Volatile Value

$CAR.UN Canadian Apartment REIT - Investor Meeting

So this isn’t really First Brands specific - I just don’t think ppl outside of Credit fundamentally understand the diligence dynamics of Public Credit vs Private Credit. And that ppl will try to correlate the problem of poor managers to broader and systemic issues. Let’s dive into it. My ultimate view is the problems in Credit are with poor managers and those with risk-on mandates. The most important thing I can say is that you can’t define all lenders in the same bucket. Some groups are better educated, higher compensation, more diligent, have more thorough processes, have low risk parameters, and have competitive dynamics that give them higher quality deals. Meanwhile some firms have lower comp, a less experienced team, quicker processes, higher risk parameters to deploy quality, a willingness to focus on relationships over deal quality, or because of where they sit in the market they have to take on lower quality deals. Credit Suisse in particular, was a high risk culture and long before its eventual demise there were a lot of questions about what it was financing and the quality of the deals it was agent on or heavily exposed to. But just because Credit Suisse is Credit Suisse, it doesn’t mean JP Morgan is Credit Suisse. Jefferies has also fallen into the bucket of generally being pretty risk on, which has helped them in a lot of instances, obviously not here. So i’m not a believer in ‘private equity is a bubble” or “private credit is a bubble” and instead of you need to more so call out the firms that aren’t performing - they have to do continuation funds because they can’t fundraise, their deals are constantly going through LMEs, etc. Let me go through how i view diligence in Public Credit and Private Credit. Unfortunately, asset-based finance isn’t really where I spent my time, but I can opine a little there. I just think it’s important to distinguish where the risks could be and what could generally be fine.