How Oaktree's Head of Sourcing Finds the Next Great Deal

Summary

Odd Lots Podcast Summary: "How Oaktree's Head of Sourcing Finds the Next Great Deal"

Bloomberg's Odd Lots podcast, hosted by Joe Weisenthal and Tracy Alloway, delves into the intricate world of finance, markets, and economics. In the episode titled "How Oaktree's Head of Sourcing Finds the Next Great Deal," released on November 28, 2024, the hosts engage in an insightful conversation with Millwood Hobbs, the Head of Sourcing and Originations Group at Oaktree.

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1. Introduction to the Guest

Timestamp: [03:45]

Tracy Alloway introduces Millwood Hobbs as the ideal guest to discuss the nuanced process of sourcing deals within private credit markets. Hobbs brings a wealth of experience, having led Oaktree's Sourcing and Originations Group since its inception in 2020.

Tracy Alloway: "We're speaking with someone whose day-to-day business is talking to people, sourcing and finding deals, bringing things into the world."

2. Millwood Hobbs' Professional Journey

Timestamp: [07:43] - [10:21]

Millwood Hobbs shares his extensive background in finance, detailing his progression from public accounting to leveraged finance banking. He highlights pivotal moments, including his tenure at Nations Bank (a predecessor to Bank of America), Columbia Business School, First Boston, Deutsche Bank, Goldman Sachs, and finally, joining Oaktree in 2013.

Millwood Hobbs: "When I joined Oaktree in 2013, every strategy within Oaktree kind of did its own thing. So what we decided as the market evolved... was to create my group with the real purpose of making sure we were focused on providing capital solutions versus trying to figure out what fit a particular strategy."

3. Evolution of Credit and Capital Markets

Timestamp: [10:46] - [16:41]

Hobbs discusses the transformation of the private credit market over his career. He contrasts the pre-Dodd-Frank era, where banking was the primary source of leveraged finance, with the post-crisis landscape that saw the rise of private credit markets. The reduction in bank leverage ratios from 30x to 15x post-Dodd-Frank significantly altered market dynamics, leading to increased reliance on private credit.

Millwood Hobbs: "Post Dodd Frank... more of that has just migrated to the private credit market, supplemented by the fact that there are these private equity professionals who are very efficient at looking at both markets and figuring out where they should play or where they should place their credit or their deals."

4. Sourcing and Finding Deals

Timestamp: [17:06] - [24:19]

Hobbs explains the strategic approach behind Oaktree's Sourcing and Originations Group. Emphasizing relationship-building, his team focuses on being the "first call and the last call" in deal sourcing. This involves cultivating deep relationships with private equity firms, understanding their needs, and positioning Oaktree as a trusted capital provider.

Millwood Hobbs: "The goal is the more conversations I have, the more informed I am of where the market is. ... we spend time making sure that they know who our CEO Armin is or Bob O'Leary, that they know the PMs at the different strategies."

5. Relationship Management in Finance

Timestamp: [22:33] - [31:48]

A significant portion of the discussion centers on the importance of personal relationships in finance. Hobbs shares anecdotes illustrating how personal connections—ranging from family interests to shared hobbies—facilitate trust and open communication between financiers and clients. He underscores that maintaining amicable relationships, even when deals don't materialize, is crucial for long-term success.

Millwood Hobbs: "We're always trying to make sure we're understanding relative value between public and private... We're still a trust me business."

6. Negotiation Strategies and Challenges

Timestamp: [24:24] - [36:37]

Hobbs delves into the art of negotiation within private credit deals. He recounts a memorable negotiation where he offered to buy a stake in a struggling deal at a significant discount, illustrating the delicate balance between firm decision-making and maintaining positive relationships. The discussion also touches on the complexities of deal structuring, the role of legal documentation, and the impact of add-backs on adjusted EBITDA.

Millwood Hobbs: "The art of negotiation is not the negotiating point you're discussing at the moment. It's the points that are coming two points later."

7. Handling Rejections and Maintaining Position as First Call

Timestamp: [44:20] - [46:51]

Hobbs emphasizes the importance of gracefully handling rejections to preserve Oaktree's reputation as a reliable first call. Instead of outright saying no, his team offers alternative pathways to agreement, ensuring that relationships remain intact even when specific deals don't proceed.

Millwood Hobbs: "We don't say no. We say, here's how we can get to a yes."

8. The Interplay Between Private and Public Credit Markets

Timestamp: [46:51] - [48:35]

The conversation shifts to the dynamic between private credit and public markets. Hobbs explains that refinancing private credit deals in public markets often stems from cost reduction motives and the pursuit of greater flexibility. He reassures that the growing private credit market, bolstered by substantial dry powder, can accommodate these shifts without compromising Oaktree's position.

Millwood Hobbs: "There's $3 trillion of dry powder at private equity firms. There's enough for us all to do and be happy."

9. Legal Considerations and Documentation

Timestamp: [40:29] - [42:36]

Addressing the role of legal teams, Hobbs highlights the necessity of thorough legal documentation in safeguarding deals. He notes that while legal costs have risen, effective documentation ensures clarity in transaction intentions and governance, which is paramount in protecting investors and managing risks.

Millwood Hobbs: "Lawyers are very valuable in our process. We spend a lot of time making sure we have the right counsel who can understand and be able to move with us if this goes sideways."

10. Reflections and Key Takeaways

Timestamp: [42:47] - [51:05]

In wrapping up, Hobbs reflects on his career's successes and challenges, emphasizing the human element in finance. The hosts commend his ability to balance analytical rigor with interpersonal skills, underscoring the multifaceted nature of sourcing and negotiating deals in private credit.

Joe Weisenthal: "That was very interesting... I really enjoyed hearing him describe how he negotiates those implicit negotiations."

11. Conclusion

Timestamp: [51:05] - [52:45]

The episode concludes with the hosts expressing appreciation for Hobbs' insights, highlighting the valuable lessons on relationship management, negotiation, and strategic deal sourcing in the evolving private credit landscape.

Tracy Alloway: "Millwood Hobbs, thank you so much for coming on Odd Lots."

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Notable Quotes

• Millwood Hobbs [04:30]: "I have a lot of Lucites... It's like an actual glossy picture book of the deal."

• Tracy Alloway [24:37]: "You're Oak Tree. And so I have the market as one. As one firm."

• Millwood Hobbs [25:15]: "Our job is to protect our investors. That's our job."

• Joe Weisenthal [44:20]: "Talk to us about saying no, but still maintaining the first sometimes."

• Millwood Hobbs [46:51]: "You're Oak Tree. And so I have the market as one. As one firm."

