 04

  Right?

• 27:01Joe Weisenthal?

  That's money that could go to you.

• 27:02Speaker 04

  That's money that could go to anybody but them, right?

• 27:04Joe Weisenthal?

  Yeah.

• 27:04Speaker 04

  And so, you know, the job of a sponsor at that moment is to call the top five lenders and say, hey, I'm doing a dividend deal and they take me from violently upset to mildly annoyed. That's the job.

• 27:15Joe Weisenthal?

  Yeah.

• 27:16Speaker 04

  So this sponsor did not call us on that dividend deal. And so now I have a, I'm in a unique situation. They went to other lenders and got the 51% to do the deal. And I felt some kind of way about that.

• 27:29Tracy Alloway?

  Hmm. Some kind of way.

• 27:31Speaker 04

  Some kind of way. And, and so I proceeded to try to figure out why folks would agree to this dividend deal. And so I called the market and the sponsor sort of said, you know, he calls me and he says, Millwood, I hear you're working against me on my dividend deal. I said, well, that's not actually true because you didn't call me when you launched it. So. He said, but I thought we had a good relationship. I said, we do. I thought so too, but you didn't call me. All right? And so, long story short, the dividend didn't go through, right? And so then we changed the structure of the dividend to allow, we shrunk the size of the dividend. We changed the original issue discount. And I told the sponsor, I said, look, unfortunately, I'm going to sell the position when this closes.

• 28:16Speaker 04

  And the point of that story is sometimes it's life's too short. And not all, not all relationships are meant to go on forever. We still talk, I, I'm still a good friend, you're still a good friend. But we haven't done a lot together since then because sometimes, you know, in our, in our, in a negotiation, if you don't see eye to eye and that deal worked out, what happens if it doesn't work out?

• 28:40Joe Weisenthal?

  Yeah.

• 28:40Speaker 04

  Right? So sometimes, sometimes you're managing relationships to, to keep and sometimes you're managing relationships to not do on a business side, but you always want to be friendly in this market. Because you're usually one person away from somebody that matters in business.

• 28:56Joe Weisenthal?

  Actually, since we're on this point, that strikes me as very savvy and very wise and like probably a lesson many of us should learn in many realms that sometimes it's okay to, uh, take the L or let a proposal fall apart because life is long and other things happen at some point. We have listeners who are in college or young and they think about, you know, career trajectories, et cetera. I'm curious, just from your perspective, this is probably a sort of attitude that you would hope the people who work for you cultivate, internalize, so to speak. How do you recognize who has that? And like when you think about like people that you want on your team,

• 29:34Speaker 04

  Yeah.

• 29:35Joe Weisenthal?

  are you able to sort of like build intuitions about, you know, the people who can, uh, who can think that way?

• 29:41Speaker 04

  Yeah. So good, good question. So I would say on my team, everyone is uniquely different. And everyone is exceptional at something and very good at everything else. And I think where you make a mistake in building teams, especially in, in our business, is you try to find someone who can be exceptional at more than one thing. So I'll tell you a good story. So when I was first starting out, I would, I would fly to Dallas, Texas, and I would meet with folks in Texas. And I thought I was a pretty charming, knowledgeable person on the markets. And, and everyone in Texas was friendly. But what I figured out was by the time the deals made it to me in New York, everyone in Texas had already passed. So it's almost like wrong way risk. And so.

• 30:23Joe Weisenthal?

  They explained that.

• 30:24Tracy Alloway?

  Yeah. Why was that happening?

• 30:25Speaker 04

  Well, because. You're in Texas, right? It's a different culture, different market than New York. And, and, and in some markets, folks wanna do business with folks they may see on the weekend or see in the gym or, you know, and so it's, it's more of a, that person sits in New York, they don't really know me, right?

• 30:45Joe Weisenthal?

  Yeah, yeah.

• 30:46Speaker 04

  So, but if people in Texas didn't really like the deal, then you call the people in New York.

• 30:52Joe Weisenthal?

  Oh.

• 30:53Speaker 04

  So, so I decided that I needed to put someone in Texas. So how do you hire people, right? So this is for the, your young audience. So I went to a conference and he was kinda managing the room really nicely. So I gave him my business card, I said, hey, we'd love to spend some time with you. So I called him and we set up two days of meetings. What he didn't realize, I was actually interviewing him for two days. Because everyone says they have great relationships.

