It's A Borrower's Bond Market, As Amazon Scores Record Low Rates.

in markets. We're seeing that across the board at a time when America's cities are dealing with the unrest, the likes of which we have not seen since the late nineties sixties. We also see split fates among corporate America, with the haves and the have nots, the haves being able to borrow virtually for free, and the have nots going bankrupt. Joining us right now is Molly Smith, the corporate finance reporter for Bloomberg News, the latest Amazon dot

Com borrowing money basically for free for three years. I mean really, I'm paying what twenty basis points above treasuries to borrow this amount of money? Molly, what do we know so far about this amount? So this is Amazon actually set a few records yesterday, not just on the three year, also for seven, ten, and forty year debt that these premiums are just mean, I feel weird calling it a premium. There's hardly one of any there. This is more or less a treasury bond, or perhaps even

less in some cases. So it's uh, it's pretty impressive to see how Amazon was able to do this yesterday. But again, like you said, so just really speak to the divide in the market right now that Amazon Convertual can borrow for basically nothing, while you know, there are so many companies that don't have any bond market access at all right now. So Molly, you have a great chart in your article kind of looking at the high grade barring costs, and it's almost back to where it

was pre pandemic. Is this just simply the market saying, you know, the Federal Reserve has our back here very much. So yes, so we can think that said for not only the rally here in spreads, which is the reflection of the demand and the secondary market, but also for all the issuance we've seen in the primary market that last week we hit the one trillion dollar annual issue, and for the fastest rate ever last year. We didn't

get through that until November. So, uh, the said has been there for both supply and demand, and it's really just opened up a ton of issuance on this Matthew rally. So the trillion dollars that investment grade corporate corporations have borrowed in the first couple of months of the year, I'm wondering what people think. Is this to continue or is this just basically the largest best capitalized companies creating

war stashes of cash just in case things deteriorate. So it's a lot of that, a lot of companies, like you said, capitalizing on these low interest rates. It's also been a lot of companies that genuinely do need the money and are still investment grade rated, like Carnival and Marriott UM hardly a borrower of an Amazon kind of status, but nonetheless are still rated investment grade and that they've come to the market as well. But uh, most strategies are seeing that this is going to slow down a

lot in the second half of the year. That so much of what we've seen largely been pulled forward from what would have been uh in the second half of the year. So we're probably going to see issuance slow down some say, I think of America maybe even just two hundred billion dollars of issuance in the last six months smally in terms of use of proceeds, are most companies here refinancing existing debt or are they just as at least with steching, you know, taking down debt bolstering

up putting cash on their balance sheet. Here, it's a little bit of both. So we've seen a ton of companies to liability management exercises in UH in tandem with these bond offerings, so they'll issue new debts hopefully and use those proceeds to take out debt that's coming up in UH in new in upcoming years. So we've seen a lot of those concurrent bond offerings and tender offers together.

But then there are a lot of companies, like you said, all that are just they need the money and they're just trying to have the war chest now and who knows what's in front of us, So it's a combination of both. Molly, the last time Amazon dot Com borrowed money was ahead of their acquisition of Whole Foods. Now they're raising ten billion dollars at a time when they don't exactly need a ton of cash. It's not as if their business model is struggling right now. Do we

have any idea of whether they're planning another acquisition? Uh, they could be, and I believe that's what our analysts at Bloomberg Intelligence uh speculate could be something that they're thinking about. Amazon also did borrow in in um, a smaller offering than this one, but like you said, yes, they've been a pretty infrequent borrower and the one that's

really of note was for the Whole Foods acquisition. So it's hard to tell beyond what they said is just general corporate purposes as far as what this ten billion dollars maybe used for. Smally, how far how broad is this? Uh you know kind of uh rallying the bond market, new insurance market going down in terms of credit quality, we're seeing a lot of investment grade issues issuance where does it kind of get dicey here for an issuer?

