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Hello and welcome to The Money Stuff Podcast, your weekly podcast where we talk about stuff related to money. I'm Matt Levin and I write the Money Stuff column for Bloomberg Opinion.
And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.
Katie, what are we talking about today?
We're going to talk about Direct TV buying Dish. We're going to talk about fan duel and gambling addiction, and we're also going to talk about Apollo. Hey, Matt, have you ever gotten a really bad haircut?
I've almost exclusively gotten really bad haircuts.
I feel like I reached you cut that out.
I've recently moved on to getting better haircuts, but for much of my life I got bad.
Your last few haircuts, I've said, you've got a haircut. It looks nice.
Thank you. That's the highest compliment.
It's really easy to tell with men because you shorter hair. Anyway, moving so long. So direct TV paying one dollar for Dish and nine point seventy five billion dollars of debt.
Or less than that. Yeah, Well, go on, tell me why they're buying Dish Ray slightly negative or meaningfully negative amount of money, or they're trying to.
They are trying, They're trying to.
So Dish is a company sort of that is an entity, but it is owned by Echo Star, Charlie Ergan's satellite conglomerate, and so EchoStar wants to sell it to DirecTV. DirecTV wants to buy it, but the value of the company
is apparently somewhat less than its debt. So it has like nine point seventy five billion dollars of bonds outstanding, and the direct TV doesn't want to pay all those bonds back, so it wants to buy it for one dollar, you know, a check for one dollar to do Echo Star and also for taking on the debt but taking on less than all of the debt. And basically to get the deal done, the bondholders have to agree to a bad haircut, an unpleasant haircut.
Yeah, so we're talking about one point six billion dollars worth of haircutting going on.
Yeah, so like you know, bond holder dets agree, Like they can just insist on getting their money back, but if they agree to take one point six billion dollars less, so like a total of like eight point two billion dollars, then the deal will go through. And if they say no, then then technically the deal doesn't have to go through.
But like everyone understands that this is just the opening of negotiations, and so what is happening is that the bondholders have said no. And the way it works is you kind of get a vote, so, like you know, basically you need to get like two thirds of each series of bonds to agree, and so some bond holders have said that they have accumulated a blocking position, which means basically they have enough bonds to prevent the deal from going through, and they don't not want the deal
to go through. This will be a better company that is more likely to pay off its debts if it gets more money in, and what they want is just get less of a haircut.
Right.
There's a different series of with different maturities that were trading at different market prices, and like the longest dated it was trading in like the fifties cents on the dollar area, and they are offered to pay it off at sixty cents on the dollar, and the vond holders were like more than sixty cents on the dollar. So that's sort of the state of plays. They've said no, but it's like an opening and negotiations.
They would like a slightly less worse haircut, something that doesn't look as bad.
I'm resisting the temptation to just spend the whole time talking about my own history of quests for getting haircuts.
You know, I cut hair. Yeah, I cut men's hair.
I cut Oh, that's right, I did know that.
Yeah, I cut my husband's. Your Instagram if you're cutting your husband's, my dad, my brother, and my nephew. My nephew has gotten like three haircuts in his life, and I've done all of them.
This is gonna be like the money stuff live event. Yeah.
Well, actually I love cutting hair. I'm always looking for opportunities anyway, So yeah, Bloomberg News. That, of course is according to Bloomberg reporting about that locking position. Bloomberg also expanded on that in the Brink newsletter, going through the various contentions that this group of creditors have. First, they contend that they were being asked to take losses as
high as forty percent of face value. That obviously doesn't sound great, While Echo Star owner Charlie Ergan comes out relatively unscathed in all of this.
