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One story that caught my eye today I actually had to do with private equity firms and private equity firms getting rid of their equity and the liquidity in the market always a big question, but even more so now as the IPO market in the amity market kind of goes nowhere fast. Claire Ruckin is a Bloomberg News senior reporter and she joins us on in the story. Claire, we are kind of waiting for the private equity guys to like offload all their stakes and companies this year.
Is that happening. It's not happening at the moment.
There's a bit of a sign of life, but it's it's nowhere near where they wanted it to be. And so because it's nowhere near where they wanted it to be, they have to get creative and do other types of dills in order to try and show some returns to shareholders, and that's by dividends. They're loading their portfolio companies with debts and they're taking it out as a dividend to show some sort of distribution.
What are the lenders saying here, because I mean, you know, this is a dividend recap, that's what we used to call it back in the day here, and that's not the type of loan that you generally like to make. But it seems like lenders are going to step up here.
Yeah, so we're still calling at dividen recaps. They're happening quite a lot. If you look at like where dillflow's coming from, you've got a lot of like refinancing of existing debt and then you've also got these dividends now happening. It's like the next stage on Because the debt markets are so hot, so there's been a record level of inflows into credit funds and collacterize loan obligations, which are the biggest buyers of loans, and they're desperate to put
their money to work. And because there's been a lack of M and A and a lack of new places to put this money, sponsors have been able to get creative. That's private epty firms, and they are doing dividend recaps, so they're adding debt onto companies and taking it out in the former dividends. And this is something that investors traditionally don't like because obviously you're piling leverage onto a company,
and it's something that's usually a nog. But because the debt markets are so hot at the moment, they're like, yeah, this is great. It's a new place to you know, put new capital, and so they're giving the go ahead to them. Basically, so we have seen quite a bit of volatility hit the market at the moment because the Trump and tariffs and Dell's are starting to get pulled. But the ones that are not the dividend recaps.
So usually when we talk to private equity guys are like, look like you're locketting your money five, seven, ten years, it's going to be fine. We can manage any sort of big swings in volatility. Does that still ring true or are we seeing some issues here? When liquidity tightens up, it gets harder and harder to find ways around it.
Yeah, that's right. They are having some difficulties. They're having difficulties showing those exits. So whether it's via the IPO market or the M and A market. They just haven't come back yet to the level that they would have wanted. We are seeing some dells happen. So Walgreen Boots was a massive deal. It's most probably one of the biggest LBO since the financial crisis, and that's something that banks have piled into and they feel confident that they can
sell down to investors. But those megadills are few and far between. We might see some mortil flow happening in the second half, but it really it's not where people would have wanted it to be, and therefore privateity firms are having to get creative and investors are you know, holding their noses and buying in Basically, this isn't the
type of dills that they would have liked. In essence, you are piling debt onto companies, you're increasing leverage, but it is an opportunity to invest new money, and therefore they're doing it even if that means that the existing debt is getting refinanced at a lower rate and therefore they're getting a lower return on their money.
Clear one of the one of the key key variables and these types of deals is what kind of return does the equity investor get paid here on this dividend? If I know, if this person, you know, investment firm, put in a dollar and I loan them money for a dividend recap, do I value that dollar at a dollar, a dollar, fifty two dollars, three, three dollars. Are they getting returns when they get these divnd recaps?
It depends.
It depends how much they're able to take out. I mean, Clarios's is one of the biggest, most recent examples. It's the biggest dividend recap that we've seen in a very long time. They took out, they raised four point five billion of debt and they took all of it out as a dividend, and they got one and a half time's return on their equity. And we are asking other companies come back and they're issuing, you know, not just one division, but it might be their second or their
third time that they're doing this. So in some instances they're just getting their initial equity return or reducing the amount of equity that they have in a company. But in other instances, yeah, they're getting all their equity back, if not more. And the debt markets are allowing for that, there's a lot of money out there that needs to be invested, and this is a place where they can
invest it. So there is a caveat. It has to be for most probably a strong issuer, a well known company with a borrower that you know that they know, and a privateity sponsor that is liked.
Really great reporting.
It was such a great story I recommend that everyone read it on the terminal there. Again, it's about private equity firms getting rid of their equity. Claire, thank you very much. Claire Reckon, Bloomberg News Senior Reporter.
