Michael Tennenbaum's Interview on Distressed Debt

In an interview on Bloomberg News, Michael Tennenbaum, founder of Tennenbaum Capital Partners, presented his thoughts on the current state of the distressed debt market. (Interview video embedded below). In addition, Bloomberg held it's Dealmaker's Summit, which I will also report on later today / tomorrow (lots of fantastic speakers)

Here are some of my thoughts / biggest take-aways from the interview:

• Talks about the 1.2 trillion of debt coming due over the next five years (200 billion due in the next two years). With so much of that in lower rated credits, thinks default cycle will pick up - something I am very much in agreement on.
• Distressed debt for control is complex and thus less competition and thus better entry valuation points - something Seth Klarman has discussed repeatedly as it related to distressed debt
• Points out that Tennenbaum is a "rescuer, not a shark." Tennenbaum historically has been very active in the DIP space - a space that is getting very crowded right now.
• B rated issued default at a 15% cumulative rate over 3 years. Lots of B rated issue now and last year. More opportunities coming down the pipe.
• Interviewer correctly notes that the overall credit market's gain is really not the best thing for distressed debt investors - Not exactly right: A healthy credit market means easier exit facility financings and generally higher valuations on exits if that sort of thing is the way you will play a particular case (see: Six Flags).
• Tennenbaum notes that middle market issuers are having issues coming to market. What about all the funds whose sole purpose is to do that sort of thing? Highbridge for instance has a fund whose main purpose is lending to middle market issuers. That being said - that has been a GREAT business to be in the last year.
• Outlook for economy: Poor - no real drivers. Muddle along as John Mauldin would say.

Overall great interview. I have worked alongside and across the table from the guys at Tennenbaum Capital - incredibly smart group of people. Will try to post more on them in the future.