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Interviewer (Bloomberg Host) (0:23)
Let's turn to private equity. The consortium Bank Electronic Arts is set to add more than a dozen banks to its underwriting group after JP Morgan put up 20 billion billion of debt to bankroll the leveraged buyout. The banks are in line to share roughly $500 million in fees for arranging the financing. Joining us now a man who knows something about a leveraged buyout, Steve Paluca of Bain Capital. Steve, it's good to see you.
Steve Paluca (0:44)
Good to be here.
Interviewer (Bloomberg Host) (0:45)
Good morning. Let's reflect on your time. The largest leveraged buyout ever before this one was HCA back in 2006, 2007. There you were right there in the middle of it. Describe that moment and how it compares to what we're seeing play out now.
Steve Paluca (0:59)
Well, it's really interesting. I think that buyout was 5 billion equity and $27 billion debt. This, this buyout is much more equity, you know, kind of 30 billion of equity and 25, 20 billion debt, maybe 35 billion of equity. So the markets have changed to that extent that you can't leverage much. But the EBITDA is a little less very quality sponsors and JP Morgan is a very quality bank. So they did the deal because of the great growth in gaming and media and entertainment. And I think it's a very solid company.
Interviewer (Bloomberg Host) (1:29)
You did tremendously well out of hca, needs to be very, very clear about that. But the timing of came right at the peak of credit and this is now too. Is that anything to be concerned about?
Steve Paluca (1:40)
You know, I'm less concerned about credit right now in terms of the private credit markets because the private lenders actually are very good. The banks have been very good. J.P. morgan, especially bank of America, well run well capitalized banks. And private credit is different than credit for banks because if it does go bad, you only write off the equity from people who put the equity in. It doesn't have a systemic multiplier effect. So I'm less concerned about private credit. What I'm more concerned about is the size of the national debt and how much interest we're spending on the national debt. It's really interesting if you go back to when I got out of business school, there was a huge sturm and drawing about the national debt passing 1 trillion. That's in 1982. So it took 250 years to have 1 trillion of national debt. In the last 40 years, we now have 37 trillion, which is more than the GDP. GBP is about 30 trillion. So that concerns me more in terms of the impact of the dollar interest rates. Our interest from the government now is one of the highest expenditures. It's right up there with defense and health care. So that concerns me more than private credit.