• 31:17Joe Weisenthal?

  Yeah.

• 31:18Speaker 04

  Right? Everyone says, oh, yeah, I've got the best relationship, dah dah dah dah. But how do you actually test that? Hmm. So I spent two days with this person. And look, you know, high school football matters in Texas. I didn't play high school football, I played high school baseball. This person plays high school football. And so you put someone in that territory that understands the local culture. Hmm. And what we're trying to do is have a hub and spoke origination model where we, where we, where we have a, a global firm, but we try to talk on a more regional or local level. And that's what I think makes our sourcing origination a little bit different. And again, people matter in this business. And again, the goal is to get the first call and the last call.

• 32:00Speaker 04

  That person may spend a lot of time, you know, going to events, spending time with the families.

• 32:06Joe Weisenthal?

  Yeah.

• 32:06Speaker 04

  And, and ultimately what you want folks to do is to show you deals because they trust you. And it's still a trusty business.

• 32:28Speaker 01

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• 33:05Tracy Alloway?

  One thing I wanted to ask you, just going back to something you said about the management of a particular company being good. In credit, we've spoken about this on the podcast before, but we tend to think about it as avoiding losers, right? Whereas equities are more about finding the winners.

• 33:23Speaker 04

  Howard Love you said that.

• 33:25Tracy Alloway?

  So I guess my question is, like, when you're looking at a particular deal, do you feel that you're making a bet on that business? Or is it just about looking at the numbers and making sure that, you know, you're not going to lose out?

• 33:37Speaker 04

  They're unlikely to screw it up. So interesting enough, what we're trying to do in a diligence process is figure out where there may be holes in that investment. We did one deal with a counterparty that we required them to switch to CFO. Just because the questions, it took too long to answer. Like, if I ask you, how many days does it take you to close your books? What percentage of that is manual versus automated? What do your management letters say in the auditor? You know, those types of questions, if you have to think about them or you say, I'll come back to you, as a CFO, that would be concerning. So, you know, our job is to protect our investors. Yeah. That's our job. And what we're trying to do is make sure we understand the investment.

• 34:22Speaker 04

  And no one bats a thousand, right? If you look at the top 10 hitters in Major League Baseball, they strike out as much as they hit. So, you know, our job is to avoid losers, like you said, and we have to manage that through a process.

• 34:35Joe Weisenthal?

  Can you say actually a little more? I thought that was really interesting about some of the questions that you asked and the idea like, why can't the CFO just quickly answer how long it takes to close their?

• 34:43Speaker 04

  You would think that would be an easy, yeah.

• 34:44Joe Weisenthal?

  I'm always surprised also, just generally, there's a bit of a tangent that even, you know, in 2024 with like, all the computer and accounting systems that like, fraud still happens, that there are still way, or you know, companies like, we have a material weakness and we're gonna have to, I'm always a little surprised that that can even still happen. I'm curious like, how you like, this world of things just being wrong or ambiguous at companies. I'd love to hear you talk more about that.

• 35:07Speaker 04

  When you're, when you buy a business as a platform, and then you then buy successive businesses, more than likely, they didn't have all the same financial system.

• 35:17Joe Weisenthal?

  Oh, yeah, yeah.

• 35:17Speaker 04

  And the integration process, depending on how quickly you want to grow it, drives how long you actually integrate. And so time, what time, what happens sometimes is you don't fully integrate these businesses and systems. If you go back to failures of businesses in our market, SAP integration is a big sort of point of contention. And so businesses, you focus on risk that you see time and time. So fraud, fraud, you know, there was a water business that was, you know, that was fraud, fraudulent, that, you know, some banks lost a lot of money. You know, if you go back to like Collins and Aigman, which was an LBO a long time ago, there was some fraud. And you could see what you, what you're doing

• 35:58Speaker 04

  in a diligence process, you are looking for sort of what I call inherent weaknesses in the information you get back. And management letters, which the auditors produce, is a good document that sort of highlights the risk of accounting systems, financial systems. And that's a pretty, systems tends to be a big driver of sort of integration issues.

