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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Traded corporate debt is much more attractive than private credit, according to RBC BlueBay Asset Management. “Public credit is far superior,” Tom Moulds, senior portfolio manager for investment-grade fixed income at the $534 billion firm, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Tolu Alamutu in the latest Credit Edge podcast. “There’ll probably be a point where you do see losses and people get very concerned,” says Moulds, referring to private debt, which he doesn’t invest in. “If we did slip into a period where growth looked weaker, then I think it would be a problem,” he adds. The three also discuss impact investing, defense sector opportunities, financial debt valuations, real estate stress and European sovereign risk.

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Leveraged buyouts are poised for a revival, albeit less aggressively structured than in the last wave, according to Moody’s Ratings. “Ultimately everyone will need to adjust to the new environment and you will see deal flow come back,” Christina Padgett, the firm’s head of leveraged finance and private credit research, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Jean-Yves Coupin in the latest episode of the Credit Edge podcast. “There’s too much capital that needs to be put to work,” says Padgett, noting potential for LBOs in the technology, health care and services sectors. We also discuss the rise of distressed debt exchanges, leveraged loan risk, the impact of tariffs on weak borrowers and why default rates should fall next year.

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Collateralized loan obligation equity stands to gain as much as 15% this year, according to Tetragon Credit Partners. “It’s teens returns, high current cash flows and diversification,” said Dagmara Michalczuk, co-chief investment officer at the firm, which specializes in the riskiest part of the CLO market. “We are in vanilla corporate America, just using a little bit of leverage in financial engineering to generate those returns,” she tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Mike Campellone in the latest Credit Edge podcast. Michalczuk and Campellone also discuss the risk of loss from liability-management exercises, private debt valuations, loan defaults and relative value in European CLOs.

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More companies will fail to repay debt as funding costs stay high, according to Mudrick Capital Management. “What we’re getting is just elevated defaults every year, we think for the next five to seven years,” Jason Mudrick, the distressed debt fund’s founder and chief investment officer, tells Bloomberg News’ Irene Garcia Perez and Bloomberg Intelligence’s Mike Holland in the latest Credit Edge podcast. “The catalyst today is not an economic downturn — it’s this normalization of interest rates,” says Mudrick. They also discuss the Tropicana, Yellow Pages and Shutterfly debt restructurings, as well as flying taxi maker Vertical Aerospace.

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Fox Legal Training sees debt documentation risks rising as too much cash chases a limited number of high-yield deals. “Provisions these days are drafted in a way that they are very much departures from reality,” Sabrina Fox, the company’s founder, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Aidan Cheslin in this episode of the Credit Edge podcast. “That creates an alternate universe, like La La Land, where the numbers don’t match the performance of the business,” says Fox, who specializes in covenant analysis. Fox and Cheslin also discuss lack of transparency in high-yield debt deals, lessons learned from the Altice debt restructuring, how aggressive liability management spreads to Europe from the US and where to spot trouble in prospectuses.

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US billionaires and sovereign wealth funds are going to get more active in global sports investing, according to Andalusian Credit Partners. “The US invasion into other markets is just getting started,” Aaron Kless, the US middle-market direct lending platform’s chief executive officer, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Arnold Kakuda in this episode of the Credit Edge podcast. “A lot of the largest sovereign wealth funds are interested in getting deeper into sports investing,” adds Kless, whose firm focuses on sports, media and entertainment. Kless and Kakuda also discuss the next big sports deal, the high cost of being a fan and how not to get trapped in the vanity play.

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Ares Management, the $550 billion alternative investor, expects private lenders to get more involved in funding Europe’s rearmament. “We are starting to see more defense opportunities come across the desk,” Mike Dennis, the company’s co-head of European credit, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Jeroen Julius in this episode of the Credit Edge podcast. “We would tend to be cautious — we need to listen to what our LPs’ appetite for those types of businesses are,” says Dennis, referring to Ares’ limited partners and their environmental, social and governance concerns. Dennis and Julius also discuss middle-market loan pricing, private credit returns and where Ares might look to open up new offices in Europe.

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