What does this tell us about what we can expect from other highly anticipated offerings coming down the pike?

So it is a great barometer of the interest and euphoria that we're seeing around AI and every derivative around artificial intelligence, because that's effectively what SpaceX is a bet on.

It's a bet on XAI and how quickly companies and people will spend money for AI tools, and we have two other massive AI companies in the wings that have already filed to go public.

This is Anthropic and OpenAI.

And so the really strong reception from retail investors as well as really large institutions indicates that fervent demand remains there.

And I should say, it comes in a week when we saw a $35 billion debt financing for Anthropic secured.

When we talk to people on the debt side, they are incredibly active trying to fund the data center build-out and all the infrastructure needed for this.

Where are we still seeing maybe some pessimism or not as much optimism?

What exactly did Blue Owl disclose yesterday?

So Blue Owl disclosed the size of investor redemptions from two of its flagship private credit funds.

For one, its kind of marquee fund with about twenty billion dollars of net assets, it said it received redemption requests of almost twenty-two percent.

For a smaller fund that's focused on lending to software companies, it said redemption requests surged above forty percent.

These are really large figures compared to rivals across the industry, and it prompted Blue Owl to limit redemptions from both of the funds, as many of its larger peers have also done.

[laughs] Nice

...

I don't, [laughs] I don't think that we are seeing a systemic kind of issue.

So are we at a turning point for private credit?

A hundred percent.

If you are at one of these firms, you are looking at due diligence on loans very differently.

And then if you were an investor in the funds, if you're a state pension plan or an endowment, you're looking at this credit and you're saying, is this more dangerous or is this riskier than junk bonds and leveraged loans? Like, have I been exposing myself to more risk that's really centered in software and And are the returns going to be pretty disappointing going forward? And so I think that itself will gum up how much capital some of these firms can raise.

And it's interesting, right? Like while I've been covering private credit over the last few years, like they – Anytime they went out trying to raise a fund, oversubscribed.

They could raise more money than expected.

Whereas Antoine was covering private equity firms which were struggling to raise their next vintage.

But what about this focus on wealthy retail investors? Are private credit firms going to keep courting these sorts of clients? Or has this group proven too fickle?

What does that mean? What- what exactly does that look like?

Sure.

Think of a mortgage, right? A mortgage is just a loan against a home.

There is this valuable asset behind the mortgage, so if the person who owns it can't pay, they're still value to the lender, right? This is why even though mortgage-backed securities have this blemish on them from the financial crisis, they're really a big and powerful tool to the US home market.

They allow millions of people to take out mortgages which are then securitized together, packaged up, and sliced into different tranches and sold to investors.

And the thing is, you can do that with so many different asset classes, and Tre Colore and First Brands were doing it in slightly different ways.

Tre Colore would make auto loans to customers in the South, and those loans were secured by the cars, so there's some value there.

What are we learning from the collapse of Tre Colore and, you know, First Brands being on the verge of bankruptcy and how these non-bank lending organizations are working out in practice?

Why did the debt turn toxic so quickly?

Yeah, so go back to April 2022, right? Morgan Stanley corrals six other lenders to provide almost $13 billion of debt and they're super pumped to, you know, really deepen their ties with the world's richest man.

And then things start to go wrong, right? Traditionally, when a company or business is trying to buy another business, very often they secure debt from banks but the banks don't ultimately like to hold that debt, right? They go out to big giant investors and they sell it on to them.

Now, Morgan Stanley, it became clear, couldn't do this in 2022.

There were too many issues.

Elon starts to get cold feet over the, the merger and he tries to back out.

The Fed starts raising interest rates.

W- what caused that turnaround?

And where does private equity come in here? How does the seizing of the corporate bond market really influence PE?

Yeah, PE is hugely dependent on the high-yield bond and the leveraged loan market.

They use it to fund their buyouts.

And if these markets close, it effectively shuts them out of business.

They can't do new deals.

It becomes very difficult for them to refinance debt of their existing portfolio companies, which makes their returns even more challenging and it raises questions about kind of the vitality of the private equity business.

And so, it really depends on how long things are shut and at what pricing levels do they reopen at.

And so then, Eric, how does this actually play out into the wider economy? We're talking about here kind of a seizure that's going on within the corporate bond and junk markets, but also, you know, a slowdown in deal-making.

What exactly has been happening?

Sure.

So this was an all-out sprint it sounds like from the major parties involved in this.

On one hand, you had CK Hutchison, massive conglomerate in Hong Kong run by the billionaire Li Ka-shing, which owns these ports on both sides of the canal.

On the other hand, you have BlackRock, Global Infrastructure Partners, and Terminal Investors Limited.

These are big investors in infrastructure and ports.

And right now, it's just an agreement in principle.

Now, if this goes through, do we have any nuts and bolts takeaways about what happens next? Like, are these ports kind of in the hands of BlackRock and these other companies?