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Restructuring__

@Restructuring__

Jun 9

🚨 Private credit helped build a boom. Now it’s creating a mess.

Distress is spiking across the middle market, but not the kind we’re used to…

More firms are failing by accident than by design. And many lenders? They’re learning workouts in real time.

SCP CEO Lawrence Perkins breaks it all down on Bloomberg’s FICC Focus.

Here are my insights that every operator, sponsor, and creditor should know 🧵

1) Rise of “Distressed-by-Accident” Cases

Perkins observes a growing cohort of workouts he calls “distressed by accident." These are situations where overly aggressive financing (often from private lenders) unintentionally pushes a company into trouble, rather than a planned restructuring.

In his words, he’s seeing “more ‘distressed by accident’ lenders these days, courtesy of the private credit boom, than the ‘distressed on purpose’ ilk.” For restructuring professionals, the implication is clear: sponsors and advisors must monitor covenant-heavy deals closely.

Even healthy companies can suddenly trigger defaults, so early warning signs must prompt prompt action. In practice, this means conducting stress tests and engaging lenders before a crisis spirals out of control.

2) Private-Credit Boom Transforms Distressed Investing

The interview highlights how the private-credit boom has reshaped the distressed-debt landscape. Perkins directly links the “distressed by accident” trend to this boom.

With more non-bank lenders and direct-credit funds in the market, mid-market companies have taken on debt structures that may not have been fully tested in downturns.

These lenders often lack formal workout experience or coordination mechanisms (such as lender committees), so their deals can catch all parties by surprise.

The net effect is a broader, more unpredictable distressed market. Sponsors and buyers must now navigate a crowded field of creditors—many with new playbooks—and may face rapid-fire collateral sales or consent solicitations.

Perkins’s insight suggests that distressed professionals must adapt: anticipate a higher volume of unexpected workouts and be ready to educate these new lenders on restructuring processes.

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Restructuring__

@Restructuring__

Jun 8

Apollo’s $800bn Credit Revolution: How to Turn Cheap Liabilities into a Global Origination Machine—and Why It Matters for Every Portfolio in the World

Wall Street’s usual private-equity tale ends with a splashy IPO.

Apollo Global Management has written a different sequel

It has turned itself into the world’s most sophisticated credit factory, originating more than $250bn of debt every year and warehousing much of it on its own $330bn insurance balance sheet.

John Zito—once a credit hedge-fund trader, now Apollo’s Co-President—recently unpacked that evolution on the Invest like the Best podcast.

1) From Hedge‑Fund Desk to $800bn Platform
2) Why the Athene Merger Changes the Game
3) Rewriting the Rules for Investment‑Grade Borrowers
4) The Origination Flywheel in Practice: Atlas and Beyond
5) Carvana: A Creditor Co-op That Rewrote the Playbook
6) The Cultural Operating System: “Thumbs, Not Fingers”
7) What the Model Means for Ordinary Investors
8) Where the Capital Will Flow Next: AI Infrastructure and Beyond
9) Hertz, Re-Examined: An Inside-Out Playbook

1. From Hedge‑Fund Desk to $800bn Platform

When Zito started trading in the early 2000s, bank loans did not even have tickers; they sat inert on commercial‑bank balance sheets. Credit default swaps (CDS) were a novelty, and a $1bn hedge fund seemed vast.

Two decades later the liquid loan market surpasses $500bn in annual issuance, and Apollo by itself manages almost that amount across liquid, illiquid, and captive insurance pools.

The through‑line is scale. A traditional asset manager invests a client’s money and charges a fee. Apollo still does that, but after its 2022 merger with retirement-services giant Athene, it now directly manages—and takes first-loss investment risk on—roughly $330bn of long-dated insurance float.

That capital ultimately belongs to annuity holders, yet the assets and equity cushion sit on Apollo’s consolidated balance sheet, giving the firm “skin in the game” on every coupon and principal payment it earns.

That structure reshapes incentives inside the firm. Instead of asking each desk to maximise its stand-alone carry, senior leadership asks a simpler question: Where does this asset live best along our “good-better-best” continuum of balance sheets?