• 36:19Tracy Alloway?

  So this isn't necessarily fraud, but you just reminded me of add backs and deals and, you know, adjusted earnings and things that can be inflated to make a transaction look a lot better than it actually is.

• 36:32Speaker 04

  Yeah.

• 36:32Tracy Alloway?

  The last time I remember writing about this was, I guess, gosh, five or six years ago. And the feeling back then was that there was more sketchy stuff happening on the valuation side of credit deals. Is that still the case? Or has that been your observation over the years?

• 36:49Speaker 04

  Well, so, so the add backs is, is an assumption and it's, it's an ask to get credit for something that may happen in the future, right? Or it's saying something's happened previously that hasn't fully been flown through the financial statements and we want to get credit or we don't want it to affect our earnings. Every deal has adjustments. Okay? So just start with the premise that adjusted EBITDA will exist. And, and part of our job is to trust our partners that they're adjusting the right things. What happens is if you watch the financial statements over time, sometimes the adjustments never go away, right? And then you start to say, okay, this is recurring, non-recurring, right?

• 37:30Speaker 04

  We, we did a deal for a sponsor and we were, and it was near year end and the sponsor's going through each line item of what they wanted to add back. And you know what? I said, wow, we could, we could go through this for three days, right? Explaining why they add back. I said, you know what? You can add back five million. Call it whatever you want, right? So at the end of the day, what we're trying to do is understand the rationale for the add back. In a market like today, the problem is the rationale isn't fully explained all the time. And the amount of time you want to add it back is kind of almost infinite. So you start to say, okay, and the sponsor's perspective would be, I'm paying for that, right?

• 38:14Speaker 04

  Cause I'm paying off that adjusted EBITDA, so you should leverage against that. The, the, the counter would be, I'm capped upside, right? I'm capped at par. And if you go back to oh seven, a lot of the add backs in, in some of the large LBOs never truly came to fruition. So if you take cap structures that were leveraged seven times, they're adding back a hundred million, that's 700 million more debt. That if the hundred million never comes through, at some level, you could be over levered. So that's why you have to look at add backs. And in the one notion, folks say documents are loose.

• 38:50Speaker 04

  Well, I would argue it's about asset selection, right? A document is not going to help you if you just underwrote the wrong asset. At the same time, a document, if you're doing well, and I'm not letting you lend more, what do you think I'm going to do if you're doing well? I'm probably going to figure out a way to fix the document to allow you to lend more. So I think part of our, you know, business, you're right on at bats. But, you know, cove light, the market is mostly cove light. And even when you think about structures with a covenant, a lot of times, if you actually hit that covenant, it's unclear the business

• 39:25Joe Weisenthal?

  All right.

• 39:26Speaker 04

  is a going concern at that point.

• 39:28Joe Weisenthal?

  If you need the document to save you,

• 39:30Speaker 04

  Right.

• 39:31Joe Weisenthal?

  then you've got a problem, you've already got a problem.

• 39:33Speaker 04

  You're, yeah, you're in, you're in.

• 39:35Joe Weisenthal?

  Well, since we're actually talking about documents, and we have done a recent episode about so-called creditor on creditor violence, and how that works, etc., one thing that came up with that, and I'm also curious about it, is like, um, legal expenses and you're, and detail, like, you know, every comma and all that stuff in these documents. I'm just curious, like, over the course of your career.

• 39:57Speaker 04

  Yes.

• 39:58Joe Weisenthal?

  How much have you seen, and to the, perhaps to the point that it extend, uh, uh, changes your expected, um, return on investment, uh, legal costs, and the sort of rising lawyer fees, etc., to check those documents, regardless of how many covenants they have in them? And have you seen an evolution over time since you've just been in the business of how much of, uh, deal resources end up going to the legal side?

• 40:24Tracy Alloway?

  Yeah, how much do the lawyers bill you every year?

• 40:26Joe Weisenthal?

  Yeah, and what have you seen?

• 40:27Speaker 04

  So while I, while I said, I'm going to now counter myself.

• 40:30Joe Weisenthal?

  Okay.