So the high old market has definitely been open to some of those custody or borrowers, like you said, even just today we're seeing some the like MGM uh, which is actually just the reek connected to the casinos is borrowing in the high old market. We also have Sick Goes, the US refinery unit of Pita Vesa so and outside of that, just more largely, we've seen a lot of issuance from hotels, casinos, a lot in the travel leisure sector more broadly. That really speaks to those sectors that, um,

that need the cash right now. They're not looking to refinance that, they just need the money wherever they can get it from. Although let's be clear, some of the lower rated borrowers aren't exactly getting the best deals in the world. It's not like they're borrowing for free, right. I mean, we've seen them pledge islands. We've seen them, you know, pledge cruise ships. We've seen them pledge you know,

the clothes in their closet. I mean, at a certain point, their ability to borrow isn't necessarily testament to a great desire for their debt correct, correct, you know. And that's a great point at Lisa, And yeah, and that's even and that's what's more remarkable, like you said, is that these are secured offerings, so there is some physical collateral protection, um, you know, like an island in the case of Norwegian. Uh. But it's like you said, most of these deals, they're

coming at double digit interest rates. We've seen some think, off the top of my head, up to fourteen percent yields on some of these, which was I believe that was Landry's, which is the operator of a casino and restaurant empire. So we've seen well into the double digit interest rates, and like you said, these are hardly coming for free for some of the more challenge companies. Molly Smith, thanks much for joining us. Molly Smith is a corporate

finance reporter for Bloomberg News. Brings us up to day on what has just been in a short and your new issue market, particularly in the investment grade market. Lisa a year today hitting that trillion dollar mark, uh, the earliest on record just recently. So again, if you need cash in your investment grade rated uh, boy, now is the time. Yeah. I can just already hear people saying bur like the cash printing machine that the Federal Reserve is making. I mean, that's essentially what a lot of

people are attributing this to. Given how much the Feds actions stepping in saying that they're going to buy corporate debt for the first time in its history, pushing down yields considerably near their all time lows now for investment grade companies. Still, however, the question in my mind is at what point do investors start to price in the fact that the FEDS actions will not prevent certain companies

from going bankrupt? Yeah? Absolutely, Looking at just the ten year yield on the treasures right now, the it's down three thirty seconds, pushing to yield up just slightly to uh point six. Let's call it point six on the tenure treasure just extraordin. We have been wondering about the disparities that we have been seeing in the job market, with some of the job losses in the wake of

the coronavirus hammering the Black and Latino communities disproportionately. This just has come to the fore as the unrest in America cities gets harder and harder to combat. Joining us right now is John Stroyer, chief executive officer of Calvert Research and Management. I want to know from your perspective, you say that ending racism is the responsibility of corporations. Why do you say that? Thanks for having me on and and certainly we've given corporations a significant amount of

power in the United States. They inform innumerable social and environmental outcomes. So as a result of having that power, which has been something they've acquired over time, they have a responsibility to help solve these types of issues. Additionally, their ability to take action and to drive positive social change is a significant driver for their brand value and their attractiveness and reputation as a provider of products and

services as also as an employer. So they have that responsibility, they've taken it, and they've got to take action to help solve this. John, how about the counter argument that the responsibility of a company is to maximize shareholder profits. Well, I think there's a tie in here, because you know, society that is destabilized as results of civil and rest, which is an outcome of excessive inequality GDP, is suboptimal.

So I do think that companies working to solve this problem will be able to see a benefit to long term value creation. I don't really think there's a conflict here, although markets may disagree, and I'm thinking of Facebook and Twitter in particular, and not necessarily on the racism question, but certainly on interfering and sort of making a judgment call when it comes to how people are using their platforms.

Facebook aired on the side of not really interfering, and Twitter has loved a number of labels with warnings on it for a number of different leaders recently including President Trump. How can this not necessarily be what we're looking at longer term in terms of the benefit and attractions and interfering, because right now it seems like Facebook is one and Twitter is lost. Well, certainly in the short term, anything

can happen with with security prices. UM. What we think about is long term value creation and what happens over a slightly longer time period. And I think it also extends well beyond social media. UM. Two companies that are doing business in in in every community. And I'm not sure that you know Twitter has won or lost or

Facebook and Water loss. It's way too soon to tell. So, John, this discussion, your argument per se, seems to fit into the E s G kind of discussion environmental, social and governance that a lot more investors are paying attention to in their securities analysis. How do you think this fits

into kind of E s G and overall analysis? Well, companies today UM are all striving to prove their capabilities on diversity and inclusion, whether that's t E s G investors or whether that's to the workplace of today in the future. So this is uh. This is a square on E s G issue, and investors and asset owners really expect companies to provide the necessary information so we know how they're really doing. And let me relate this to financial returns. Today, the demographics of the country that

really shifted and changed. We have a much larger Black population, of much larger Hispanic population, and educational attainment across the board in minority groups is going up. So we want companies to be able to draw from a broad labor pool. We want companies to be able to achieve the benefits

of diversity and inclusion. From an E s G investor's perspective, though, we need data from companies to really assess how they're doing and for companies to be able to be attractive workplaces for Blacks, Force band X, for Asians, for all people of color, and for everybody. They have to do a good job helping to actually use their voice and solve these larger social issues. So it's a square on

