‘Who’s the Next Winner?’: Diameter Capital’s Scott Goodwin

Bullish:

• $X - Twitter/X debt purchased at 14% yield is now at 5-10% LTV given xAI's $230B+ valuation, representing significant value appreciation from the merger synergies

  • “We went into the banks and provided them a bid... at low nineties and of low teen 14% yield on the credit... Now on a mark to market basis post the merger with XAI, if you look at where XAI is rumored to be raising capital around 230,000,000,000 now, if not higher, the Twitter debt is something like 5% LTV or 10% LTV.”

    Scott·6:11
• $SATELLITE - Satellite company debt purchased at distressed levels recovered to par after successful spectrum sales to larger telecom entities

  • “We made a big bet on a satellite company that was the largest owner of Spectrum in The US outside of the big telecom providers... Fast forward to this year, they have now sold spectrum to larger entities... and the debt back to par.”

    Scott·9:24
• $TELECOM - Telecom infrastructure debt bought at 30 cents recovered to par as AI inference workloads require commercial fiber networks to leave data centers

  • “We were looking at, okay, who are the infrastructure players?... when people actually started using the AI for inference... It had to leave the data center. How would it leave? It would leave on the commercial fiber, the pipes.”

    Scott·8:44
• $DATACTR - Senior chip financing opportunities offering double-digit yields with 3-year amortization in the growing datacenter and AI infrastructure space

  • “We're also seeing a lot of opportunities in the chip finance space. Financing chips is something that we weren't really thinking about doing two or three years ago... we're at the senior part of the chip, so it amortizes over three years, earn a double digit yield.”

    Scott·11:07

Bearish:

• $SAAS - Pre-COVID vintage SaaS LBOs face AI disruption risk with high leverage and poor recovery prospects when cash flows deteriorate

  • “If you look at Levfin private credit, about one third of that market is software SaaS LBOs... These have been great companies to lend to... But the SaaS companies that got LBO'd pre COVID, late twenty teens and through COVID... When these things start to go bad, it's not like you have oil in the ground. That cash flow scheme goes away.”

    Scott·13:05
• $CONSUMER - Hidden consumer leverage through online lending platforms has grown 700% in five years and isn't captured in traditional bank credit data

  • “What we see is... the online consumer lending, the Upstarts, the Sofis, these are huge companies now. That's grown by 700% in the past five years... those are loans that aren't on bank balance sheets... they're not showing up in the credit data in some cases.”

    Scott·2:00
• $PACKAGE - Packaging companies for wine bottles and beer cans struggling due to GLP-1 drug adoption reducing alcohol consumption

  • “If you see that penetration happening and you look at the demand for wine bottles, beer cans, things like this, some of these packaging companies that make the labels are really struggling.”

    Scott·4:08
• $HOUSING - Ongoing housing recession since 2022 with poor new and existing home sales creating distressed opportunities in housing-related debt

  • “And then in The US, you're in this housing recession since the big inflation spike in 2022 that we're still in. We're not producing the number of homes we had been historically. Both new home sales and existing are terrible.”

    Scott·3:10