Weekly News – May 10

Steward and Sam Ash hit BK, FTX recoveries to the moon, retention battles heat up, Adam Neumann out, Tony Yoseloff speaks up, CRE stress, and much, much more… ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­  

Creditor Corner

for the week ended March May 10, 2024

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BREAKING NEWS

Steward  Health Care and retailer Sam Ash hit BK, FTX recoveries to the moon, retention battles heat up, Adam Neumann out, Tony Yoseloff speaks up, CRE stress, and much, much more…


FEATURED CONTENT

Bruce Richards on the Markets:

Levers Owners can Control: Corporate Direct Lending vs. Commercial Real Estate Loans

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Tweet of the Week

Dumbledore to Texas!

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Hospital chain into BK

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In the News

More retail pain…

News of the Week

FTX recoveries to the moon!

But, then there’s this…

crying over spilt milk!

Our take:

maybe FTX was bailed out by the market, and maybe a certain law firm played fast and loose with conflicts, but it’s hard to quibble with the outcome…

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retention battles heat up…

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Our take:

we don’t buy into the argument that representing affiliated and conflicted insiders happens all the time. It’s time for a change.

In the News

we have a feeling the train has left the station…

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Private Credit League Tables

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What We’re Reading

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What We’re Watching…

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Data Download

consumers under pressure…

Data Download

amid softening labor market….

Data Download

CRE under pressure

Featured Content

Levers Owners can Control: Corporate Direct Lending vs. Commercial Real Estate Loans 


Revenues have contracted for the past 4 quarters for Private Credit corporate loans, but impressively EBITDA growth has improved as operating margins strengthened.


Now compare this with the net operating income for many CRE properties where lower revenues create lower NOl, full stop, bottom line. Real Estate, in general can not make the same adjustments that companies can make. Today’s post examines this dynamic. Real Estate is a local market, with each sub-sector subject to its own dynamics, where footfall, location, supply-demand dynamics, and quality of the asset are key differentiating factors. Yet, there is a huge difference in the flexibility a company typically has vs. a single asset CRE property.


Companies have the flexibility to adapt various strategies to cut expenses to improve operating margins/enhance profitability that insures long-term viability. Management can reduce SG&A, optimize headcount, negotiate contracts/payment terms with suppliers, outsource certain activities, reduce CapEx, adjust advertising spend, restrict T&E as well as increase productivity, sell non-core divisions, eliminate unprofitable business lines. Holding all things constant, the LBO sponsor has more flexibility when a portfolio company struggles under the weight of Higher for Longer vs. a CRE sponsor.


Commercial Real Estate has few levers to push on since the property manager can do little to reduce its cost structure as it provides basic service with minimal room in adjusting variable costs & personnel expense. To improve operating efficiency for the property it typically requires additional CapEx such as lighting upgrade, water conservations systems, maintenance & repairs, building automation, which is highly capital intensive. So, when revenue falls (vacancy rises) there is little the property manager can do to increase NOl (the equivalent of EBITDA) away from leasing.


Weak companies and properties will struggle in this environment. My team at Marathon Asset Management avoids the “weak” as the focus is to wisely invest capital and be a thoughtful & creative partner to companies and asset owners that will make it through the trough.


As time goes on and both sectors feel the stress, there is a huge need for tailored capital solutions, a condition that should prove ideal for teams with deep expertise and an established presence across opportunistic credit. Marathon has never been busier as we are “Open for Business” – a willing, disciplined, and thoughtful lender for both sponsors financing LBOs and sponsors financing their CRE properties. The BIG Delta is cash-out refi is possible for LBOs as EBITDA increases and valuations rise vs. many property owners require cash-in refi as cap rates have expanded and property values have declined over the past 2 years.


Best to avoid Office: only 35% of Office Loans can refinance according to Moody’s:



To follow Bruce’s thoughts on the markets, investing and more, follow @bruce_markets

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