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Insights and Conclusions

• Relationship Building is Paramount: Success in private credit sourcing hinges on cultivating deep, trust-based relationships with private equity firms and sponsors. Personal connections facilitate smoother negotiations and enhance Oaktree's reputation as a reliable capital provider.

• Adaptability to Market Evolution: The private credit market has significantly evolved post-Dodd-Frank, necessitating a strategic shift from traditional banking to specialized private credit solutions. Oaktree's structured approach ensures they remain competitive and responsive to market demands.

• Strategic Negotiation: Effective negotiation requires forward-thinking and the ability to anticipate future points of contention. Offering flexible solutions rather than outright refusals helps maintain positive relationships even when specific deals don't proceed.

• Importance of Legal Documentation: Comprehensive legal documentation is crucial in safeguarding deals, managing risks, and ensuring clarity in transaction intentions. Collaboration with adept legal counsel is essential for seamless deal execution.

• Balancing Flexibility and Efficiency: While private credit offers cost efficiencies and flexibility, maintaining a balance between these and the need for thorough due diligence is vital for long-term success and risk management.

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Final Thoughts:

This episode of Odd Lots provides a comprehensive look into the strategic and interpersonal facets of sourcing deals in the private credit market. Millwood Hobbs' experience and insights offer invaluable lessons for professionals navigating the complexities of modern finance, emphasizing that success is as much about relationships and strategic thinking as it is about financial acumen.

Transcript

[PGIM Representative]

What do you see on the horizon? Uncertainty or opportunity? Whatever you see at pgm, we can help you rise to the challenges of today when active investing and disciplined risk management are needed most. Drawing on deep expertise across the world's public and private markets in pursuit of long term returns, our investments shape tomorrow today. Pursue your tomorrow with pgim, a leading global asset manager.

[Millwood Hobbs]

Meta's open source AI is an open invitation. It enables small businesses, startups, students, researchers and more to download and build with our models at no cost. Which means more people can build amazing things. Because when AI is open source, it's available to all. And when AI is available to all, everyone benefits. Learn more about Meta's open source [e-mail] Open.

[Tracy Alloway]

Bloomberg Audio Studios Podcasts Radio News hello and welcome to another episode of the Odd Thoughts Podcast. I'm Tracy Alloway.

[Joe Weisenthal]

And I'm Joe Weisenthal.

[Tracy Alloway]

Joe, do you remember deal toys? Did you ever see those?

[Joe Weisenthal]

I never got a deal. I never. I do know what they well, you.

[Tracy Alloway]

Wouldn'T get a deal toy unless you were working on something.

[Joe Weisenthal]

So I'm aware that they existed, but I don't. I never had one. I never saw one.

[Tracy Alloway]

I used to be slightly obsessed with them.

[Joe Weisenthal]

So were they toys like or were they like like or were they those sort of Lucite?

[Tracy Alloway]

Yeah, that's pretty much it. So if you are working in capital markets or in mergers and acquisitions and you completed a deal, you would mark the end of that trans transaction by, you know, getting some sort of swag, I guess. And it could be really boring. It could just be a Lucite block or something like that. But some of them were really interesting and fun and one of the ones I remember seeing was someone it must have been working in like capital markets. It was a little toggle, like an actual like think of like a railroad kind of toggle. And it was to celebrate the first ever picked toggle transaction.

[Joe Weisenthal]

So can I say something? You know, we talked to first of all, it's amazing. Second of all, you know we talk to a lot of investors on the podcast. We talk to a lot of people whose job in some way resembles our job, which is looking at screens all day or maybe looking at data. I think if I ever had gone into finance I would have some job that looked involved a lot of looking at screens and a lot of maybe looking at data, but mostly just looking at screens. We don't often talk to a lot of people who are in the world of actually talking to other people about making things happen. I never think I'd be good at that. No one wants to hang out with me, you know, stuff like that. And so I want to learn and talk to more people about how actually things in finance, whether we're talking about a deal, whether we're talking about a new issuance, et cetera, how that actually happens, how an instrument or security actually comes into the world.

[Tracy Alloway]

Well, I am very pleased to say, Joe, that we do in fact have the perfect guest for this topic. We're going to be speaking to someone whose day to day business is talking to people, sourcing and finding deals, bringing things into the world and someone who also knows exactly about that pick toggle deal toy that I mentioned earlier. So I'm very excited. We're going to be talking, we're going to try to thread the needle between sourcing deals and also something else we've been interested in lately, which is private.

[Joe Weisenthal]

That's right.

[Tracy Alloway]

All right, so without further ado, we're speaking with Millwood Hobbs. He leads Oak Trees Sourcing and Originations Group. So really, again, the perfect person. Millwood, thank you so much for coming on all thoughts.

[Millwood Hobbs]

Thank you for having me.

[Tracy Alloway]

So I'm right, right about the pick toggle toy. You've seen this toy?

[Millwood Hobbs]

Yes, I've seen it. My favorite deal toys, there's two that stick out. When Ford spun out Hertz in 2005, I was part of that transaction. And so I have a set of car keys and there's a. From Hertz and they're called Lucites. And then the other one, which was pretty cool, I did the Mars Wrigley deal with Byron Trott. And so I have two Eminem amazing guys that sort of, they lay out the training.

[Joe Weisenthal]

Do you have a room in your house that's sort of like I'm imagining high school athletes with all their trophies, et cetera. Do you have them all together?

[Millwood Hobbs]

So I have. We moved during COVID in 2020 and we bought a house. And now I have like a real library. And in that library there are two things from investment banking that I have. I have bank books from deals. We used to go to a printer and we used to draft.

[Tracy Alloway]

Oh, like the pitch deck kind of.

[Millwood Hobbs]

Well, it's like a, it's like an actual. It's a glossy picture book of the, of the deal. The transaction goes through transaction overview. It goes through company, it goes through business. And that was what folks used to actually underwrite deals back in early 2000. Yeah. And then I have Lucites. So I have a lot of Lucites.

[Tracy Alloway]

So the unit that you're leading at Oak Tree.

[Millwood Hobbs]

Yes.

[Tracy Alloway]

That was created, I think, relatively recently. It was like 20, 2020. What was the thinking behind that?