• 40:31Speaker 04

  While I said the document won't save you in a deal, it's very important you have a document that's sort of expressly documents what, what it is, the intentions of the transaction.

• 40:44Joe Weisenthal?

  Yeah.

• 40:44Speaker 04

  And it's very, it's very good to have governance in the document, right? So if you just think about public versus private markets, in a public market situation, you're given two to three days to review a 300-page legal document. Now, if the deal is going very, very well, Arguably, there isn't a lot of opportunity for you to push back on a document, right? So you kind of take the document as is in the public market. And the issue with that, there's a lot of, and you said credit and current balance, but there are a lot of opportunities for you to take assets out of a restricted group, create new assets, new co. Mm-hmm. And lending against that and take value away from existing lenders. I think one thing that private credit is very good at, and it's focused on that part of the document,

• 41:28Speaker 04

  we've been very firm on making sure that the ability to take assets out and create new assets or new financing or new capital, we've limited that quite a bit in private credit. But I will tell you, lawyers would argue inflation is real for them too, right? Yeah, sure, sure. So, you know, and a lot of that deal cost gets kind of, you know, born at the beginning. But yeah, lawyers, but you need lawyers, right? You need them, you know, there's two reasons why a deal usually gets hung up. It's usually a legal or a tax reason. On the M and A side, on the financing side. And so lawyers are an important part of, of our process. And we spend a lot of time making sure we have the right counsel who can understand and be able to move with us if this goes sideways.

• 42:13Speaker 04

  We want to make sure your bankruptcy and attorneys are really good. We want to make sure that you are put, you know, if you're thinking about biotech or something where IP is important, how do we make sure that IP? Yeah. You can't over-license it. There's a lot of nuances in the document that we, we find lawyers are very valuable in our process.

• 42:31Tracy Alloway?

  So I just have one more question, but you know, you've had such a long history in this market and you've worked on so many interesting transactions. What deal are you most proud of?

• 42:42Speaker 04

  So when I was doing LBOs, it's almost like you're watching the company and the sponsor get married. And you sit in the middle of that marriage and you're kind of playing consultant. And all of my deals, I still talk to the CEOs of those deals because you get to know these people. You're on planes with them for 10 days, you know. I know some of the quirks of some CEOs of, you know, you just get to know people, you know. When I was doing the buyout, when Hughes spun out DirecTV, Roxanne, Roxanne Austin was a rock star, right? A female CEO running DirecTV, a very profitable business and really, and really get to know interesting people.

• 43:21Speaker 04

  So I, I would tell you there, there, all the deals I'm pretty proud, there's probably one that was a bit of a disaster that, that, you know, you know, we used to say, if you made one bond payment.

• 43:31Tracy Alloway?

  Wait, tell us about the deal that you're least proud of.

• 43:33Speaker 04

  Yeah, so that was probably the deal.

• 43:35Joe Weisenthal?

  It's actually just a more interesting question, but nobody really wants to ask that first.

• 43:38Speaker 04

  Yeah, that, that deal, that deal was hard, that deal was hard. It made one coupon payment and filed.

• 43:44Joe Weisenthal?

  But you're gonna tell us what it is?

• 43:45Speaker 04

  No.

• 43:46Joe Weisenthal?

  Okay.

• 43:46Speaker 04

  I want to protect those involved.

• 43:48Joe Weisenthal?

  Okay.

• 43:48Speaker 04

  Yeah, but good question. Um, and I think, you know, so I've done a lot of deals and most of them I'm, I'm pretty happy about.

• 43:56Joe Weisenthal?

  All right. I think you mentioned, you take, all right, you want to be the first call. And to some extent being the first call is some combination of, you know, the ability to give decent pricing.

• 44:08Speaker 04

  Yeah.

• 44:08Joe Weisenthal?

  And also just being a likable guy that people want to talk to about their family, right? But I think you said you'd take 20 calls and you maybe take, like, what?

• 44:15Speaker 04

  So, so what you're saying, what I'm saying is out of 20 calls I get, the last two are the most interesting. So how do you actually?

• 44:23Joe Weisenthal?

  Well, like.

• 44:24Speaker 04

  Engage 18 times and it goes nowhere.

• 44:26Joe Weisenthal?

