00:00This dispersion among investors has been talked about for some time, and I wonder if we're reaching something of a
00:06tipping point where it is real LPs are not recommitting capital to funds that they don't want to be with,
00:11and we're starting to see the emergence of more, I guess, like zombie funds in the world of private credit.
00:16Yeah, I think most of the funds that people are talking about are actually heavily regulated, and they have robust
00:20valuation processes.
00:21So most of our deals, if not all of them, go to third parties to get valued, and we have
00:26auditors, and we have other processes.
00:28So I actually think the valuation methodology that most private credit firms use is actually pretty robust.
00:32So that's not a problem.
00:34I know, though, you've noted before one issue in the industry has just been the huge amounts of dry powder
00:39that people have on their side.
00:41You talked about this in one of your early 2026 kind of like credit themes, that they've had to put
00:46that to work and maybe take in deal, and deal quality has suffered because of that.
00:50That was early this year that you said that.
00:51Are you still seeing some of those issues in the ecosystem right now?
00:55I think a lot of that dry powder has dried up because people have been deploying, fundraising slowed, and people
01:00have redemptions.
01:01So I think you put those all together, and spreads are going wider.
01:04So is there a liquidity issue for this industry then?
01:06I wouldn't say there's a liquidity issue.
01:08I just think people are being more discerning about deploying capital because people have less dry powder than they've had
01:12in the last couple of years.
01:14Well, BC Credit itself exists in this really interesting space because you're not one of the huge mega platforms.
01:18You're certainly not tiny either.
01:20The comment has been made to me before that maybe it's the sort of ones in the middle with, like,
01:25tens of billions that will struggle to survive.
01:28I want to be clear, no one's ever named BC Credit in talking about this.
01:31But, like, that general attitude that it's tough to be in the middle right now.
01:34Is it tough to be a middle market manager, not one of the big platforms, but not, like, small and
01:38super, super niche?
01:39Oh, I can't disagree with that sentiment more.
01:42Like, we are so well positioned.
01:44Like, the five managers that we got benchmarked against in our last fund have all been sold.
01:48So if areas, like, the types of deals we do and the types of EBITDA that we're focused on, like
01:52non-sponsor lending or, you know, what we're doing in asset-based finance, we just face less competition than we
01:57face in a very long time.
01:58Just because people have gone way up market.
02:00So are people calling you up every day and saying, like, hey, Ted, nice business you got.
02:04Would you like to come on our side?
02:06Yeah, if you want a check of, like, $75 to $100 million, there's just not that many people to call.
02:10It's too small for the big guys to do.
02:12And the people who are stuck are the people somewhere in between the Blackstones and us.
02:15Those are the people who I think are going to struggle a little bit more.
02:17For us, you know, we still are able to be nimble and run it like an investment firm versus an
02:21asset management firm.
02:22Well, I'm just curious because there has been a lot of consolidation.
02:25People want to get bigger.
02:25They want to become the size of a Blackstone.
02:27And how much do you think that there is just going to be a lot of M&A within private
02:32capital and among private credit, especially if maybe some managers are struggling?
02:36Like, are you expecting a big wave of consolidation?
02:38I think consolidation is going to actually accelerate, which is right to your point.
02:42Like, size matters.
02:43Scale matters.
02:44You know, it's much more expensive to run these platforms, much harder to raise capital, much more investment needed.
02:49So I think we'll be, again, at the forefront of rolling up smaller managers.
02:54So you yourself, are you looking at then at smaller managers potentially to buy?
02:58Yeah.
02:58So with all this dislocation in retail, people talk about the big five or six firms.
03:02You know, there's the top 10 firms managed $90 billion in the Interval Channel.
03:07The next 300 firms manage $30 billion.
03:11So there's lots and lots of small little funds that just can't make money, and those are really good consolidation
03:15candidates.
03:16What kind of things are you looking for?
03:18Like, what is the checklist?
03:19What is the due diligence in finding firms that – because there's a lot of egos in this business.
03:23M&A is difficult.
03:24So what do you look for in terms of someone you'd want to bring in-house?
03:28That's a good question.
03:29You know, some of these deals for us provide strategic benefits, so they have some niche or vertical that is
03:33very strategic for us that we can originate new types of debt.
03:36And others provide us additional permanent capital.
03:38So we can take on that capital, we get to bigger size, and we can provide bigger solutions for our
03:43clients.
03:44Just finally, Ted, because sports is in the air.
03:47England is tragically currently losing to Congo, which I'm glad our viewers aren't currently watching that because it's a heartbreak
03:53and they should stay on Bloomberg deals.
03:55You have some really interesting sports investments yourself.
03:57It's more kind of around, I guess, like the infrastructure and services, not leagues itself.
04:03Why go in that direction?
04:04Or is that just kind of the start and maybe you'd eventually, like, lend to a league or a team?
04:08Yeah, I just think as more money piles into sports, the ecosystem will benefit.
04:12And we're finding great value in places like sports – we own a stake in a sports agency.
04:16We own a stake in a Riddell, which is a football helmet company.
04:20These companies are greatly benefiting from the additional money coming into sports, and it's almost like a rising tide lifts
04:25all boats.
04:26So as long as investments go into sports, our sports agency will greatly benefit.
04:30So does that mean you maybe wouldn't go into leagues?
04:32Are valuations there a little too frothy?
04:34I think there's a lot of, like, mixed quality things that we're seeing.
04:38And there's lots and lots of opportunities, and I think you have to be pretty disciplined about what you invest
04:43in.
Comments