Yeah, I don't know the full history of it, but like obviously you know they're selling it for zero dollars of equity value, right, So like it's respecting seniority in the sense that the equity is getting nothing, and like there's apparently so little value here that in addition to the equity hitting nothing, the bond holders have to take a haircut in order to sort of sell the asset, right, And the fact that the bonds are trading it, you know,
fifty something sounds on the dollars. Is that you know, people did not think there was a ton of equity value here before. This deal, isn't nun So Yeah, like this is a deal where you look at like the trading prices of the bonds and you're like, oh, if we can get this asset for the value implied by these trading prices and also paying a dollar to the equity,
then it's a good deal. Right. And then you're like, oh, pay a little premium to the values applied by the trading prices, and like that's you know, that's like normal MNA, except that here, you know, the thing is underwater, and so instead of paying off the shareholders. You're paying off the bond holders, but you know you're not paying them that much of a premium to the trading prices, and unlike shareholders, they have a contractual right to demand their money back. So it's a it's a fight.
Well to that point. One of the other contentions is that some of them argue, and I'm reading directly from the Brink newsletter, some of them argue that the sale direct TV for one dollar confirms that the company was already insolvent when it completed a contentious deal in January to strip them of their collateral. If the company wasn't solvent at the time, that transaction could be avoided and the whole plan could be called off.
Yes, but you have like your legal rights, but you also have like you know, like if you win those arguments, like what the company is into bankruptcy, we won, Like yeah, you like there is going to be some intro credit or fighting about like you know, who gets the collateral
or whatever. But like I think in general, you would rather have the company be solvent and get paid a premium to the market value of the bonds than have the company not be solvent and sort of take your chances, but you want to get paid a premium to the market value of the bonds, and like this premium was a little it was a little slim.
It's interesting that this might be what kills the deal because I remember when this was the whole deal. I know, but people were talking about regulatory concerns, blah blah blah. Wasn't going to get blocked because you remember the history of these two companies, DirecTV and Dish. They've been flirting with merging for like two decades, and that regulators sued in two thousand and two to block a previous attempt
to combine. Now they're coming back together. It's sort of like j Lo and ben Affleck and we know how that ended. They recently filed.
For Direction exactly. Yeah, followed that closely. Ye, I don't know. The world has changed in two thousand and two, and like the idea of that Dish DirecTV are monopolists in the provision of television is a lot less compelling than it was twenty years ago, right, I mean, like, who has shir DirecTV likes? It's just yeah, streaming has overtaken them, and so it is now like these two somewhat troubled players are trying to merge.
Well, that's the thing, Like, what are we fighting over. There's some great Bloomberg Intelligence data that shows that together Dish and DirecTV have lost sixty three percent of their satellite customers since twenty sixteen. Uh, that's according to the companies. And then Bloomberg Intelligence says that nearly thirty percent of that loss of their user base or six million subscribers,
has been since the start of twenty twenty two. So, I mean it's ugly, Like, this is a tough, tough business, and you're right, things have obviously changed dramatically in the past twenty two years.
Right, it's a tough business. And I mean trading for lower than the value of the done is maybe something to be done.
Yeah.
The other thing that's interesting is like, you know, we say like direct TV is buying Dish, but like kind of what's happening here is TPG is buying both of them, right, Like DirecTV is like a AT and T obsidiary that like AT and T saw the writing on the wall and sold the part of it to TPG, the private equity firm, And now as part of this deal, TPG is buying the rest of it, and also putting in cash directly to finance Dish like before the deal closes,
and also buying Dish. Right, So this is like going from being a big part of two public companies to being, you know, a private equity roll up that you know, it sort of sounds like that classic private equity playbook of like a declining business and like, you know, sort of extracting as much money as they can for as long as they can.
Well, I was kind of wondering about the creditor dynamics here, and you wrote a bit about this. I was wondering if this is like a beautiful moment of like the creditors banding together to stop themselves from being screwed. But it seems like you're saying that things will get ugly between creditors.
No, they're they're banding together. It's nice. It's like they're but like you can't just be like, oh, we want a hundred cents on the dog, because like there's some risk there. Right. The other thing that I wrote is that Charlie Erican clearly has some ability to to put it on past creditors, you know. But it is interesting to me that this is a private equity roll up.
