Eugene G

@NickNemo17 @LeylaKuni Curious, what downside case are you actually underwriting? If 15% default / 50% recovery feels too low, what numbers do you use and how does the math shake out vs ~10% yields?

@LeylaKuni I cannot believe that he said that

Let’s now annualize this math, add fees and leverage

@LeylaKuni What would be your expectation including fees and leverage in this severe downside case?

@partners_road Do you think these add-backs are unjustified? My understanding is they’re fairly standard in underwriting to normalize earnings and reflect expected run-rate EBITDA. Curious where you think the line is between reasonable adjustments and aggressive ones.

In leveraged loans, EBITDA add-backs now reduce reported leverage at issuance by roughly 1.2 turns & larger in direct lending at 1.9 turns. For both the gap is ~double vs ‘15. The result? New issue debt/EBITDA of 4.6x (lev loans) & 5.0x (direct lending) is actually 5.9x & 6.9x.

@Jim_Kozlinski @DownsideCase That’s fair and I agree they are overvalued given rate cuts/default cycle . My only point is that in private credit the clearing price in a thin secondary market can diverge a lot from hold-to-maturity value, so liquidity alone can sometimes overstate NAV mispricing.

Yeah. We’re arguing different points. Illiquidity alone does not prove mispricing. But most people are rarely arguing ceterus paribus, we use mosaic theory to formulate decision matrices. The write offs that are currently taking place, and that will most likely accelerate, in combination with low liquidity, and the panic I see in eyes of PC managers when I speak with them show that mispricing is highly likely.

This guy is smart enough to know the difference between asset quality and trading liquidity. It’s all fair play, but he’s deliberately playing dumb to feed into a fear trade

@Jim_Kozlinski @DownsideCase Private credit NAVs are typically DCF marks assuming hold to maturity, not forced liquidation prices. Secondary markets for these loans are small by design (arguably even thinner than PE secondaries). NAVs may still be optimistic, but illiquidity alone doesn’t prove mispricing.

Sure, those are the basic mechanics during a normal regime. If the loans were compellingly priced, there would be no problems getting liquidity. Point is, they are massively overmarked, so they can’t sell them to get liquidity. There is a price where these loans will clear, and what Jeffrey is saying, in an indirect way, is that the clearing price is much lower. Doesn’t matter if it’s public markets, private markets, or beanie babies, if the portfolio is marked at the appropriate price there will be buyers. The tender offers are 35% to NAV, and I think those are optimistic. I owned a small amount of distressed in 2015, so I’ve watched these markets clear before. It is slow and painful.

@CPDDOUGH @Vuzhteetz @DonutShorts That’s fair, ROE and portfolio risk skew matter more than a single sale print. I was just framing asset downside vs current discount. The real debate is earnings durability from here.

@EugeneGoodman @Vuzhteetz @DonutShorts Good thought though. I’m not trying to be dismissive. They are complicated beasts!

"Those marks are rock solid" "We have contractually committed cash flows" "We've got plenty of collateral under us" "Umm, we are selling paper at 94 cents on the $" ......... What what they do

@CPDDOUGH @Vuzhteetz @DonutShorts Agree they needed to clean up the book and delever. But if this pool is reasonably representative, a ~15–20% NAV impact implied by the execution still suggests the current ~29% discount may be a bit overshooting it?

@EugeneGoodman @Vuzhteetz @DonutShorts All that said, I think NMFC needed to do this given their v high leverage and the AI situation. They needed to derisk. And still need to do more of it.

@Vuzhteetz @DonutShorts The released the breakout in their earnings presentation. It decreased exposure to PIK, subordinated, and software. So doesn’t seem to be cherry picked best performing

@EugeneGoodman @DonutShorts What no one seems to be asking is WHAT DID THEY SELL. If they sold the best performing positions, well then 94 cents seems terrible. If they sold a representative amount of the portfolio than 94 cents seems to indicate the equity is crazy undervalued

@DonutShorts That’s fair but I’m just looking at it relative to where the equity is pricing the portfolio. If assets are clearing at 94 but the stock pricing something worse, that implies market oversold?

@EugeneGoodman That's now how these instruments were sold. We're defining deviancy down.

@yieldsearcher Based on their current discount to NAV, and fact this sale is representative of their total portfolio, isn’t a 6% discount a good execution? I’d imagine this should be supporting the idea that market is oversold on PC?

New Mountain is one of the best-regarded PE sponsors on the Street (among those who know), with no history of portco BKs. Notable even they are willing to take a haircut on their loans (~6¢), which compares to BKLN and SRLN, both of which are down ~3% ytd.

@paulswaney3 Always looking to improve my models

@StevenCheah @hen_ease @BarstooliCasino I’ll be there every week with the fellas. Let’s try not dropping you got your 100 vaccine shot mid big hand next time though

.@hen_ease and I started to get VERY 🔥🔥 last night on Monday Night Blackjack and looking back, I probably should've picked a different time to bring up I just got my 5th COVID shot. Tough spot for my internet to conk out too. @BarstooliCasino. But shoutout to our guy Eugene.

Arguably the worst clock management by a football team/coach in history #TCU

@GlobalProTrader What do you view as a “correction”? Think @calculatedrisk views a slowdown/stall with prices potentially being flat to low single digit increase still. Do you think it’s going to a sharp price decline like 07-09 housing bubble bust?

@DiveBarJesus @revolttv That hurt but true. Also not even the best Jay-Z or Biggie albums, guess that was intentional?

@EugeneGoodman @revolttv You're in Jersey. You can be honest about this now.

If you had to choose one album from this lineup, which one are you choosing? 💿

@DiveBarJesus @revolttv Life after death and il throw hands about it

@revolttv Aquemini

CAM THOMAS ARE YOU SERIOUS!!!!???

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@Stuckey2 It was just 4th down and 32 for Maryland if that says anything….

How bad is this Illinois-Maryland game? I haven’t seen a single tweet about it on my timeline