E s G issue. By the way, I think the E s G investing community needs to do a lot more to push companies to help solve these problems and provide us the data that we need to know what outcomes are really achieving through these diversity and inclusion programs. John, your position a top Calvert Research Management which was acquired by eat Advance and overseas nearly twenty billion dollars with this focus on E s G is admirable, and I would love to see some of the things that you're

talking about come to fruition. What are you looking for with respect to corporations steps that are meaningful towards ending racism? What can they actually do well? Racism is tied up with inequality, and inequality in this country is deeply embedded and starts with inequality of opportunity at every level. So there are a number of things that companies are responsible

for doing. And they said a first thing is disclosure, providing us the real information about the demographics of their workplace, who has what jobs, so that we know how well the company is doing there. Next, creating attractive training and development programs for people of color and for um people who have not had those opportunities in the educational system is critical. Being able to develop talent across the board

is essential UM. I think also working with the educational system in the communities where these companies draw from and helping to create equal opportunity in the educational system is also critical. And if you think about it, companies in America need to have a well educated workforce across every demographic. So there are a number of things that companies need to do in order to secure their place in the

labor market and to help improve the workforce. So it isn't just what they should do, it's what they need to do. Hey, John, thanks so much for joining us.

We appreciate that John Strayer uh CEO of Calvert Research and Management with that nineteen billion dollar dollars in assets on the management based in Bethesda, talking about racism and the role that corporations have Lisa, and it kind of goes back to that E s G discussion, is we think about UM companies holistically and their impact on their environment.

It also goes to some of the comments that we've heard out of the chief executives from everyone from City Group to JP Morgan to black Rock in response to the protests really coming out in solidarity with the cause,

certainly not the violence, but the cause. Then everything that's been going on, Paul, we have not discussed one area of the market that was super hot a couple of years ago, and that is the crypto assets sector, and it has actually been on fire, with Bitcoin rallying above ten thousand dollars once again and it has gained forty

percent more than that so far this year. Let's talk about digital gold with maltolm Demers, chief strategy officer with coin Shares Group, which has about seven fifty million dollars in the digital space, joining us from London, Maltham, thank you so much for being with us. Can you talk about bitcoin and it's use or just a crypto assets sector in general. It's use is digital gold right now, absolutely, and thanks for having me on. So it's really interesting

to be living in this time right now. Bitcoin with a product of the last financial crisis. As some of us who been the been in the space for a while they know, the Bitcoin white paper was written in two thousand nine and the network launched in two thousand ten. We're now eleven years into sort of the Bitcoin story

and we're seeing bitcoin really come of age. And mature in this financial crisis we're going through right now, particularly as we've seen over the last three months, a lot of risk, a lot of uncertainty, and investors really starting to look at the investing landscape and reevaluating how they want to be allocated going into the next year and beyond. So the investment community obviously still has a lot of

mixed views on bitcoin. Some and assement firms and investment managers have made big strides into the sector and are offering products and services to their clients. Where one example, we come from the commodity space as a team that have been in the digital assets space for the last seven years now. Other firms, most notably Goldman's wealth management team,

have been less than hot on crypto assets. But one thing is sure, every investor is talking about bitcoin, getting smart on crypto assets and starting to develop a perceptive and really trying to figure out where bitcoin might fit into their portfolio going forward. So it's an exciting time. It's been a really wild time, and we're really excited about the intelligent conversation we see developing around bitcoin, digital assets,

and this technology more broadly. So, maltime you mentioned the Golden Report, I remember when I came out and caused some waves here sometize what Goldman was saying there and whether kind of what if you agree or disagree with them? Absolutely,

so it's import to know. UM. The report was issued by one of Goldman's chief investment officers, who has been an analyst of a lot of different trends in the investing space UM, and I think it was an interesting summary because it really used what's happening in macro markets was happening in gold as a way to flame why they felt bitcoin was not a great investment, UM, not

a great long term value investments for investors. The way they described bitcoin, which I think was an interesting characterization. They talked a lot about issues pertaining to money laundering, and as we know, Goldman has itself been dealing with a number of issues related to money launderings following the fallout of the one MDB scandal and the other aspects.