What I wrote was that you could have a model that is, like important skill set of private equity is extracting value from creditors, right like they're repeat players, are doing liability management transactions. And if you get good at that, then like you can make a troubled company worth more than anyone else could because you can, you know, make
the creditors take back less money. And you know, if you own a troubled company, you might be like, well, I got to sell this to private equity because they're the only people who can kind of extract some value from it. Although here, you know, the equity owner got one dollar, so it's not that much value for him.
Watch this space unless you have anything else like that.
You end every segment with watch space.
Let's talk about FanDuel and gambling addiction. I really enjoyed listening to this or reading the robot from the robot told me all about this.
So there's this guy, I mean Patel. He worked for the Jacksonville Jaguars, which is a football team.
Yeah you might know, uh I heard of.
Him, and he stole twenty two million dollars from the Jaguars to do a bunch of things. He was arrested and died. He's in prison right now. He pleaded guilty. He did a bunch of things with the twenty two million dollars, and the prosecutors of course listed them all. He like bought some fancy watches, he like paid for trips on private chats with his friends, normal stuff. He put some of the money towards a retainer with a criminal defense layer, which is an amazing thing to do
with money that you've stolen. Right, It's like, I know I'm gonna get caught. I'm going to hire my criminal defense layer in advance so that when I get caught, at least they'll have a you know, a well paid criminal defense layer.
Yeah.
Just amazing, like real indication of his state of mind. He was, I'm not like, oh great, I'm commnting the perfect crime. And he was like, oh my god, I am stealing all this money and.
I'm going to our own time here.
So why did he steal all this money even though he knew it was a bad idea because he was a gambling at it. Because most of the money that he stole went not to his lawyers or to watch his but to FanDuel I read an article saying that he was known as the biggest loser ever on Fandel, like he lost the most money and so that was bad and he went to prison. And this week the news is that he is suing Fandel for letting him do that. And I have like a lot of sympathy
to him. I have no way of handicapping like how this lawsuit will go. I think there's like a real common reaction of like, come on, man, you stole this money, you voluntarily bet it on FanDuel, and now you're suing FanDuel for letting you. But I kind of think he's got a point.
What is he suing for? Does he want his stolen money back?
He wants money? Does he want his stolen money back? He wants money for like fraud, damages and right and like his emotional distress he wants He's suing for more than the twenty two million dollars. Yeah, I think the number in the lawsuit is like two hundred and fifty millions, But like, you know, he's not going to get like I think he'd be happy with some money. But yeah, I mean there's a bunch of theories, but basically they're
like you exploited my gambling addiction. And even though you had policies to not take money from addicted gamblers, you went around those policies. So there's things like you know, you had like a vip host, right, Like.
That was the craziest part to me, the vip host that he was texting with. Oh yeah, one hundred texts a day.
Yeah, any casino business, right, Like if you are a whale, if you're like gambling a lot of money, they will do nice things for you, like he got like tickets this morning events and things. But they also have like a customer service representative whose job is to make you feel special so that you gamble more with them.
Just so many texts, Like even the height of my texting days in like high school, I don't think I was exchanging that many text messages.
Well, I think that a lot of his texts were.
Like gambling orders.
At least give me more credit on fanduels so I can bet more.
Just so much.
Yeah, but like also like the texts were like they moved it from the guy's like work account to like his personal phone for like the reasons that you know, I talk about a lot when the sec goes after. You know, it's like easier to avoid compliance when you're texting from your personal phone, and like they were doing dummy texts, like they're making sure to text from the guy's work account like a few times a day, so that compliance wasn't like why did you stop texting with
this guy? Because if compliant saw that, they would know he was texting somewhere else. But anyway, so like he had this vip host, and the vip host was like getting around all of you know, first of all, he was doing it from his personal phone, but secondly, he was allegedly getting around limitations on how much the credit the guy could get. And there's other claims like he was doing a lot of gambling with just his Jaguars corporate credit card. And fan Duel is sort of regulated
like a financial stituition. It has anti money laundering requirements, and those requirements, you know, they're sort of geared towards
you should not be taking stolen money. And because he was gambling with stolen money, he is now arguing you should have known and you probably did know that I was gambling with stolen money because I was, for instance, using my corporate card to make bets and you should have stopped me and I should get the money back because you didn't do the anti money laundering and know
your customer checks. I think it's like a really interesting theory that like traditionally, when a bank fails to do it's money laundering checks, it will get in trouble with the government if it allows a terrorist or a drug trafficker to use the payment system. You never hear about like the drug trafficker saying, well, you should have to give me the money back because you didn't do your KYC checks. But here it's like I was doing crimes
and you didn't check, so I should get the money back. Yeah, it's a good theory.
