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Let's turn to private equity. The Consortium Bank Electronic Arts is set to add more than a dozen banks to its underwriting group after JP Morgan put up twenty billion dollars of debt to bankroll the leverage buyout. The banks are inline to share roughly five hundred million dollars in fees for arranging the financinc Joining us now a man who knows something about a leverage buyout, Steve Paluke of Being Capital. Steve's good to see us, so it could
be a good morning. Let's reflect on your time. The largest leverage buyo ever before this one was HCA back in two thoy and sixty thousand and seven. There you were right there in the middle of it. Describe that moment and how it compares to what we're seeing play out now.
Well, it's really interesting.
I think that buyout was five billion equity and twenty seven billion dollars debt. This this buyout is much more equity, you know, kind of thirty billion of equity and twenty five twenty billion, may thirty five billion of equity. So the markets have changed to that extent that you can't leverage you much, but the ibadas a little less very quality sponsors, and JP Morgan.
Is are very quality bank.
So they did the deal because of the great growth in gaming and media and entertainment, and I think is a very solid company.
You did the tremendously well out of HCA. It needs to be very very clear about that. But the timing of it is curious. It came right at the peak of credit and this is now too. Is that anything to be concerned about?
You know, I'm less concerned about credit right now in terms of the private credit markets, because the private lenders actually are very good. The banks have been very good at JP Morgan, especially Bank of America, well run, well capitalized banks. And private credit is different than credit from banks because if it does go bad, you only write off the equity from people who put the equity in. It doesn't have a systemic multiplier effect. So I'm less
concerned about private credit. What one more concerned about is the size of the national debt and how much interest we're spending on the national debt.
It's really interesting if you go back to.
When I got out of business school, there was a huge storm and drawing about the national debt passing one trillion. That's in nineteen eighty two, so it took two hundred and fifty years to have one trillion of national debt. In the last forty years, we now have thirty seven trillion, which is more than the gdpgbt's about thirty trillion, So that concerns me more In terms of the impact of the dollar interest rates, our interest from the government now
is one of the highest expenditures. It's right up there with defense and healthcare. So that concerns me more than private credits.
I st I could probably find you people who are consent back in the eighties two and then in the two thousands, and as we went through ten trillion, twenty trillion and kept going high, they were concerned all the way up. Yeah, unfortunately, say miment different.
Well, I think I don't know if it is different, But in situations like this, it's always okay till it isn't okay, So you get used to you pass a trillion. Ever, Dirkson had a board up that was counting it up at that time and it passed a trillion. There was a huge outcry. Now it's ten trillion, and then twenty, then thirty. Train but at some point you've got to have some long term plan to pay that money back and get that deficit down because it's eating up huge
amounts of the government budget. And as as as the interest rates roll over, you know, a lot of that is still financed in the old really low interest rates. They're going to have to refinance it at five percent, you know, four and a half percent, and then the number goes up again.
Well, when you see what's going on Washington, I want to go back to your EA deal. It's not just the size and scope that got a ton of people's attention. There's concern in Washington given some of the players involved. Have you heard from politicians about that.
I don't think there's been a lot of pushback on that and the deal. I think we'll be controlled by silver Lake, which is an American you know, fantastic private equity company.
But with the Saudi PIF being involved, some people think Jared Kushner was brought in just to get you know, check government.
Seal of approval.
You know.
Again, I think silver Lake's a fantastic firm and they're leading the charge there, and so I think there's really going to be no concern because they'll be calling the shots on the deal sink.
If we started this conversation by comparing this dayo CI I was six, I seven. Have the pose of capital changed in the last twenty years.
Yeah? Absolutely.
You know, when I started out in the industry, there was only three or four firms doing this I think in general, and it was mostly USA. Now it's global. The fund sizes are up probably twenty times from when I started. And also you have sovereigns and bid in constitutional players partnering with private equity, so the dry powder is huge.
Are there enough opportunities to go around?
You know? You know I got asked that question in nineteen eighty nine.
It's going to again, and.
I feel like a broken record. A private equity I think is here to stay. The model has really evolved, so it really is huge value added to to transform companies, make them better, globalize them, build new products, and in an environment where you don't have to worry about quart of learning. So the model is a very good model, and it's only expanded that it's only gotten big and I think it'll meet There will be plenty of opportunities for these folks to invest money.
Well, let's talk about the opportunities now for you and how your sport franchisees are going. Starting with Atlanta, Steve walked into the room with some Atlanta sneak as with the sponsor New Balance song. The relationship between you and New balants, Can you just describe what that's like at the moment?
A fantastic A New Balance is a is kind of a fighting brand growing, taking a lot of share. They really like the Atalanta story because we have the same values. You know, we're kind of a fighting brand against your the wanted ac one team that you support, and so it was kind of a matchmate in heaven. The New Balance is very excited about it. We're excited about it. We've just named our stadium New Balance Arena. I think it's the first arena that New Balance is named, and
we're very proud to be associated with New Balance. It's a family company, you know, the Package Group is a family company in the Percossis in Italy, your family companies, So the three families have come together and hopefully take to the next level.
You've done a tremendous job with the same in a franchise. Can you just describe the opportunities now that exist in this sports world at a time where some people are pushing back against valuations.
Well, no question valuations or record levels. Why is that is because sports is now the only thing left that aggregates huge audiences globally. And there's been a technology change where when I lived in Holland And in the nineteen seventies, you would only get sports scores three days later from an international tribune and you could watch anything.
Now you can watch any team globally.
So fans are counted in the billions instead of the tens of thousands where they used to be thirty years ago. So I think sports still has upside because advertisers, you don't want to reach the globe, and that's the way to do it.
As you look at the sports world and it's pretty broad, where do you see the best opportunity right now? Because your name's been linked to a team in the WNBA, I know you wanted to bring a team up to Boston. Is that where you're looking stale or is it outsewear?
Well, we're looking at many opportunities. I think the WNBA is a great opportunity women's sports and general women's soccer in the USA and globally is growing. The NFL is the market properties. I think they had record ratings and record advertising on the NFL. So again, I think sports as a category is really a growth asset. And as you have this battle between old media and new media, it's existential for them and they're battling over these properties that get all the eyeballs in.
So I think that bodes well for all the leagues.
John mentioned the w A Connecticut team. Do you think that there potentially could be a future for you and that team?
That's something clear.
We've we've kind of stood down for now and uh and and we're going to abide by whatever the NBA wants to do with the team.
I think it's it's very exciting.
The ratings are huge for w n b A, and I think it's great that all all Americans are following that sport now and it's going to it's going to really take off, and the NBA has done a great job with that.
You've done a great job, Staf. It's always going to catch up with you. What a career if those like you have in the best of times.
Now, you know, I've been very fortunate, you know, coming my grandfather came from Italy on a boat with one suitcase, and we're in a shoe factory here in New York in the Bronx for eight dollars a week. So I would say America is a great place coming coming from from that, and and I've loved the homecoming, coming back to Italy with Atalanta. I get off the plane and I love it because everyone looks like me there.
We talked, I haven't lost my Italian hedge.
We've talked extensively about this in the past together offline, and I'm very proud of you. I never think you've done Steve.
Thank you, appreciate it.
Thank you, Steve Patiuca of Been Capital