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Bloomberg


The Credit Edge reviews the top credit news of the week and looks at the week ahead, with in-depth research of the most important corporate sectors, trends and themes. Analysis of specific corporate bonds and credit default swaps is backed by Bloomberg Intelligence's robust data sets and indexes.


The Credit Edge by Bloomberg Intelligence

Lack of discipline is a concern for credit markets as investors rush to fund artificial intelligence, according to Oaktree Capital Management. “Just how much money is chasing deals — I think you need to be mindful of that,” Danielle Poli, a portfolio manager for the firm’s global credit strategy, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Phil Brendel in the latest Credit Edge podcast. “What stands out is that anything with AI is just getting done,” Poli added. “A lot of the excess we’re seeing is in that space.” They also discuss where to find better returns in collateralized loan obligations, real estate debt, strategies for busted convertibles, private market relative value and opportunities in Europe.
 
 

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Oaktree Worries About Lack of Discipline in Rush to Fund AI

Credit investors should be careful about participating in the artificial intelligence boom, according to DoubleLine Capital. “You have to be not only cautious about the tech sector, but the tangential related sectors that are providing support for these new projects,” Robert Cohen, the firm’s director of global developed credit, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Robert Schiffman in the latest Credit Edge podcast. “Who knows what the spillover will be if the music stops?” Cohen added. They also discuss compressed returns in private debt markets, commercial mortgage-backed securities, how to invest in corporate bonds by duration, rating and sector — plus the outlook for 2026.

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DoubleLine Is Ringing Alarm Bells on the AI Debt Funding Bonanza

Investors are too sanguine after shrugging off recent debt-market distress, according to Crossmark Global Investments. “My key concern is the complacency,” Victoria Fernandez, the firm’s chief market strategist, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Jean-Yves Coupin in the latest episode of the Credit Edge podcast. “Jamie Dimon talks about the cockroaches, but the investors don’t seem to care,” Fernandez says. They also discuss opportunity and risk in the build-out of AI infrastructure, health-care bond spreads, private credit troubles and the performance of values-based investments.

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Crossmark Says Investors Are Too Complacent About Market Risks

Corporate collapse and allegations of fraud hog the headlines, but a slumping US economy is much more troubling for debt markets, according to Monarch Alternative Capital. “There are large portions of the economy that are hurting,” Adam Sklar, the firm’s co-chief investment officer, tells Bloomberg News’ Irene Garcia Perez and Bloomberg Intelligence’s Negisa Balluku in the latest Credit Edge podcast. “That is a more notable element to the corporate-credit story right now than super-loose underwriting or fraud,” Sklar says. They also discuss private credit stress, opportunity in auto, chemicals and packaging debt and risks to software companies.

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Monarch Sees Bigger Hazard Than Fraud

Private credit is better placed than public to avoid blowups being seen in liquid debt, according to Ares Management Corp. “The level and amount of work you can do from a diligence standpoint is dramatically more extensive,” Joel Holsinger, partner and co-head of alternative credit at the company, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s David Havens in the latest Credit Edge podcast. “There probably would have been more ability to do some of the work to unearth some of the stuff that has been alleged,” he adds, referring to recent bankruptcies of First Brands and Tricolor. They also discuss significant risk transfers, data-center lending, fund and asset-based finance, as well as philanthropy.

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Ares Says Private Lenders Are Better Placed Than Public to Avoid Pain

More highly indebted companies will slip into distress as the US economy slows and earnings suffer, according to Aegon Asset Management. “I am bracing for a little more trouble ahead,” Jim Schaeffer, the $380 billion manager’s global head of leveraged finance, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Julie Hung in the latest Credit Edge podcast. “We’re starting to see more and more companies just hitting a wall,” he adds. They also discuss the third-quarter earnings outlook, opportunities in structured finance, how to invest in the debt of beer and food companies, as well as private credit hazards.

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Aegon Is Worried About Junk-Debt Blowups

Collateralized loan obligations, particularly those backed by middle-market borrowers, are a growing opportunity for investors, according to Crescent Capital Group. “You have to work really hard to blow those structures up,” said John Fekete, the company’s head of tradeable credit, speaking of CLOs generally. Middle-market deals will make up a “larger and larger percentage of CLO issuance,” he tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Jody Lurie in the latest episode of the Credit Edge podcast. We also discuss leveraged loan relative value, the outlook for US consumers and casinos, tariff damage and the impact of liability management exercises.

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CLOs Are Tough to Blow Up, Crescent Says

There’s opportunity in collateralized loan obligations, according to BlackRock, the world’s largest money manager. “CLO tranches are probably one of the best relative value picks within the credit markets,” James Turner, the firm’s co-head of European fundamental fixed income investment, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Tim Riminton in the latest Credit Edge podcast. “You are getting a very good spread and deal pickup there,” he adds. They also discuss opportunities in the auto, health care and defense sectors, how to play chemicals industry debt and the outlook for buyouts, defaults and recoveries in leveraged finance.

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BlackRock Says CLOs Are Among Best Relative Value Picks in Credit

Razor-thin debt spreads underpin the global investor push into private markets, which can pay significantly more, according to Blackstone. “We see excess spread in private credit,” Michael Zawadzki, chief investment officer of Blackstone Credit & Insurance, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s David Havens in the latest Credit Edge podcast. “That’s a really attractive thing for our clients around the world,” he adds, marking the premium at 150-200 bps over both traded high-yield and investment-grade debt. The three also discuss the rise of foreign insurers, pension funds and sovereign wealth in private credit, as well as the outlook for data-center finance, leveraged buyouts and default risks.

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Blackstone Says Private Credit Pays a Lot Better Than Liquid Debt Markets

Distressed debt exchanges in the form of liability-management exercises are set to take off in Europe, according to Gibson Dunn, the US-based law firm. “You’re getting the same lawyers and bankers hired in Europe for deals that they do here — it’s not surprising that they would potentially roll out a playbook that’s worked,” Scott Greenberg, the firm’s global chair of business restructuring and reorganization, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Stephen Flynn in the latest Credit Edge podcast. “It’s a natural progression to take that expertise and bring it to your clients overseas,” says Greenberg, who notes elevated levels of distress in France. We also discuss the likelihood of an imminent US LME revival, the bankruptcy outlook and communications sector stress.

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US Law Firm Gibson Dunn Is Chasing a Big Distressed Debt Opportunity in Europe

Hedge funds are jumping into the collateralized loan obligation market in pursuit of fat and steady returns, according to Bloomberg News’ Lisa Lee. CLOs are meanwhile menaced by the lingering threat of recession and higher rates — while increasingly repackaging private debt — Lee says. In this episode of the Credit Edge Podcast, Bloomberg News senior editor James Crombie also asks Bloomberg Intelligence analyst Jeroen Julius about the outlook for the AT1 market after the collapse of Credit Suisse. Prices have recovered but for some investors, the market’s just too choppy, Julius says.

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Hedge Funds Are Diving Into CLOs; AT1s Revitalize

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