Okay, so he stole the money from the Jaguars, but he was using his Jaguars corporate card.
That was the theft, Like he would just play plays bets with his corporate card.
I feel like that in and of itself should.
Be a no no, Like that's what he's saying.
No, I know, but like the fact that it's a sports organization, you know, like it's a.
Supports right, I believe from it being stolen, I agree with that too.
But like, oh my god, why are we getting millions of dollars from a sports place.
Yeah, yeah, you're right, You're right, that's also bad.
That's bananas.
I agree with you.
Yeah, I do. Wonder so as you write about, of course this is good business for FanDuel.
I mean, the biggest ever loser on Fendel is you know, yeah, like twenty million dollars to Fendel.
But like, how many of him are there? I'm wondering. I wonder how many cases like this this man there are, maybe to lesser extent.
But I think it's a really it's a really dicey business, right because like there are clearly people who are billionaires who like a gamble, who will lose a million dollars in a week and be like, yeah, that was fun and it's fine, And like those are the best customers, right, Like, those are the customers who can lose a lot of money and not feel it are great. There's not that many of them. Then they're the customers who lose a lot of money and can't really afford to lose a
lot of money. And like, you know, all these sports books have policies about safe gambling, and you know, they're regulated business, and they don't want to look like they are exploiting addicted gamblers, but clearly they make money by people losing money, and the more money people lose, the more money they make. And not all of those people
can afford to lose the money that they lose. And I've written about there's a subset of sports gamblers who are advantage gamblers, who win right, who can identify exploitable bets and make money at the expense of sports books, and those people their problem is that sportsbooks don't like them and won't let them bet very much. And so a lot of the business of being a professional sports gambler is not knowing who will win, but it's knowing how to bet a lot of money at a sports book.
And there are stories about how people do it, and one thing they do is they try to look like addicted gamblers because that's what the sportsbook wants. So there's a story of like a guy who has a bot log into his sportsbook account every night between two and four am, because that just looks desperate. If you look desperate, they're like, oh, this guy's an addict, so we'll give
him more credit. And like he seems to think that that works, right, so there's like this real tension where these companies really do not want to look like they're exploiting addicted gamblers, but like that is where the money is.
Reading this and thinking about it kind of made me think about, you know, the conversations around robin Hood when the memestock era was really in full swing. Of course, like yeah, like what is the responsibility of like Robinhood to make sure people aren't trading more than they can afford to lose? And there, of course are tragic stories about that.
Yeah, and robin Hood will tell you that they are, and I think there's a lot of truth to this, that they are sort of a gateway drug to sensible four O and K investing, Right, Like, you come to Robinhood because it's fun, and then like it's not being that fun, and like I'll just put it in like an SMP.
Index fund you like graduate up, you just like get.
Bored of like day trading GameStop and you put it money into an SMP fun That seems plausible to me.
You're like, man, why does this stock keep beating me?
Right? So, like I think there's some plausibility of that. At the same time, like you look at how robin Hood makes money. They make a lot of money on options, right, Yeah, like a lot of money on options. It's hard to argue that like a lot of retail traders are responsibly saving for retirement by day trading options. But that's where
the money is for these firms. I will say I wrote about like there's a move to make more single stock daily expery options, which I don't want to say is a pure gambling product, because I think you could imagine a hedging use for it for somebody, but it's like it's it's pretty much a gambling product. And the articles I read about it, you know, there's a lot of push from from some like market makers to do that because like a gusher of money. But Robinhood has
pushed back on it. Because you know, single stock zero day x pery options become a big thing. Robin Hood will offer them, and Robinhood's customers will use them, and there will be terrible stories like rebin Hood doesn't want that headache, right, They're like, we would make a lot of money doing this, but we don't want that that looks like catering to gamblers, and and they have, they have, they don't want it you know.