A 30-year senior-secured loan on a hyperscale data-center campus might drop straight into Athene; a five-year, second-lien term loan backing a private-equity carve-out could slot into the Hybrid Value fund; an opportunistic block of stressed airline bonds might sit in the liquid-credit sleeve Zito once ran.

Because carry, fees, and principal co-invest all flow back to the same P&L, originators focus on total-firm economics rather than turf defence—“every asset has a natural home, so nobody is swinging a single hammer hoping everything looks like a nail.”

2. Why the Athene Merger Changes the Game

Insurance is not glamorous, but it supplies the cheapest, stickiest liabilities in finance. When a retiree buys an Athene fixed annuity, Apollo receives a lump‑sum premium, invests it at 6–7  percent, and credits the policyholder 4–5  percent. The spread—known as net investment income—belongs to Apollo, yet the duration of the liability can stretch thirty or forty years.

That long fuse matches perfectly with infrastructure loans, aircraft‑lease receivables, and other assets banks view as balance‑sheet ballast rather than trading inventory.

Before 2020, no alternative‑asset manager controlled a large enough insurance book to originate directly for its own balance sheet. Apollo changed that by raising more than half of all the equity capital that has entered the U.S. retirement‑insurance sector since the Global Financial Crisis.

The math proved irresistible: traditional life insurers traded below book value on public exchanges, so selling businesses to Apollo at book—or even a slight premium—was accretive. The newly combined entity gained both the assets and, crucially, the experienced underwriters who knew how to price long‑dated guarantees.

With a giant captive buyer in hand, Apollo had to build supply. Since 2014 it has spent $10bn of its own equity acquiring or launching twenty‑plus origination platforms: aviation lender PK AirFinance, residential‑mortgage originator Newfi, and most spectacularly Atlas SP Partners, the $28bn structured‑credit engine Apollo lifted out of Credit  Suisse in 2023.

These subsidiaries employ more than four thousand people who do nothing but manufacture credit that fits Athene’s appetite. The result is a closed loop: originate, warehouse, securitise, and recycle—all without relying on Wall  Street syndicates and keeping all the spread.

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Restructuring__

@Restructuring__

Jun 5

Bain Private Equity Midyear Report 2025

The cracks are starting to show

1) Global buyout deal value
2) Global buyout-backed exit value, by channel ($B)
3) Median buyout DPI, by vintage year
4) Global buyout capital raised ($B)
5) Ratio of capital sought to funds closed in year

Thread 🧵

1) Global buyout deal value, by region ($B)

While deal value was the highest since the second quarter of 2022, having been boosted by a few large transactions, such as Sycamore Partners’ $23.7 billion purchase of Walgreens Boots Alliance, deal count is still at very low levels - less than 50% from 2021 levels

2) Global buyout-backed exit value, by channel ($B)

The slowdown on the entry side is mirrored on the exit side. The most immediate and visible impact was seen in the IPO channel, where the already subdued market for initial public offerings essentially shut early in the second quarter.

For instance, Swedish fintech Klarna—whose backers include Sequoia Capital, Silver Lake, and Permira—in early April reportedly paused its plans for a US IPO.

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Restructuring__

@Restructuring__

May 31

Everything you need to know before starting your IB/PE job - 3,000 words of (very detailed) advice

Every day, ask yourself: "Am I being the best analyst / if they had to fire all analysts but one would they keep me? What can I do differently to become that analyst/associate?"

Even if you are already working, I hope you can find something that will save you some time.

1) Working efficiently
2) Communicating effectively
3) Being professional
4) Balancing work with personal life

1) Working efficiently

Part 1

2) Communicating effectively

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Restructuring__

@Restructuring__

May 26

DECODING GP STAKES

Is GP stakes investing the next frontier in private equity? Sean Ward and Blue Owl Capital are redefining long-term growth with permanent capital.

Sean Ward’s path to Blue Owl is far from ordinary. With a blend of Wall Street, PE, and legal experience, he’s leading Blue Owl’s GP Strategic Capital platform. They aim to forge lasting, value-driven partnerships with fund managers.