  Yeah, but like, is there a minimum, like, you have to say yes to, you can't say no forever. Otherwise, at some point, you'll no longer be the first call, right? If I like, I might like talking to Tracy a lot, but if she never like, in the end, wants to consummate the deal, eventually she's no longer going to be my first call.

• 44:42Speaker 04

  Well, it's how you say no.

• 44:43Joe Weisenthal?

  Okay, so talk to us about saying no, but still maintaining the first call.

• 44:47Speaker 04

  Sometimes, and we don't say no, we say, here's how we can get to a yes.

• 44:50Joe Weisenthal?

  Okay.

• 44:50Speaker 04

  Right, so sometimes you give a half to a yes.

• 44:53Joe Weisenthal?

  All right.

• 44:53Speaker 04

  Sometimes in a market like we're in today, I, you know, I'm not clear, it's not clear that someone takes my no offensively. There's a lot of capital, so it's easier to say no in this market than a market. Market where there's not a lot of capital. And generally, we may say no. It may be a concentration issue. Maybe we feel like we have too much of that type of risk on our books. It could be an attachment issue, like leverage or attachment. Uh, could be a problem. It could be that we had an issue with a similar business. And maybe our LPs are fatigued in that, in that type of space. And we don't want to, you know, sort of bring it up again. There, there are a host of reasons why we may say no. We may not get there fast enough. Right? That happens in this market. But generally, I think we're a pretty good quick study.

• 45:37Speaker 04

  And what we are very good at is we do exactly what we say we're going to do. So if we put something on paper, we're going to stand by that. And I think that, that goes a long ways. And I think if people say, well, why do they call, why do they call Oaktree? I think we price risk, right? So in some markets, that's a real big competitive advantage. And I think we don't, we don't BS people. We say what we can do, we do what we say, and that's it. And so sometimes our answer is, yeah, we like it, but we don't love it. But if, if the sponsor or somebody is able to say, well, Oaktree's involved, right? That gives credibility to the deal. And we can help them get it, get it done by saying we're involved, but we may not be the anchor. We may not lead it, you know?

• 46:20Speaker 04

  And, and when you're, when you're managing the size capital, we need to write three to $500 million checks on most situations. So we're always looking at the biggest deals with the largest sponsors. Generally, those are safer plays than the lower, lower middle market. So we think there's less competition when there's only seven, seven of us that can write large checks. Versus in smaller deals, hundreds of folks can write small checks.

• 46:45Tracy Alloway?

  I have one more question, actually. I just remembered, but you mentioned earlier that you want to be friendly with everyone, um, including the banks that, you know, you're ostensibly in competition with. One thing that's been happening recently, it seems, is that a lot of deals that were originally done in the private credit market are getting refinanced in the public market by banks. Yeah. So first of all, why is that happening? And then secondly, like, is that a concern for someone like Oaktree?

• 47:13Speaker 04

  That is great. If we can be on two or three year interim capital in most situations, that's good. The reason why they're going back to the public market is there's a spread between public and private. So there's a cost reduction element. And then for the sponsor is more flexibility. Private credit is not meant to be the most flexible. It's the most efficient, but it's not necessarily most flexible. And if I can create and institutionalize and have a broader investor base, right? Sometimes I can get more things done. If a lot more people own it at very small sizes versus five or six owning at chunky sizes. So, so it's actually, you want a healthy market, public and private, right?

• 47:57Speaker 04

  And when most folks say, oh, you're losing deals to public, I'm like, well, we probably should have gone to public market anyway. Right? It's rated, it's, it's, it's an existing issuer, it's been in the public markets. It should stay in the public markets. You know, if you think about the private credit market, we're 1.7, 1.8 trillion going to probably three trillion. There's ABF, Asset-Based Finance, which is a new phenomenon, which isn't really new, right? GE Capital was a large ABF lender, but there's $3 trillion of dry powder at private equity firms. There's enough for us all to do and be happy.

• 48:30Tracy Alloway?

  All right, Millwood Hobbs, thank you so much for coming on All Thoughts.

• 48:33Joe Weisenthal?

  That was amazing. That was so good. Thank you so much. I'm so glad we made this happen.

• 48:51Tracy Alloway?

  Joe, that was so much fun.