Yeah, well it would give us something to talk about on the Money SOFF podcast.
Zero day single slock options, Yeah, we just talked about them, I know. I mean yeah, it's again, it's like they expire at four and so like if you're heading earnings and earnings come at four fifteen, you're like exercising at a stale price. It's it's crazy product.
I'm really glad that that's a sandbox I can't play in because that sounds fun.
What zero day single slack options.
If I wasn't there, I would be the most degenerate day trader. I would have a great time.
Really. Yeah, I didn't know this about you.
I love a drenaline you can't tell, okay, but like that particular form of I would not be a day trader and scared. Well, there's two sides sides to the trade or something. Let's talk about Apollo. A lot of Apollo headlines recently.
Instay doing some stuff. Tell me about it.
Well, I was gonna turn it over to you. Apollo's Investor Day. They came out with a big projection ten billion dollars of annual earnings in five years. Before that, they joined forces with City Group, for this twenty five billion dollar private credit push. It just feels like Apollo has been particularly in the news lately.
Their investor Day, they sort of positioned themselves as everyone's retirement fund.
Yep, they certainly did. CEO Mark Rowan, he said that privates can produce fifty to sixty percent better outcomes for for one case, and would expect him to say that, I don't know's well, of course, I mean that's the thing, Like, of course he would say that do we need privates in four one ks? I don't know.
I don't know. I just think about this kitty. You are ETF build, You're a sure big believer in.
Can't even get an ETF and a four oh one K.
You're a big believer in daily liquidity.
Sure am, I'm sorry. I just value transparency and interry day liquidity.
But it is possible, Like a four one K is really a perfect place to not have those things. I know, like it is, And it isn't right because like you, because it's for small investors. You do want like transparency and low fees and not like you don't want people to like lock their money away for thirty years and forget about it and have someone stealing it, you know. No, definitely, it is a place where you can lock your money away for thirty years, and that does suggest that you
don't need daily liquidity. Yeah, and if it is the case that I liquid things pay premium, and like you know, Apollo sort of looks around and it's like, we are in the business investing in liquid things, right, and so who do we find on the other side, Like who will give us the money to invest in liquid things?
It's like, well, you know, it's pensions and endowments, and like, oh, let's have a you know, a THEENE is like I always out of Athene is sort of like a life insurance company, but it's not really it's like an annuities company, right, It's like a or like those are kind of two sides of the same thing, but like it's you know, they position in the investor day as a as a retirement services company, which is what it is, right, And so eventually you sort of get to the point of saying,
you know, we need all the money and the place where people have long time horizons and so some ability to take your liquidity is like in their retirement accounts. Yeah, it makes a lot of sense to me when I
think of it that way. It's like a little weird that retel products and like mutual funds have liquidity requirements because it's not exactly addressing the problem of retirement savings, which is why people have annuities and stuff, right, I mean, that's like the classic way to do this is like Athene sells people an annuity and then apollos and charge it figuring out how to invest their money for the next forty years or whatever.
Yeah, No, I hear what you're saying, and it doesn't make sense. Like, again, you're locking away your money for thirty years. You don't need that intry day liquidity. I guess it's just what I like about public markets and public assets is just knowing the performance.