[Millwood Hobbs]

So the market, private credit and origination and financing of deals has evolved quite a bit. If you just go back to kind of pre Dodd Frank, most private equity firms didn't have what we call capital markets professionals. And post Dodd Frank and the migration and creation of a robust private credit market, most of the private equity firms have capital markets professionals who really spend time drafting, creating, structuring financings for the private equity buyouts. And what we figured out, Oaktree, we, in 1995, we manage a couple hundred billion dollars. What we were figuring out. When I first started in 2013, every strategy within Oaktree kind of did its own thing. So if a deal came into one strategy and it didn't work, it just kind of died in that strategy. So what we decided as the market evolved and moved towards capital, solution provider versus this fund does this, and this fund does that. We created my group with the real purpose of a couple things. Number one is making sure we were focused on providing capital solutions versus trying to figure out what fit a particular strategy. Yeah. And then the second reason we really did it is that, you know, capital is the commodity in our business. Everyone has a lot of money, but how do you get the first call and the last call? And that's the relationship. So my team is meant to really spend time and develop relationships with the counterparties. Because, look, the reality of it is we shouldn't. We're not agreeing on. We have different investors. So a private equity firm has a different investor base than we have. And so the goal in my group is to, one, make sure the entire firm sees a transaction, and two, we're involved in the art of the deal. Right. And so the goal is no one really should win. Both parties should be just mildly annoyed. And how do you do that? How do you do that? And the way you do it is through a relationship.

[Tracy Alloway]

That's funny, because we say that in journalism sometimes, like, the goal is for everyone to be, like, slightly dissatisfied with the story. Because if everyone's happy, then you basically put out a press release.

[Millwood Hobbs]

Somebody's wrong. If one side is really happy, the other side is probably wrong.

[Joe Weisenthal]

I know Tracy already more or less asked this question, but I'll just put it in a different way. Why don't you just give us a sort of brief overview? If someone says, what do you do? And how'd you get here? Yeah, what'd you do? And how you get here.

[Millwood Hobbs]

Yeah. So you don't want my full background, do you?

[Tracy Alloway]

Oh, I actually do. Because you've been in the market for a really long time.

[Millwood Hobbs]

Okay, okay, I'll start from. I'll start from. So look, my dad was in public accounting and originally. So I got a full academic scholarship to Rutgers to go to law school. I sat in political science and I would fall asleep and wake up and they were talking about the same thing. So I said I don't think I can do four years of political science. So I switched to accounting because my generation, you did what the adult said to do. And so I switched into accounting and my dad said, don't do public accounting, do banking. So I started out at a firm called nations bank which is now, it's a predecessor to bank of America. And the most interesting job I had at Nations Bank, I was a controller for leveraged finance. I was the controller and the youngest controller in the firm. And I said I want to be a leveraged finance banker. And the reason why it sounds silly when you're at my age, but they wore the nice tie, they wore nice shoes, they were big in finance. And at that time nations bank was a pretty big term loan B lender. And so the head of the group basically said, look, right now you're just an accountant. He said, go get a sales job and then go to business school. So again I went to GE Capital and I financed commercial equipment, so rolling stock assets, cars, trucks, forklifts. Did that for one year to today and then went to Columbia Business School. I summoned at First Boston and I summered in asset backs and leveraged finance and then joined deutsche bank in 2000 full time. And during that time period I structured a lot of LBOs, Sungard, Neiman Marcus, US food, Ceridian first deal.

[Tracy Alloway]

Neiman Marcus being the first ever pick toggle deal. Yes. And so you had that deal toy.

[Millwood Hobbs]

I have it. I'll be honest with you. I think I gave it to someone more senior.

[Tracy Alloway]

Should have given it to me. I would appreciate it.

[Millwood Hobbs]

I know somebody who has one. And then in 2007 I left Deutsche bank. And really you sort of say why would you leave Deutsche Bank? And if you go back to 2007 the market was very concentrated. So versus today there were eight underwriters who owned all the leveraged finance. So you could see the market. When I got a call to say, hey, what leverage would you provide on a deal? I'd ask the private equity firm, well, what do you think the business is worth? And they'd say well, it's based on leverage. And so you could see that coming to a head. So in 2007 I went to Goldman Sachs. I did LBOS at Goldman Sachs and also did high yield sales and joined Oaktree in 2013.

[Joe Weisenthal]

It's always interesting to hear someone's background, but I like how this dovetails with the actual development of the industry itself and this idea that at one point there were just a handful of very small or a handful of banks that ran leveraged finance. And then of course we know about the proliferation of all that. So useful to get that background.

[Tracy Alloway]

Well, why don't we dive into that a little bit more? So talk to us about how the credit market, the capital market has evolved over the course of your career.

[Millwood Hobbs]

Yeah, so look, when I first started, covenants were pretty standard. Amendments to deals were actually fairly standard. And as you moved forward, by 2007, the majority of market was Covlight. The one interesting thing about pre Dodd Frank was in the credit agreement, which is a document that governs the loan, if you will, you had to hedge 50% of your floating rate risk. And so going into the cycle, two things that made sense then is one folks were hedged 50% and then the other thing is Libor, if you Remember back in 2007 was at 5%. So the spread to deals was 200, 250 to get to that 7.5% average LBO. Well, what happened when Dodd Frank, when the markets crowded the global financial crisis, rates went to zero. So companies actually generated cash flow in that cycle. The challenge or difference we have today is we've been in a no rate environment. So no one really hedged one and then two because there was zero percent base rates, the spread on deals was much higher. Instead of 200, 250, you had 450, 500, 600. So when 22, when rates started to move up, you actually had a situation where a lot of companies couldn't support the cash flows because no one predicted that rates would move. And most folks were not hedged like they were in 2007.

[PGIM Representative]

What do you see on the horizon? Uncertainty or opportunity? Whatever you see at pgm, we can help you rise to the challenges of today when active investing and disciplined risk management are needed most. Drawing on deep expertise across the world's public and private markets in pursuit of long term returns, our investments shape tomorrow. Today, pursue your tomorrow with pjim, a leading global asset manager.

[Joe Weisenthal]

This is Tom Keene.

[Tracy Alloway]

I'm Carol Massar.

[Millwood Hobbs]

And I'm Joe Matthew. And we want to tell you about Bloomberg News Now.

[Joe Weisenthal]

It's news when you want it on your schedule.

[Tracy Alloway]

Subscribe to Bloomberg News now on Apple, Spotify or any podcast platform.

[Millwood Hobbs]

These are short audio reports, five minutes or less, that bring you the latest headlines with context 24 hours a day.

[Joe Weisenthal]

Listen for just a few minutes to stay on top of the latest news from around the world.

[Tracy Alloway]

Get it on your smartphone.

[Millwood Hobbs]

Subscribe to Bloomberg News now on Apple, Podcasts, Spotify or anywhere you listen.

[Joe Weisenthal]

Can you talk a little bit? You know, it's a theme that obviously comes up in every private credit, but also other episodes as well. Talk to us a little bit more about, like the passage of Dodd Frank and how it's set in to people's brains that this is going to restructure the financial industry, that there are going to be various activities, whether we're talking about trading, whether we're talking about lending, et cetera. These are not going to be part of the banks anymore.