That was interesting is in this report they not only mentioned that they felt bitcoin was really just purely speculative and not really fundamental value investment, they also made a similar assessment of gold, where they stated they did not feel that gold was a significant investment opportunity for investors, and as we look at what's happened to those, both the price Schoold and the price of bitcoin, I think here is an interesting instance where the market certainly is

indicating it's not in agreement with that particular assessment. But then, to be fair, though, I think they're not alone in saying that right there especially, I mean, I leave gold decide, But when it comes to crypto assets, Colman sacs Uh certainly has plenty of company and saying it's a speculative asset. Considering the fact that people are not using it the way that they would another currency, what's the counter argument to why this has staying power in a way that

goes beyond what some people are saying. Sure, I think there's been a lot of great rebuttals written by the industry that use a great set of data. I think there's a lot of evidence to the contrary, and we have coined share and a lot of time surfacing that data and sharing it with our investors, our clients in the market. But I think there are a few key trends here on bitcoin is being used and the way

it's being used by people. It's being used as a hedge against inflation and as a long term store values. There are more people than ever that whold bitcoin in their investment accounts, whether that's through a structured product like our xbt provider products or the gray Scale GBTC products. Here in the US, there are a lot of bitcoin wallets that have been created and that number continues to increase.

The bitcoin that's held in those wallets of staying dormant, meaning people aren't speculating on it, they're really holding it. And then most importantly, we've seen just a tremendous number of inflows into bitcoin over the last two months alone. One interesting fact over the last two months, the demand for bitcoin has outpaced its supply. Uh So, as you know, bitcoin has a daily production of new bitcoins through an

activity is called mining. And in the last two months alone, the amount of investor demands for bitcoin through things like squares cash app, Gray Scales, GBTC product US, and our XPT Provider products, which is an exchange traded product, there has been a hundred and fifty per cent demand for bitcoin that exceeds the supply being produced, which to me, again is a very bullish indicator. We're also seeing investors

on the trading side, taking a lot of interest. H The Ciene Bitcoin futures contrast broke all time high in the last month in terms of outstanding up an interest on the platform, and at the end of May we saw one day where we had over a billion dollars of traded volume, which is an all time high for that particular product. Meltem thank you so much for joining us.

Meltem demere she's a chief strategy officer for coin Shares group of seven million dollars in digits in the digital space, based in London, giving us the latest on Bitcoin which is rolling as Lisa mentioned earlier, and all things in the crypto space. Trying to get greater credibility in financial markets. It looks like they're having some success. Looking at the price of bitcoin, busy, busy, moreing here. We're taking a look here at an interesting story that we are seeing

from Bloomberg Business Week about private equity firms. They've been really big investors in the hospital business, and they've also been beneficiaries of some of the bailout money. David Kaczynski, Bloomberg Business Week reporter, joins us. David, thanks so much for joining us. I think he's getting up right now.

But it really is an interesting focal point because private equity was sort of carved out of a lot of the programs passed by the federal government, with them saying that they do not want these firms to be beneficiaries, and yet they have been such huge investors in the healthcare industry and hospitals in particular, that there's been an extra emphasis Paul on on on how to parse out the healthcare considerations with the efforts on the part of

lawmakers and others to keep money away from private equity. Yeah, so let's welcome David and David Kozski. Bloomberg business Week reported, David, thanks so much for joining us here. Lisa and I were just talking about your story here. Private equity really investing in the hospital business and they've received some bailout money. Give us a sense of kind of the scope and scale of this, Well, well, the scope is still being

we're still kind of digging through the numbers. Um. You know, there was concern when the administration and amongst some lawmakers about private equity not getting bailout money and trying to target that money towards the needier healthcare companies. However, we found there's this tranch of loans. It was a hundred billion dollars in uh interest free loans that hhs UM decided to give out in late March and early April, and well none of it wouldet went directly to private

equity companies. UM. The portfolio medical care companies they owned got more than one point five billion dollars. So can you walk us through how they managed to get this where the money went, especially given some of the sentiment that you talked about trying to keep money away from