So Cliff Assess has this great blog posts from a couple of years ago. Cliff Asseness is like a public markets value investor, right. One thing he doesn't like is that private equity, which is kind of like you know, value investing in companies. Private equity has what appears to be a much better sharp ratio because it has much better risk adjusted performance because it has high performance or you know, it has sort of vaguely SMP like performance,
but it has much less volatility. And the reason has much less volatilities because it doesn't report with market prices every day. Right, Like a lot of what happens in the public market, sprices go up and down without that much change in fundamental value, and so it looks like your stocks are very valatile. Private equity doesn't look vital because they report marks once a year or whatever, and like they have, you know, have some flexibility to say
out nothing's changed. And he is like kind of mad about that, but he's also saying, he says in this piece, you can see why that's actually good because, like what happens is if your stocks move around every day, you'll be tempted to sell them at the worst time. You'll panic. Right, Buying private equity is a way to like discipline yourself and prevent yourself from panicking when market prices move around.
And that story that private equity is traditionally a story about pensions and endowments, right, who you know are maybe prey to like political factors and will take their money out if prices go down, and can stop that by
investing in things that don't report prices. But it's like also equally true of retirement savers, right like if you if you're looking at your furrow and k every day and saying, oh, no, stocks went down and take my money out, Like maybe it's better to be locked up in something that doesn't have price transparency.
That's a fair point. I do find it fund that. Of course, Apollo is public, locally traded, and it's interesting to consider it's its market cap. It's something like seventy four billion dollars. Their AUM is like six hundred sixty two billion dollars somewhere around there. It's a fun thought exercise to compare that to black Rock, which has ten trillion dollars in AUM and their market cap is like
one hundred and forty billion dollars. And this is something that we've talked about a little bit before, like Square, Yeah, exactly, Like how the stock market values these different asset managers.
I think it is pretty straightforward, right crudely, if you put it ten times multiple on earnings, right, like Apollo can kind of extract kind of one percent in fees.
I have some numbers right here. Yeah, I printed I'm reading this right. So if you take a look at Apollos AUM, this cent earned per one dollars of AUM is point eighty.
Nine yeah, so close to one percent.
Yeah, and then you compare that to black Rock and it's like point oh six sense well.
Like sixplasive points. I think like there's two kinds of asset managers. There's like expensive asset managers who charge one percent, and there's cheap asset managers who charge like one basis point right, right, and then you put it ten times multiple on them, and like black Rock should trade it like one percent of AUM, and Apollo should trade it a ten percent of AUM, right, yeah, because like they're charging one percent of AUM versus charging ten basis points
of AUM. And I wrote about this in the context of Brushing Square, where they raised money at a valuation for the management company of something like fifty percent of AUM, which implies quite insane things about the fees they can charge or about their expected growth. But that's neither here
nor there. What is Yeah, Like Apollo is in the business of being an expensive asset manager, and one thing that might happen, one that you could imagine is like if all of their pushes to be like mass market and retirement savings and all these things all come true, and like possibly there will be some fee compression, right, possibly you can't charge the same fees for everyone's retirement account that you can charge for like private equity.
I would imagine. So Also John Farrell and BTV interviewed marcro In the day after the investor Day, and he asked the good question, which is that you have rates coming down. The economy is looking pretty good right now, financial conditions are easy. Why would people keep going to the private credit markets versus issuing in the public markets,
which I think is a fair question. Marcro And said something like, you know, we're doing things that the public markets wouldn't allow, and then he talked about infrastructure for a while. But there was also an interesting story on the terminal from Ellen Schneider and Michael Toblin, quoting Bank of America research that said almost thirty billion dollars of private debt has been refinanced through broadly syndicated loans across
more than seventy deals so far this year. So banks reclaiming some ground there from private credit.
Yeah, that makes sense. As you said, they just a a big, you know, partnership with the city, right, So I think there's a real view that private credit is going to stick around. You can imagine a story of, like a lot of private credit funds raised a lot of money because it's very hot, and then like in a year, they need to deploy that money, and they are possibly giving better terms than the public markets. Right.
I think a lot of the story of private credit in recent years has been like when public markets seized up, private credit seized a lot of share. But you can imagine a story of just like there's so much money in private credit, it's going to be cheap, and watch the space comebye.
Watch the space bye bye.
And that was the Money Stuff Podcast.
I'm Matt Levian and I'm Katie Greifeld.
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