[Millwood Hobbs]

Right.

[Joe Weisenthal]

Talk to us a little bit about those sort of early post and we're talking 2009, 2010, those initial conversations that people were having about, oh, something new opportunities are going to emerge from it.

[Millwood Hobbs]

Right. Well, if you go back to 2007, when a portfolio manager on a public side was selling risk in the market, the banks were the shock absorber to that risk. So when I was sitting at Goldman Sachs, it wasn't unusual for US to buy $200 million of an issue and.

[Joe Weisenthal]

It would be on your balance sheet.

[Millwood Hobbs]

And it'd be on our balance sheet. Post with Dodd Frank did effectively said, okay, if you go back to the leverage, and I hope I'm not being too technical, but no, that's great. Banks were levered roughly 30 times pre global financial crisis post, they're 15 times levered. Right. So once you shrunk that liquidity or capital out of the banks, they can no longer absorb the deals. And so what happens is, and this is why liquidity is really an important phenomenon. So when a PM calls the desk and says, hey, I have to move 5, 10, 15 million, you're not really sure what their real size is because they know the market's not liquid. When I was in sales and trading Pimco or somebody would call and say, hey, I've got several million to move. And I'd say, well, this is your first call or last call. And they laugh and they say, why? I said, because I give you two different prices. And so what happens in a market that's less liquid is as they're trying to Sell, they call different banks. And every time they make a call, a bank then assumes that there's more behind that to go. And so they re rack the pricing. And so in a public security, which is different than private, a public security can actually move pricing wise without anything really trading, but on the anticipation that there's their supply out there. And so that created, you know, and if you go back to 2009, private credit market was like $300 billion. Right. Most of that was more mez or off the run. Not what we call our regular way, direct lending, private credit, which we were active in, but we were doing it more on the distress or opportunistic credit side. And over time, because of the liquidity and capital requirements of banks, more of that has just migrated to the private credit market, supplemented by the fact that there are these private equity professionals who are very efficient at looking at both markets and figuring out where they should play or where they should place their credit or their deals.

[Tracy Alloway]

I'm getting a lot of flashbacks to writing about corporate bond inventories at the dealers around 2012. So just on this note is the pitch from private credit. Is it basically execution? You don't need to worry about us actually being able to do or complete this deal. Whereas at a bank they're taking into account leverage considerations, regulatory requirements and all of that.

[Millwood Hobbs]

Right, right. So what a proper deal should be. If you're sitting in private equity, your job is to find the most efficient, best price capital for your deal. Right. The public market, what they're very good at doing is saying here is the indicative rate for a deal. And let's just say the indicative on a term loan is sulfur plus 400. Right. Then the private equity firm comes to us and says, where will you actually own that risk? Right. So they get a level where we're owning, which won't be the indicative because remember, the banks are marketing, hey, we can get you the best rate and best execution. We're in the storage business, the banks are in the moving business. So they're trying to move the risk and we own the risk. And so we price the risk where we'll hold it. And if those two are not aligned, then. And then what you add to that 400 is you add what we call flex. So if you take the indicative plus flex, that gives you an idea of what the banks are willing to say that this debt will price. So let's say the flex is 150 basis points. So they know on the private equity side, they know worst case, the banks will own it at SOFR550, which the banks have gotten that sort of flex number based on their discussions with us to know where we would actually own that risk.

[Tracy Alloway]

I see, yeah.

[Millwood Hobbs]

So the process is how do you create an efficient auction to have the debt in the right market at the right pricing with the right structure?

[Tracy Alloway]

Okay, so here's my other question. When you are about to do a deal or when you find a deal, who are you actually talking to? Is it the banks or is it like the companies that are borrowing in the market?

[Millwood Hobbs]

So generally who are most your meetings.

[Tracy Alloway]

With on a day to day basis?

[Millwood Hobbs]

Oh, wow.

[Joe Weisenthal]

Sorry. Answer Tracy's question. But I'm just sort of like how I would have phrased the question.

[Millwood Hobbs]

I'm talking to both.

[Joe Weisenthal]

Right.

[Millwood Hobbs]

Everyone's my friend. And the goal is the more conversations I have, the more informed I am of where the market is. Right. The interesting thing about public markets is that market reprices risk faster than private credit because there's a secondary market. Private credit doesn't really have a secondary market. So what we're always trying to make sure we're understanding is relative value between public and private. And so my conversation, let's say XYZ sponsor wants to buy a business, right? And let's say it's a public company. The first call I'll get is from S. Barnson and say, hey Millwood, we'd like you guys to look at a financing opportunity for a public company we're looking to buy. I'm like, great. I say, look, I'll put my compliance on the email and we'll do a conflicts checks on that business because we don't know if we own the stock or there's existing debt outstanding. So it goes through a process where that company is actually vetted from a conflicts perspective. Once it's vetted and that clears the process, then we get initial information on that lbo. And that information could be a selling memoranda, it could be an initial model. And so then we start the process and what the sponsor wants to be able to do is from the preliminary information is get a sense for do you like the asset or not? Do you want to finance it? Where do you want to finance it at and what's your leverage and what's your pricing? So there's some high level indication that they get from us to determine if they, if we should move forward with a more robust diligence process. So that's how it starts. And then at that point we do a due diligence process on the Asset. Right. So we may call third party consultants. We may do some background on it. We have a call with the sponsor. We understand their investment thesis, like, why are they making the investment? And then we talk internally, and we have an investment committee, and we discuss it, and then we'll iterate with the sponsor on diligence questions. And then at that point it becomes, are you in? Are you out? And so then once the sponsor kind of has a sense for who's in and who's out, now, their goal is to get the right terms. And so there's a process around sending us their thoughts on the terms. Right. And our job is to figure out which of those we want to negotiate and which are we fine with.

[Joe Weisenthal]

First of all, this fantastic stuff, I want to talk more about, you know, what. Or get to what it takes to be the first call. Because you said that's important. And I'm curious, like, you know, if Tracy and I are compatible, why does one of us get the first call or not? But even before we get into that question, and it occurs to me that because you work for Oaktree and there are multiple strategies within it, and you work, I assume, with different people on different committees and different funds, et cetera, is there ever tension that arises between your recognition of the need to get that first call versus what people on investment committees see as the fair price? Right. Because if the investor is always trying to get every penny right, then at some point, I'm going to stop calling Millwood 100%. Talk to us about reconciling that. And I also have to imagine, just to sort of add on a part of this question. You know, it'd be one thing if, like, it was a small shop and one strategy, but you're looking at this holistically correct. Whereas the investor who's running a specific fund there cares about their returns and doesn't care so much about the return of the other fund or just the general. So talk to us about reconciling some of these tensions.