• 48:53Joe Weisenthal?

  That was an unusually fun and good episodes, even though all of our guests are the perfect guests. You know, I'm, I really like, and I think we should do more about talking with the people whose job it is to be nice to people and hang out with people. Yeah, because that's like an element that's still. Yeah, we could, we could, but that's like an element in finance that's still, you know what? Like I said, we talk to a lot of screen people and I'm a screen people. I'm glad that there are still parts of the industry where there's a big role for. Likeable people who can maintain relationships and stuff like that.

• 49:26Tracy Alloway?

  And play golf.

• 49:27Joe Weisenthal?

  But that's part of being human, right?

• 49:29Tracy Alloway?

  Uh, don't you have a whole song with the title, like All My Friends Are Online? Or something like that?

• 49:33Joe Weisenthal?

  Yeah, All My Friends Are On My Phone.

• 49:35Tracy Alloway?

  Yeah.

• 49:35Joe Weisenthal?

  Yeah, like, I want to, I want to know more people who have friends who are on their phone.

• 49:39Tracy Alloway?

  Friends IRL?

• 49:40Joe Weisenthal?

  Yeah.

• 49:41Tracy Alloway?

  All right, um, there was a lot to pull out of that. I did think like Millwood's early point about banks being in the business of like pricing and moving risk very quickly.

• 49:53Joe Weisenthal?

  Mm hmm.

• 49:53Tracy Alloway?

  Was a good one because I think like that's kind of a fundamental difference with private credit.

• 49:59Joe Weisenthal?

  That was really interesting. I also, and it was really interesting hearing him talk about the tensions that emerge because you want to be the first call and you want to have a reputation for at least saying yes 10% of the time or something like that.

• 50:13Tracy Alloway?

  Yeah.

• 50:13Joe Weisenthal?

  With the demands of the actual PM who doesn't care about all the times you have to say no, you know, I think this is probably a sort of asymmetry that comes up in a lot of sales based businesses, right? Where you have some salesperson and their job is to hit a commission or something like that. And then you have like a product manager who's like, no, you can't price it at this or we can't move the product this fast.

• 50:37Tracy Alloway?

  Yeah.

• 50:37Joe Weisenthal?

  This is just sort of like an interesting dynamic that emerges in all businesses. And I really enjoyed hearing him describe how he negotiates that implicitly.

• 50:46Tracy Alloway?

  Yeah, the negotiations because a lot of these deals involve like so many different entities who are all coming at it from a different angle with a different incentive.

• 50:54Joe Weisenthal?

  Yeah, so much, uh, so much there. We'll have to talk to Melody.

• 50:57Tracy Alloway?

  Yeah, we should. All right, shall we leave it there?

• 50:59Joe Weisenthal?

  Let's leave it there.

• 50:59Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 51:05Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at TheStalwart. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashell Bennett at Dashbot, and Kell Brooks at Kell Brooks. Thank you to our producer, Moses Andam. For more Odd Lots content, go to Bloomberg.com/oddlots. We have transcripts, a blog, and a daily newsletter. You can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 51:28Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we talk about how to source deals in the private credit market, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, in addition to getting our daily newsletter, you can also listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

• 52:19Speaker 07

  Underdog already has team picks, player props, money lines, spreads, you name it, they got it. But apparently, somebody over there said, you know what's missing? Screaming like a maniac about a rookie card on your couch. And we love them for that. Because Underdog now has rips. You get a digital pack, starting at just five bucks. You check the live odds, see which grails you could pull, then rip it open to reveal a real, physical card. And the grails are no joke. They have cards up to $125,000 in value, and plenty to pull. From football and basketball to Pokémon, with new limited edition packs dropping regularly. Even cooler, you can decide to keep the card and Underdog will ship it straight to your home, or sell it back instantly at 100% of its fair market value. And the cash

• 53:03Speaker 07

  goes right in your account. No listing it online, no stranger lowballing you in the messages. Just rip, reveal, and cash out instantly. Or make some room on your shelf. Download Underdog and get in on the chase. Get five free rips packs when you deposit $5. Real rips, real cards, real cash. Only on Underdog. Unleash your dog. 18+, terms apply. Top grails are extremely rare.