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Well later on today, Ukrainian President Vladimir Lenski will speak with you, as President Donald Trump, following Trump's conversation with Putin that lasted nearly two hours on a ceasefire yesterday. Nasty Whitcoff is a White House Special Envoy to the Middle East and he joined Bloomberg Surveillance this morning, and when asked about a ceasefire between the two countries, he said, it is very likely to happen.
What was agreed between the two presidents was, and it was at President Trump's suggestion, that there'd be a cessation of attacks on energy infrastructure from both sides and all and civilian infrastructure for that matter, also working towards a black Sea moratorium on hits on naval vessels and freighters carrying grain and things of that, and ultimately that would evolve into a full on ceasefire.
That was Steve Woodcoff, White House Special Envoy two the Middle East. Let's get more perspective on this with Shelby McGee, a Deputy Director of Eurasia Center at the Atlantic Council, joining us now on this.
Lots of questions to unpack.
Here, Shelby, but based on what we saw overnight in terms of some attacks, in terms of some attacks on energy infrastructure, what did you make of where the ceasefire is and where the reality is?
Thank you, and I'm glad you mentioned those attacks and those are Russian attacks. Russia sent over one hundred and fifty drones and hit Ukraine including taking out the power in one city, hitting hospitals and other infrastructure. So what we're seeing is that President Trump yesterday said and he posted on true social that there was an immediate limited agreement for a ceasefire and that would cover energy.
And I'm not sure.
How immediate that is because as we now see Russia immediately violated it. They might say that this will be a read on later looking at how to actually enact this and execute it in the talks in the Middle East with the US and Russia. But unfortunately, I do think Wikkoff's assessment of the call in the situation is a bit optimistic. Though we are moving in the direction where we could see a c spire, but it doesn't look like Putin's overall goals and demands have changed.
Shelby, as we sit at this stage here at the US slash Ukraine on one side, and maybe I don't Russia on the other, is there where's the leverage right now? Do you think so?
Of course, the US has leverage, and we saw President Trump using that leverage against Ukraine and that was a painful roller coaster. But I think we're in an okay position there right now. But Trump also threatened recently that there's still more leverage and pressure that he can put against Russia. There is more economic pressure that we can do with increased sanctions, and I believe Senator Lindsay Graham also is preparing a package of legislation that could put that pain on Russia as well.
What do you think the conversation is going to be later on today, when Zelenski and Trump wind up having this phone conversation in light of the last twenty four hours.
I'm glad they're speaking. It's really important that Ukraine is not left out of this conversation, and it's great that President Trump is taking the time to speak to him. Immediately, I imagine that President Zolensky will point to the Kremlins readout of the call, which differed from the White House readout. The Kremlins readout reiterated many of these maximalist demands that Putin has that are red lines for Ukraine and truly would be existential threats to their security. So Zelenski will
point to that. He'll talk about the damage that Ukraine's all every night. But Zelensky will also smartly, I hope thank the US for the continued engagement and support, and also talk about Ukraine's willingness and desire for peace, because as we've seen, Putin and Russia are the obstacle.
So I guess just yesterday's call, some could read it as a disappointment that Russia did not agree to the seaspire as Ukraine has done.
Do you read it that way?
I'm not surprised. I am disappointed with everything that Russia does, frankly, but I read it as a positive, neutral or slightly positive on the US side, And that is actually more important because we did not see President Trump move away from support for Ukraine. We did not see him bend too many of these demands from Putin, and on the Russian side, they're stalling for time. Putin is very good at playing people, and so I hope that Trump does not get played well.
To that point, what was interesting is that Steve Woodcop, the White House Special Envoy, said that we're gonna trust Putin and take him at his word.
What is the history in that happening.
The history is that you should never take Putin at his words. So again, as I said earlier, that's an optimistic take. Of course, you need to listen to what Putin is saying, but you also need to look at his actions. As for the history, Russia has violated ceasefire agreements with Ukraine. I don't know the exact number of times, think it's in between one hundred and two hundred times
over the Menska agreements. And they continuously act aggressively even after they say they won't and that they want peace, that they care about saving human lives. And Putin has shown he doesn't even care about the lives of his own soldiers.
So I guess you know. White House special Onenway wid Coughin did say that the seasfire could happen in a couple of weeks. Do you share that timeline view?
I think that could be realistic. It depends on what the US continues to push on Russia. I do think that Putin and the Russians are hesitant to completely say no to Trump and risk hurting their warming relationship and angering him, So a ceasefire there's a lot to work out on the technicality side. Ukraine is not the hold up, so we'll have to see. But I think i'd say sooner than a couple of weeks does not seem likely, But a lot of discussions can happen in a couple of weeks, so maybe.