[Millwood Hobbs]

Right. So the biggest tension is, like I said earlier, we don't necessarily agree on price, structure, leverage. Right. But what we're doing is I'm talking to that sponsor or that client or that company all the time. Hey, how's your family? I know where they go to school. I may do zooms with their kids. Hey, Millwood.

[Joe Weisenthal]

It really is a part of my being talked to.

[Millwood Hobbs]

Hey, Millwood. I want to go to Ocean Prime. I know you know the manager. I'm bringing my family.

[Joe Weisenthal]

Oh, so this is real estate so.

[Millwood Hobbs]

Yeah, so we are full service here. And again, like I said, the relationship is getting the first call and the last call. And by the way, out of 20 deals, I only care about the last two. So how do I pass 18 times so I can see the last two? So it really is a form of art, if you will. And what we're trying to do is demystify the negotiation, and we're institutionalizing relationships. So if XYZ sponsors in la, they'll call me, say, hey, Millwood, who should I talk to? Okay, let me give you a list of folks, because the more that that private equity firm or that sponsor or whatever client it is, feels like they understand our firm, the better the relationship. So we spend time making sure that they know who our CEO Armin is or Bob O'Leary, that they know the PMs at the different strategies. So it's not a scary monster. You know, when I. When I joined and originally Oak Tree, remember, we were more opportunistic. And as the market has evolved and as we have evolved as a firm, we're sort of private credit and opportunistic. And by the way, the client will say, milwaukee. I don't really care about one side of the house versus the other. You're oak tree.

[Joe Weisenthal]

Right, right, right, right.

[Millwood Hobbs]

So we have to sort of.

[Joe Weisenthal]

And you're oak tree.

[Millwood Hobbs]

I'm oak tree.

[Joe Weisenthal]

Right.

[Millwood Hobbs]

And so I have the market as one. As one firm.

[Tracy Alloway]

Wait, talk to us a little bit more about what negotiations are actually like, because I will say we just had Sujit Indap on who wrote a great book about the Caesars palace. Lbo.

[Millwood Hobbs]

Yeah, we're in that. We're in that.

[Tracy Alloway]

Yeah. You're in that.

[Millwood Hobbs]

Yeah. No, it's not in.

[Tracy Alloway]

Not you specifically, but Oak Tree certainly is. And there's certainly, like, there are some very dramatic negotiations that take place in that.

[Millwood Hobbs]

Sure. Oh, yeah. I mean, well, look, sometimes you just. You get up, you throw your pencil in there, and you walk out of the room. And sometimes, you know, so at the art of negotiation is what I say to my team is it's not the negotiating point you're discussing at the moment. It's the points that are coming two points later. You're always thinking ahead on the negotiation. We did a deal for a business that wasn't really loved in the leveraged finance market, and I knew that type of business because I had done an lbo, and the market really didn't understand it, but it was a great management team. Sometimes deals do well because the management team's very good and very articulate. And I knew this deal would struggle at a bank. And so when it was hung, which means the bank had to fund it.

[Tracy Alloway]

They got stuck with it.

[Millwood Hobbs]

They got stuck with it. I called in and I said, hey, sorry, but I'll buy 50 million at 90.

[Joe Weisenthal]

Okay?

[Millwood Hobbs]

Right. Oh, gosh. What? 90? Wow, that's a deep discount. Da, da, da, da, da. I said, well, I think as you now realize that business, it's a little tricky business. And it was a public to a private. A private equity firm was taking a public company and making it private. Even though it was a declining margin business, There was a view that the public company expenses were high. You can map a scenario where over 12 months they were going to cut some of the public company costs and create a more efficient. Which would create more ebitda.

[Joe Weisenthal]

Yep.

[Millwood Hobbs]

Right. So they sold it to us. So now I'm a top five lender. Right. With the right sponsor, you have the right relationship. Right? Well, sponsor, which they're meant to be opportunistic, too. Cap structure. EBITDA grew, cap structure looked good. So they wanted to do a dividend. Now, again, in a negotiation, if you're doing a dividend, that means you're putting more debt on my capital structure. Right.

[Joe Weisenthal]

That's money that could go to you.

[Millwood Hobbs]

That's money that could go to anybody but them, right?

[Joe Weisenthal]

Yeah.

[Millwood Hobbs]

And so, you know, the job of a sponsor at that moment is to call the top five lenders and say, hey, I'm doing a dividend deal. And they take me from violently upset to mildly annoyed. That's the job.

[Joe Weisenthal]

Yeah.

[Millwood Hobbs]

So this sponsor did not call us on that dividend deal. And so now I have a. I'm in a unique situation. They went to other lenders and got the 51% to do the deal. And I felt some kind of way about that.

[Tracy Alloway]

Some kind of way.

[Millwood Hobbs]

Some kind of way. And so I proceeded to try to figure out why folks would agree to this dividend deal. And so I called the market and the sponsor sort of said, you know, he calls me and he says, millwood, I hear you're working against me on my dividend deal. I said, well, that's not actually true because you didn't call me when you launched it. So he said, but I thought we had a good relationship. I said, we do. I thought so, too, but you didn't call me. All right. And so, long story short, the dividend didn't go through. Right. And so then we changed the structure of the dividend to allow we shrunk the size of the dividend. We changed the original issue discount, and I told the sponsor, I said, look, unfortunately, I'm going to sell the position when this closes. And the point of that story is sometimes life's too short. And not all relationships are meant to go on forever. We still talk. I'm still a good friend, you're still a good friend, but we haven't done a lot together since then. Because sometimes, you know, in our. In our. In a negotiation, if you don't see eye to eye and that deal worked out, what happens if it doesn't work out?

[Joe Weisenthal]

Yeah.

[Millwood Hobbs]

Right. So sometimes. Sometimes you're managing relationships to keep, and sometimes you're managing relationships to not do on a business side. But you always want to be friendly in this market because you're usually one person away from somebody that matters in the business.

[Joe Weisenthal]

Actually, since we're on this point, that strikes me as very savvy and very wise and probably a lesson many of us should learn in many realms, that sometimes it's okay to take the L or let a proposal fall apart because life is long and other things happen at some point. We have listeners who are in college or young and they think about career trajectories, et cetera. I'm curious, just from your perspective, this is probably a sort of attitude that you would hope the people who work for you cultivate, internalize, so to speak. How do you recognize who has that? And, like, when you think about, like, people that you want on your team, are you able to sort of, like, build intuitions about. Yeah. The people who can. Who can think that way?

