“Overblown” Sell-off in Software Loans | Matthew Bloomfield on Public BDCs (Business Development Companies) and Collateralized Loan Obligations (CLOs)
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Today's episode is brought to you by QIA NXT. Later in the show, you'll hear more about how you can take the next step for your clients with QIA NXT's alternatives education courses. But for now, let's get into today's interview. Very pleased to be joined today by Matthew Bloomfield, partner at Palmer Square Capital Management. Matthew, welcome to Monetary Matters.
Thanks for having me, Jack. A pleasure to be here.
I'm really excited for this conversation, and I'll explain why. So your firm manages roughly 37,000,000,000 in assets, lot in the structured credit market, the CLO market. And I think your market and what you manage touches the private credit market. A lot of it is not the private credit market, but I think it's important everyone's talking about private credit and stresses in that market, perceived or real. And a lot of times in financial markets, perceived stress can turn into real stress. So I just want to kind of set the stage first for our audience before I give you the mic that private c
Well, that's a it's a it's a very good question. And you are right. Our public BDC PSBD does own the majority of the underlying collateral in broadly syndicated loans. We do have a private credit allocation within there as well that's been growing. But both on the broadly syndicated side and on the private credit side, we focus on very large borrowers. So EBITDA across the BDC of north of 400,000,000 on average. So very, very large companies are kind of view and how we viewed credit over the past fifteen plus years of doing this at Palmer Square has been that larger borrowers tend to do better
So in in the fixed income market, obviously, there's there's treasuries, there's corporate bonds, investment grade and high yield bonds. I think a lot of people, not credit specialists, might think of the high yield bond market as where that's the riskiest credit in the spectrum, but that's really just kind of the tip of the iceberg. There's leveraged loans, which are originated a lot by banks, syndicated out to a lot of owners, some of whom are banks, some of whom are not banks. And then there's this whole private credit market, which lends to companies that are a lot smaller. And I think gen
Yeah, I mean, I think that's right. I think what you've seen, particularly back half of January into February and March, has predominantly been focused on software and businesses that I think markets perceive to have much higher risk of disruption from AI. And so you're right, you have seen in the syndicated markets, obviously public equities as well, but on the broadly syndicated loan side of things, software loans have traded down meaningfully over the past few months. As I think, you know, people are cognizant that, you know, in general spreads should be wider on a go forward basis for thos
And is the concern, the unease, the selling off in the broadly syndicated loan market, is that concentrated or software or has it gone into every industry?
Definitely mostly concentrated on the software side of things. You've certainly seen overall loan prices come off in general, But a lot of that market was trading at or above par coming into this, just given the fact that we haven't seen a lot of M and A, we haven't seen a lot of new deal activity. So some of those kind of par plus loans have kind of sold off back closer to par, a little bit below. But I think that's a natural reflection of just the overall kind of risks going on from a macro standpoint. But writ large, it's been predominantly focused on kind of software and adjacent type busi
And roughly, you can give a
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