private equity back firms. Well, all the big boys got it, you know, Apollo Global, KKR, UM, Cerebrius, UH, you know those those UM private equity firms have been buying huge stakes in medical care companies and in physicians staffing companies over the past few years. UM, and it was easy

for them to get it. UM. You know. Hhs I interviewed them of Verma, who is the administrator of CMS, which is the eight the Health and Human Services department that the administer the loans, and she said they didn't ask who the who the ultimate owners are anyone who wanted money and said, hey, we're gonna be losing UM We're gonna be losing uh some income because of the

elective surgery being banned during the COVID crisis. You just put an application and they FEDS would send them, um, you know, in some cases hundreds of millions of dollars to the subsidiaries of the private equity firms. David, I'm curious there has been an emphasis by private equity firms to take stakes in hospitals that provide lucrative, lucrative operations such as the elective procedures that have been put on

halt by the pandemic. Has this been one of the main sources of hurt at a time when hospitals are there at the very epicenter of treating and caring for a lot of the people out there who are struggling with the effects of COVID. Yeah, you know, elective surgery as a profit center for every uh, you know, for

most medical providers. UM, you know. But what's interesting about this is that, you know, it also hurts some of the safety net hospitals, you know, the ones who deal with you know, who don't have the billions of dollars

in cash reserve that Apollo does or that KKR does. Um. So some of these safety net hospitals actually were unable to apply because the money was gone so many that so many of the big UM for profit UM hospital companies UM, the corporate owns and the and the private equities got in there, got all the money and they struggling providers weren't able to get money in time. So, UM it is a problem. And unfortunately HHS didn't do much to target the money towards those who needed it

the most. So how have they done just overall in the hospital business of private equity firms? You know, UM, I think they're they're in the past ten years, they've made a lot of money. I think in the last year or so, there's been some problem with KKR and black Stone because they're under fire for the surprise billing scandal UM or surprise building issue where the staff um network in network emergency rooms and surgical centers with out

of staff out of network doctors. So if you go and get a surgery, may think you're covered for the room, but you'll later get a surprise bill for you know, sometimes tens of thousands of dollars from the surgeon who was out of network. There's been such a public outcry about that that Congress has been pushing to ban it, and KKR and Blackstone, who are the two biggest um UH companies. They own Team Health and Envision, which are

the companies which are at the center of this. They spent millions of dollars trying to fight that off UM that they have been struggling because there is a sense that the public outcry is going is going to UM lead to a restriction on that. But overall they've made UM it's been a hugely profitable sector for private equity. We're speaking with David Kochanski, reporter for Bloomberg business Week,

and David just sort of tie this all together. Why is there so much opposition to private equity among hospital ownerships. I'm just trying to figure out whether they have acted worse than any other hospital operator or investor given the fact that these issues have been considered endemic throughout the

entire industry. Well, I think it's hard to paint things with a broad brush UM, but I do think if you look at the actions of the individual companies, some of them have been at the forefront of the biggest UM and what are considered the most predatory UM actions like the like this surprise billing UH situation. UM. We also mentioned Cerebraus, which owned which got tens of millions of dollars in UM low interest loans. You know they

have bought UH. There's a hospital in eastern Pennsylvania that they have been trying to sell and in the middle of the COVID crisis they threatened to close it down unless they were given millions of dollars from the government

of Pennsylvania. UM. So there isn't there is a sense that, well, you know that the healthcare UH system in the US has been UM, you know, been costs of reason above the costs of inflation for years, that private equity has in some instances used more um hard hardball tactics in terms of billing and in terms of suing low income

people who can't pay the bills. Yeah, Davidki, thank you so much for being with US reporter for Bloomberg Business Week talking about a story about private equities involved meant with the hospital system and the receiving of some of the bailout money that the US has provided, even though there was a whole effort to have private equity firms

not benefit from that. But Paul really highlighting one of the key flashpoints heading into the election and beyond, which is the rise of private equity, the rise of the alternative, alternative investment community, where in some ways the lending the risk the shadow banking system has expanded as the traditional investment banks continue to pull back in terms of size and risk taking. So a lot of questions going forward about how that will be translated into policy as well

as some of the political backdrop. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woyds. I'm on Twitter at Lisa A. Bramwoit's one before the podcast. You can always catch us worldwide on Bloomberg Radio.