[Millwood Hobbs]

Yeah. So. Good question. So I would say on my team, everyone is uniquely different and everyone's exceptional at something and very good at everything else. And I think where you make a mistake in building teams, especially in our business, is you try to find someone who can be exceptional at more than one thing. So I'll tell you a good story. So when I was first starting out, I would fly to Dallas, Texas, and I would meet with folks in Texas. And I thought I was a pretty charming, knowledgeable person on the market. And everyone in Texas was friendly. But what I figured out was by the time the deals made it to me in New York, everyone in Texas had already passed. So it's almost like wrong way risk.

[Joe Weisenthal]

And so explain that.

[Tracy Alloway]

Yeah. Why was that happening?

[Millwood Hobbs]

Well, because you're in Texas. Right. It's a different culture, different than New York. And in some markets, folks want to do business with folks they may see on the weekend. Or see in the gym or, you know, and so it's, it's more of a. That person sits in New York. They don't really know me. Right.

[Joe Weisenthal]

Yeah.

[Millwood Hobbs]

So, but if people in Texas didn't really like the deal, then you call the people in New York. Oh, so. So I decided that I needed to put someone in Texas. So how do you hire people? Right. So this is for the. Your young audience. So I went to a conference and he was kind of managing a room really nicely. So I gave him my business card, I said, hey, would love to spend some time with you. So I called him and we set up two days of meetings. Well, he didn't realize I was actually interviewing him for two days because everyone says they have great relationships, right? Everyone says, oh yeah, I've got the best relationship. Da da da da. But how do you actually test that? So I spent two days with this person and look, you know, high school football matters in Texas. I didn't play high school, I played high school baseball. This person plays high school football. And so you put someone in that territory that understands the local culture. And what we're trying to do is have a hub and spoke origination model where we have a global firm, but we try to talk on a more regional or local level. And that's what I think makes our sourcing origination a little bit different. And again, people matter in this business. And again, the goal is to get the first call and the last call. That person may spend a lot of time, you know, going to events, spending time with the families.

[Joe Weisenthal]

Yeah.

[Millwood Hobbs]

And ultimately what you want folks to do is to show you deals because they trust you. And it's still a trust me business.

[PGIM Representative]

Bonds are back and so is all the credit. PGIM Fixed Income's monthly podcast series. From the latest trends to long term perspectives, you'll get timely fixed income insights from leading economists, research analysts and investment professionals. Whether you're new to bonds or a seasoned investor, tune in to all the credit wherever you get your podcasts. This podcast is intended solely for professional investor use. Past performance is not a guarantee of future results.

[Matt Levine]

Are you looking for a new podcast about stuff related to money?

[Tracy Alloway]

Well, today's your lucky day.

[Matt Levine]

I'm Matt Levine.

[Tracy Alloway]

And I'm Katie Greifeld and we are.

[Matt Levine]

The hosts of Money Stuff, the podcast. Every Friday we dive into the top stories about at Wall street finance and other stuff.

[Tracy Alloway]

We have fun, we get weird and we want you to join us.

[Matt Levine]

You can listen to Money Stuff the podcast on Apple Podcasts, Spotify or wherever you get your podcasts.

[Tracy Alloway]

One thing I wanted to ask you. Just going back to something you said about the management of a particular company being good in credit. We've spoken about this on the podcast before, but we tend to think about it as avoiding losers. Right. Whereas equities are more about finding the winners.

[Millwood Hobbs]

Howard would love you said that.

[Tracy Alloway]

So I guess my question is, like, when you're looking at a particular deal, do you feel that you're making a bet on that business, or is it just about looking at the numbers and making sure that you know you're not.

[Joe Weisenthal]

Going to lose, unlikely to screw it up?

[Tracy Alloway]

Yeah.

[Millwood Hobbs]

So, interesting enough, what we're trying to do in a diligence process is figure out where there may be holes in that investment. We did one deal with a counterparty that we required them to switch to CFO just because the questions it took too long to answer. Like, if I ask you, how many days does it take you to close your books? What percentage of that is manual versus automated? What do your management letters say in auditor? Those types of questions, if you have to think about them or you say, I'll come back to you as a cfo, that would be concerning. You know, our job is to protect our investors. Yeah, that's our job. And what we're trying to do is make sure we understand the investment. And no one bats a thousand. Right. If you look at the top 10 hitters in major League Baseball, they strike out as much as they hit. So our job is to avoid losers, like you said, and we have to manage that through a process.

[Joe Weisenthal]

Can you say actually a little more? I thought that was really interesting about some of the questions that you asked and the idea like, why can't the CFO just quickly answer how long it takes to.

[Millwood Hobbs]

You would think that would be an easy.

[Joe Weisenthal]

Yeah, I'm always surprised. Also, just generally there's a bit of a tangent that even, you know, in 2024 with, like, all the computer and accounting systems that, like, fraud still happens, that there are still ways, or, you know, companies like, we have a material weakness and we're gonna have to. I'm always a little surprised that that can even still happen. I'm curious, like, how you like this world of things just being wrong or ambiguous at companies. I'd love to hear you talk more.

[Millwood Hobbs]

About that when you're. When you buy a business as a platform and then you then buy successive businesses, more than likely they didn't have all the same financial systems.

[Joe Weisenthal]

Oh, yeah, yeah.

[Millwood Hobbs]

And the integration process, depending on how quickly you want to grow, it drives how long you actually integrate. And so what time what happens sometimes is you don't fully integrate these businesses in systems. If you go back to failures of businesses in our market, SAP integration is a big sort of point of contention. And so businesses you focus on risk that you see time and time. So fraud, fraud. You know, there was a water business that was, you know, that was fraud fraudulent that, you know, some banks lost a lot of money. You know, if you go back to like Collins and Aikman, which was an LBO a long time ago, there was some fraud and you could see what you, what you're doing in a diligence process. You are looking for sort of what I call inherent weaknesses in the information you get back. And management letters, which the auditors produce is a good document that sort of highlights the risk of accounting systems, financial systems, and that's a pretty. Systems tends to be a big driver of sort of integration issues.

[Tracy Alloway]

So this isn't necessarily fraud, but you just reminded me of add backs in deals and adjusted earnings and things that can be inflated to make a transaction look a lot better than it actually is.

[Joe Weisenthal]

Yeah.

[Tracy Alloway]

The last time I remember writing about this was, I guess, gosh, five or six years ago. And the feeling back then was that there was more sketchy stuff happening on the valuation side of credit deals. Is that still the case or has that been your observation over the years?