Maybe it doesn't sound like you're particularly optimistic necessarily. What role, if I'm paraphrasing you, what role do you think that europe will be playing in this Because we make a lot of hay about Germany expanding its ability to reindustrialize and rearm, but all of that's going to take a while.
In your estimation, what does that part of the story look like.
That's a good question, and you were right in your paraphrasing of me. I'm not overly optimistic, but I do feel better when I look at the European angle. I don't see a European role in the upcoming negotiations on the ceasefire, which I think is a mistake because they
have a huge stake here. But what has been great is that while the catalyst was unfortunate following the Oval Office blow up with Trump and Zelenski, you're really stepped up their commitment and their action, and we've seen a lot of progress, and they're trying to do more than just words and meetings. So we see movements about this idea of a coalition of the willing that would be European forces to go in after a peace agreement. Of course,
we're not out there yet. We see more commitments on European defense and the moves in Germany are really important. And this all adds up to signs and signals to poot in two.
So I think it all is.
Positive, but we might not see the immediate effect.
All right, Shelby, thank you so much. Really appreciate getting your thoughts here. Shelby McGee, Deputy Director, Atlantic Council's Eurasia Center.
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Every day. We like to delve into the big take stories.
They're deep, deep, deep reporting and digging onto the top financial business and economic stories of our time. And the latest one today has to do with TD Securities, Tidbank, I should say, losing billions in a money laundering scam complicated, and we're here to help break it down for you. David Arrakis is a Bloomberg law reporter. David, can you just remind US as to what this story is actually about.
This is a major money laundering scandal involving TD Bank after it did a large expansion in the United States, and the bank pleaded guilty to conspiracy to commit money laundering in federal court in New Jersey last year, and it paid a three point one billion dollar fine to
various US agencies. What became clear and what our story is about, is how TD Bank failed to implement basic money laundering controls that all banks are required to use so that criminals cannot wash money, as they say, into the financial system.
Well, I've learned all about this money laundering thing for various TV shows, you know, including Breast Breaking Bad. That's where I get most of my knowledge is from you know, Breaking Note that this happened in the great state of New Jersey. That's how we do that is coincidence, folks. All right, So David, if you're Toronto Dominion, how did this happen? How does this stuff like go undetected in such size like this?
Well, what happened was TD Bank expanded rapidly over a decade and spent something like twenty billion dollars to increase its footprint in the United States, and as it did that, it was also supposed to scale up its anti money laundering controls. However, it failed to do that and there were a lot of red flags along the way indicating that its system was not working and because of its cost cutting measures, it did not spend the money it needed to spend and to make sure that criminals were
not accessing its branches. And I would just say that the story really begins when we talk about a Chinese born businessman in Queens, New York named David C who had gotten into money laundering, and he, as part of his money laundering organization, helped drug dealers put their money into the financial system, and through a series of tests, he determined that the controls at TD Bank were the most lacks of any of the banks that he used, and so he was able to bribe tellers to be
able to put large sacks of cash into the bank. And the bank was supposed to follow federal regulations to
ask a lot more questions than they did. For instance, if someone wants to put more than ten thousand dollars in cash into the bank, the bank is supposed to file a report called a currency transaction report, which alerts the Treasury Department to this deposit, and in hundreds of instances, TD Bank did not file accurate currency transaction reports about the deposits made by David C and the people he was working with in this criminal enterprise, and so that
allowed CIS organization to launder more than five hundred million dollars. Even though the regulations were in place and the bank knew what it was supposed to do, it failed to do so. And more than two dozen people have now been criminally charged as a result of the investigation stemming from TD Bank. David C has pleaded guilty, he's awaiting sentencing, and there's several bank insiders who've also been criminally charged by the Justice Department.
All right, we really appreciate it. Thank you so much.
David David rikas Bloomberg Legal reporter joining us in that Big Take.
Definitely check it out in the Bloomberg terminal.
Also Bloomberg dot com slash Big Take the money laundering scams that cost TD Bank billions.
Wow, something you know.
Having learned about this on various television shows, The hard part of being a criminals is laundering the money. I think, I mean, how do you take your all those you know, singles and fives and tens and put him into a bank and write checks and do all that kind of stuff atm cards.
Hey, you know, it's tough stuff. It's a lot of work. It's a lot of work.
He needs to do that.
There you go.
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