Here are my biggest takeaways from Sean’s conversation on Alt Goes Mainstream podcast (what a name!):

1) Blue Owl’s Early Entry into GP Stakes Investing
2) The Minority Investment Model
3) Sources of Return in GP Stakes Investing
4) What It Takes to Succeed in GP Stakes Investing
5) Targeting the Middle Market for Long-Term Growth
6) GP Stake Ecosystem in Private Market
7) Power of Permanent Capital in Securing Future Success

1) Blue Owl’s Early Entry into GP Stakes Investing

Blue Owl’s entry into GP stakes investing was a pivotal moment in the industry. Sean Ward's career took an unexpected turn after his time as a lawyer at Lehman Brothers during its 2008 bankruptcy. He transitioned into a hybrid legal-business role.

Ultimately, he helped spin out Lehman’s investment management division. This led to the creation of Newberger Berman. This evolution eventually turned into Blue Owl’s successful GP stakes platform.

In the early days, the firm set a modest goal of raising $300 million. However, their first fund ended up raising $1.3 billion. Over time, Blue Owl’s latest fund raised nearly $13 billion. The firm now holds 90% market share in large transactions.

The journey wasn’t without challenges. Fundraising was difficult, and convincing General Partners (GPs) to sell stakes in their firms was tough. GPs feared that selling a part of their business might make them seem misaligned with investors.

As time passed, GP stakes investing gained more acceptance. This shift was especially seen among larger firms. They recognized that external capital was essential for funding growth. GP stakes investing is now seen as a necessary tool for scaling up.

2) The Minority Investment Model

Blue Owl’s Minority Investment Model involves buying small stakes (10-20%) in businesses. This lets majority owners keep control while receiving capital to support growth.

The funding helps firms meet GP commitments or acquire other businesses. This increases the value of the majority stake. Blue Owl also offers strategic support. E.g. human resources, data science, and procurement. These services help firms grow without extra costs. Blue Owl brings valuable insights and scale through its large portfolio.

The AM industry has changed since the financial crisis. Many firms have focused on strengthening their balance sheets and institutionalizing their operations. Successful firms often use minority stakes to drive growth.

For example, Clear Lake grew from $7 billion to $90 billion in assets thanks to this strategy.
The firms that sell stakes are usually strong and established.

They sell stakes to fund growth, not because they are struggling. For example, Vista Equity Partners was managing $14 billion in assets at the time of the deal. They sold a minority stake to fund growth, including raising their GP commitment from 2% to 5%.

This allowed them to double their flagship fund sizes and launch new funds. This model also supports succession planning. It allows new leadership to step in without financial strain. It gives firms the flexibility to adapt to new strategies or transitions.

Read 10 tweets

Restructuring__

@Restructuring__

May 25

Buffett: "Big drawdowns are a price to pay for superior long-term investment returns"

@mjmauboussin latest paper analyses drawdowns and the art of making money in these periods

Thread🧵
1) Average Drawdown - 85% / 2.5 years
2) Drawdown Duration and Recoveries Stats
3) Buy the 95% drawdown
4) Even God Would Get Fired
5) Case Study 1: NVIDIA
6) Case Study 2: Foot Locker
7) What To Look For at the Bottom

1) Average Drawdown - 80%

Crazy stat by looking at the overall market.

What is even more interesting is that even the best businesses are not immune to large drawdowns

If we look at Apple, Microsoft, NVIDIA, Alphabet, Amazon, and ExxonMobi, the average maximum drawdown for the stocks of these 6 companies was 80.3 percent, similar to the average of the full sample

2) Drawdown Duration and Recoveries By Max Drawdown

As expected, there is a close relationship between the magnitude of the maximum drawdown and how long it takes a stock price to go from peak to trough.

Drawdowns of 95-100 percent take 6.7 years, on average, while those of 0-50 percent take only 1 year.

For the stocks that get back to par, the further they fall the longer it takes to get back to the prior peak: 8.0 years, on average, for the 95-100 percent cohort versus just 1.5 years for the 0-50 percent cohort.

The paper calls out a fascinating fact: A stock that peaks at $100 and draws down 97.5 percent (mid-range of the 95-100 percent bin) would go to $2.50. A bounce to 16 percent of par would be 6.4 times the low ($16 ÷ $2.50 = 6.4).

The issue? The unrealistic assumption is the ability to buy at the bottom.

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