[Millwood Hobbs]

Well, so the ad backs, it's an assumption and it's an ask to get credit for something that may happen in the future. Right. Or it's saying something's happened previously that hasn't fully been flown through the financial statements and we want to get credit or we don't want it to affect our earnings. Every deal has adjustments. Okay, so just start with the premise that adjusted EBITDA will exist. And part of our job is to trust our partners that they're adjusting the right things. What happens is if you watch the financial statements over time, sometimes the adjustments never go away. Right. And then you start to say, okay, this is recurring, non recurring. Right. We did a deal for a sponsor and we were, and it was near year end and the sponsors going through each line item of what they wanted to add back. And you know what I said, wow, we could go through this for three days. Right. Explaining what I said, you know what, you can add back 5 million, call it whenever you want. Right. So at the end of the day, what we're trying to do is understand the rationale for the add back in a market like Today the problem is the rationale isn't fully explained all the time and the amount of time you want to add it back is kind of almost infinite. So you start to say, okay, and the sponsor's perspective would be I'm paying for that, right? Because I'm paying off that adjusted ebitda. So you should leverage against that. The counter would be I'm capped upside, right. I'm capped at par. And if you go back to 07, a lot of the add backs in some of the large LBOs never truly came to fruition. So if you take cap structures that were leveraged seven times, if you're adding back 100 million, that's 700 million more debt. That if the 100 million never comes through at some level you could be overlevered. So that's why you have to look at add backs. And in the one notion folks say documents are loose. Well, I would argue it's about asset selection. Right. A document is not going to help you if you just underwrote the wrong asset. At the same time a document, if you're doing well and I'm not letting you lend more, what do you think I'm going to do? If you're doing well, I'm probably going to figure out a way to fix the document to allow you to lend more. So I think part of our business, you're right on at bats but you know, cov light, the market is mostly cov light and even when you think about structures with a covenant, a lot of times if you actually hit that covenant, it's unclear. The business is a going concern at that point.

[Joe Weisenthal]

If you need the document to save you, then you've already got a problem.

[Millwood Hobbs]

Yeah.

[Joe Weisenthal]

Well, since we're actually talking about documents and we have done a recent episode about so called creditor on creditor violence and how that works, et cetera. One thing that that came up with that and I'm also curious about it, it's like legal expenses and detail, every comma and all that stuff in these documents. I'm just curious, over the course of your career, how much have you seen perhaps to the point that it changes your expected return on investment, legal costs and the sort of rising lawyer fees, et cetera, to check those documents regardless of how many covenants they have in them. And have you seen an evolution over time since you've just been in the business of how much of deal resources end up going to the legal side?

[Tracy Alloway]

Yeah. How much do the lawyers bill you.

[Joe Weisenthal]

Every year and what have you seen?

[Millwood Hobbs]

So while I said, I'm going to now counter myself. While I said the document won't save you a deal. It's very important you have a document that sort of expressly documents what it is, the intentions of the transaction. And it's very good to have governance in the document. Right. So if you just think about public versus private markets, in a public market situation, you're given two to three days to review a 300 paid legal document. Now, if the deal is going very, very well, arguably there isn't a lot of opportunity for you to push back on the document. Right. So you kind of take the document as is in the public market. And the issue with that, there's a lot of. And you said credit, uncover balance. But there are a lot of opportunities for you to take assets out of a restricted group, create new co and lend against that and take value away from existing lenders. I think one thing that private credit is very good at, and it's focused on that part of the document, we've been very firm on making sure that the ability to take assets out and create new assets or new financing or new capital, we've limited that quite a bit in private credit. But I will tell you, lawyers would argue inflation is real for them too, right?

[Joe Weisenthal]

Yeah, sure, sure.

[Millwood Hobbs]

So, you know, and a lot of that deal cost gets kind of, you know, born at the beginning. But yeah, lawyers. But you need lawyers, right? You need them. You know, there's two reasons why a deal usually gets hung up. It's usually illegal, or a tax reason on the M and a side on the financing side. And so lawyers are an important part of our process. And we spend a lot of time making sure we have the right counsel who can understand and be able to move with us if this goes sideways. We want to make sure your bankruptcy and attorneys are really good. We want to make sure that you are put, you know, if you're thinking about biotech or something where IP is important, how do we make sure that ip, you can't over license it. There's a lot of new nuances in the document that we find. Lawyers are very valuable in our process.

[Tracy Alloway]

So I just have one more question. But you know, you've had such a long history in this market and you've worked on so many interesting transactions. What deal are you most proud of?

[Millwood Hobbs]

So when I was doing LBOs, it's almost like you're watching the company and the sponsor get married and you sit in the middle of that marriage and you're kind of playing consultant and all of My deals. I still talk to the CEOs of those deals because you get to know these people, you're on planes with them for 10 days. I know some of the quirks of some CEOs. You just get to know people. When I was doing the buyout when hughes spun out DirecTV, Roxanne Austin was a rock star, a female CEO running DirecTV, a very profitable business, and really get to know no interesting people. So I would tell you all the deals I'm pretty proud of. There's probably one that was a bit of a disaster that we used to say if you made one bond payment.

[Tracy Alloway]

Wait, tell us about the deal that you're least proud of.

[Millwood Hobbs]

Yeah, so that was probably.

[Joe Weisenthal]

It's actually just a more interesting question, but nobody really wants to ask.

[Millwood Hobbs]

That first deal was hard. That deal was hard. It made one coupon payment and filed.

[Joe Weisenthal]

Are you gonna tell us what it is?

[Millwood Hobbs]

No.

[Joe Weisenthal]

Okay.

[Millwood Hobbs]

I want to protect those involved.

[Joe Weisenthal]

Okay.

[Millwood Hobbs]

Yeah, but good question. Okay. And I think, you know, so I've done a lot of deals, and most of them I'm. I'm pretty happy about. All right.

[Joe Weisenthal]

I think you mentioned you take. All right. You want to be the first call.

[Millwood Hobbs]

Yes.

[Joe Weisenthal]

And to some extent, being the first call is some combination of, you know, the ability to give decent pricing and also just being a likable guy that people want to talk to about their family. Right. But I think you said you take 20 calls and you maybe take two. Like, what?

[Millwood Hobbs]

So. So what you're saying. What I'm saying is, out of 20 calls I get, the last two are the most interesting. So how do you actually. Well, like, engage 18 times and it goes nowhere.

[Joe Weisenthal]

Yeah, but, like, is there a minimum? Like, you have to say yes to. You can't say no forever, otherwise at some point, you'll no longer be the first call. Right. If I like, yeah, I might like talking to Tracy a lot. But if she never, like, in the end, wants to consummate the deal, eventually she's no longer going to be my first.

[Millwood Hobbs]

Well, it's how you say no.

[Joe Weisenthal]

Okay, so talk to us about saying no, but still maintaining the first sometimes.

[Millwood Hobbs]

And we don't say no. We say, here's how we can get to a yes.

[Joe Weisenthal]

Okay.

[Millwood Hobbs]

Right. So sometimes you give a path to a yes. Sometimes in a market like we're in today, you know, I'm not clear. It's not clear that someone takes my no offensively. There's a lot of capital, so it's easier to say no in this market. In a Market where there's not a lot of capital and generally we may say no, it may be a concentration issue. Maybe we feel like we have too much of that type of risk on our books. It could be an attachment issue, like leverage or attachment could be a problem. It could be that we had an issue with a similar business and maybe our LPs are fatigued in that type of space and we don't want to sort of bring it up again. There are a host of reasons why we may say no, we may not get there fast enough. Right. That happens in this market. But generally I think we're a pretty quick study. And what we are very good at is we do exactly what we say we're going to do. So if we put something on paper, we're going to stand by that. And I think that that goes a long ways. And I think if people say, well, why do they call, why do they call oak tree? I think we price risk, right? So in some markets that's a real big competitive advantage. And I think we don't be as people. We say what we can do, we do what we say, and that's it. And so sometimes our answer is, yeah, we like it, but we don't love it. But if the sponsor or somebody's able to say, well, oak trees involved, right, that gives credibility to the deal and we can help them get it, get it done by saying we're involved, but we may not be the anchor, we may not lead it, you know, and when you're, when you're managing the size capital, we need to write three to $500 million checks on most situations. So we're always looking at the biggest deals with the largest sponsors. Generally those are safer plays than the lower middle market. So we think there's less competition when there's only seven of us that can write large checks versus in smaller deals, hundreds of folks can write small checks.

[Tracy Alloway]

I have one more question, actually, I just remembered, but you mentioned earlier that you want to be friendly with everyone, including the bank that you're ostensibly in competition with. One thing that's been happening recently, it seems, is that a lot of deals that were originally done in the private credit market are getting refinanced in the public market. Great phenomenon by banks. Yeah. So first of all, why is that happening? And then secondly, is that a concern for someone like Oaktree?

[Millwood Hobbs]

That is great. If we can be on two or three year interim capital in most situations, that's good. The reason why they're going back to the public market is there's a spread between public and private. So there's a cost reduction element. And then for the sponsor, there's more flexibility. Private credit is not meant to be the most flexible. It's the most efficient, but it's not necessarily the most flexible. And if I can create an institutionalized and have a broader investor base. Right. Sometimes I can get more things done if a lot more people own it at very small sizes versus five or six owning at chunky sizes. So it's actually, you want a healthy market, public and private. Right. And when most folks say, oh, you're losing deals to public, I'm like, probably should have gone to public market anyway. Right. It's rated. It's an existing issuer. It's been in the public markets. It's just staying in public markets. If you think about the private credit market, we're 1.7, 1.8 trillion going to probably 3 trillion. There's ABF Asset Based Finance, which is a new phenomenon, which isn't really new. Right. GE Capital was a large ABF lender, but there's $3 trillion of dry powder at private equity firms. There's enough for us all to do and be happy.

[Tracy Alloway]

All right. Millwood Hobbs, thank you so much for coming on Authos.

[Joe Weisenthal]

That was so good. Thank you so much. I'm so glad we made this happen.

[Tracy Alloway]

Joe. That was so much fun.

[Joe Weisenthal]

That was an unusually fun and good episodes. Even though all of our guests are the perfect guest. You know, I'm. I really like. And I think we should do more about talking with the people whose job it is to be nice to people and hang out with people, to other people. Yeah. Because that's like an element that still.

[Tracy Alloway]

We could learn a lot.

[Joe Weisenthal]

Yeah, we could. But that's like an element in finance that's still, you know, like I said, we talk to a lot of screen people, and I'm a screen people. I'm glad that there are still parts of the industry where there's a big role for likable people who can maintain relationships and stuff like that and play golf. But that's part of being human. Right.

[Tracy Alloway]

Don't you have a whole song with the title, like, all my friends are online or something like that?

[Joe Weisenthal]

Yeah, all my friends are on my phone.

[Tracy Alloway]

Yeah.

[Joe Weisenthal]

Yeah. Like, I want to. I want to know more people who have friends, who have friends irl. Yeah.

[Tracy Alloway]

All right. There was a lot to pull out of that. I did think, like Millwood's early point about banks being in the business of, like, pricing and moving risk. Very quickly was a good one because I think like, that's kind of a fundamental difference with private credit.

[Joe Weisenthal]

That was really interesting. I also, it was really interesting hearing him talk about the tensions that emerge because you want to be the first call and you want to have a reputation for at least saying yes 10% of the time or something like that with the demands of the actual PM who doesn't care about all the times you have to say no. You know, I think this is probably a sort of asymmetry that comes up in a lot of sales based businesses, right, where you have some salesperson and their job is to hit a commission or something like that. And then you have like a product manager who's like, no, you can't price it at this or we can't move the product this fast. This is just sort of like an interesting dynamic that emerges in all businesses. And I really enjoyed hearing him describe how he negotiates that implicitly, the negotiations.

[Tracy Alloway]

Because a lot of these deals involve like so many different entities who are all coming at it from a different angle with a different incentive.

[Joe Weisenthal]

Yeah, so much, so much there. We'll have to talk to Melody.

[Tracy Alloway]

Yeah, we should. All right, shall we leave it there?

[Joe Weisenthal]

Let's leave it there.

[Tracy Alloway]

This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

[Joe Weisenthal]

And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our producers, Carmen Rodriguez at Carmen Armand, Dashiell Bennett at dashbot, and Kale Brooks at Kalebrooks. Thank you to our producer Moses Andam. For more Odd Lots content, go to bloomberg.com oddlots we have transcripts, a blog and a daily newsletter. You can chat about all of these topics 24. 7 in our Discord, Discord, GG odd lots.

[Tracy Alloway]

And if you enjoy Odd Lots, if you like it when we talk about how to source deals in the private credit market, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, in addition to getting our daily newsletter, you can also listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcasts and follow the instructions there. Thanks for listening.

[Matt Levine]

Are you looking for a new podcast about stuff related to money?

[Tracy Alloway]

Well, today's your lucky day.

[Matt Levine]

I'm Matt Levine.

[Tracy Alloway]

And I'm Katie Greifeld and we are.

[Matt Levine]

The hosts of Money Stuff, the podcast. Every Friday we dive into the top stories about Wall street finance and other stuff.

[Tracy Alloway]

We have fun we get weird and we want you to join us.

[Matt Levine]

You can listen to Money Stuff, the podcast on Apple Podcasts, Spotify or wherever you get your podcasts.