FTAV Q & A: Jim Chanos

Is the collapse of the first brands group “Inon’s moment” for the private credit market?

Excessive use of measurements is excessive when it comes to fiascos financial. But in the case of the first brands – which Bank bankruptcy is 12 billion dollars Does it shake some of the largest lenders other than banks in the world-something.

As with Trader Houston Energy Trader, who preached the collapse of the collapse “Funals for Special Bowers”. While the rise and subsequent collapse may nourish it with a boom and a break in stock markets, Virts First Brands is based in Ohio is a constant mania creature to obtain special credit.

At the same time that some of the biggest names in Wall Street face millions of dollars in chaos of the company BankruptcyBankers are preparing capital markets for each other The largest Buyouts In history. Music is still playing.

Looking at this case, FTAV believed that it was worth giving Jim Chanus an invitation. The legendary close seller will not need an introduction to the fans of Alfafil, but for our younger readers: Jim has strengthened his reputation in discovering fraud on a large scale through betting against Enron before its collapse.

Before we go, the necessary responsibility was not evacuated: the first brands were not accused of fraud. However, achieving bankruptcy in financing Byzantine papers outside the balance is to study whether the company has pledged The same bills several times. The first brands did not respond to the request to comment on the similarities between their financing structures and those of ENRON.

Jim had some sharp words about the “magic machine” that nourished the Wall Street debt mutation and “strange” things that could occur when investors stop doing work. The interview copy was lightly edited for clarity and brevity.

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Thanks for your time, Jim.

It would be my pleasure.

I don’t know how much FT reports In the first place of brand marks that I read, but it is a 12 billion dollar capital structure through the public budget and combating public budget debts, it has lost some of the largest names in Wall Street hundreds of millions of dollars, all of this related to the budget race outside the balance, and people who do not do work and inappropriate enthusiasm in private credit markets. As a journalist, I am trying not to do too much, but given that the situation does not seem to be over to ask whether this is the ENRON for private credit? So, I thought I should call you.

At the end of the courses, everyone’s guard was failed, right? The feeling of health disbelief is eroded, due to the fear of losing it.

the Of course I study on fraud: It is a historical account and the fraud course that follows the financial session with a delay. The longer the period of the course, the greater the sense of more investors with health skepticism and start believing in very good things so that they cannot be real and/ or do not do work. This is the final fertile field for financial fraud.

People were overwhelmed with capital and they have to put it at work Things Follow it. It is old to the financial markets.

It is not without anything that the largest fraud in the ENRON course was not technology technology-Enron, Tyco and Worldcom-but that wave of fraud was due to the fact that we had a 10-year-old bull market and people began to believe that things were very good so that they could not be correct.

I called thisThe golden age of fraudA few years ago, and of course, this is only the pure. I think we will see more of these things when the course is finally reflected.

It is very funny because, as a professional investor, I know very well that people think things are very good so that they cannot be real. Or do not look. The director of the portfolio will not inform “hey, put this file on my office until you start losing money. Once again, this is old as financial markets.

I think this is a smart note on Tyco and Enron, because in this case, you have something that makes lighting candles and windshield spaces, but it was basically a giant financing company. Not everyone realized it.

Again, as long as everything works, no one asks the questions. Not even something stumbles, or the markets stumble. People say, “Wait a moment, what do we do here, this does not make sense?”

We will see more of it, especially since private credit is to place another layer between the actual lenders and borrowers.

This is what made the mortgage crisis very bad, we had a lot of people’s layers between the source of money and the use of money. The so -called hot potatoes were. The best term his reputation was “We are in business, not storage” as it is associated with credit at that time. Now with the emergence of private credit, institutions put the money in this magic machine that gives you the rates of shares for great exposure to debts, which must once be the red flag. We rarely see how sausages are made.

As I said, it was ft Early of this story I have many sources in the world of dues financing. One of my first calls was in August with a person who said: “Rob, and this company has achieved accounts of the investment category in a two -digit yield.” Anyone looking at this should ask why.

right. Then there are additional layers of drawings. Not only is this alchemy to convert things that are supposed to be of an investment degree into stock rates, but everyone takes 1 in 15 or 1 in 20 of each layer of pie. The only way you can get there if you play a kind of exotic games or using only crazy amounts of leverage, to obtain 7 percent credit and borrow by 5 percent and convert them into a 20 percent return. It is the only way you work.

The other issue with private credit, semi -government credit in the foreground is that all financial statements are especially. We lose that window that allows skeptical analysis due to this shift away from public markets. On this topic, with Enron – some time has passed since I read Bethany Mclean and Peter Elkind’s book Remember me, how did Spe games get your radar screen?

It was just disclosure, through 1999 10-k, then 10-SS that came out after we were involved in late 2000. There was this at first inappropriate-and then it increased the level of disclosure-the entities in which the general partner was senior executives. I am reformulated here because I forget the exact language. As someone who was running partnerships at the time, there were warning bells exploding in my head, because how could they be credit for both entities?

We now know that they refer to Andy VastoThe financial manager, how can it be financially with a credit responsibility towards Enron and the general partner for a partnership where you bear a credit responsibility towards your limited partners and you are dealing with deals with both entities? You literally cannot do that. This was the advice.

right. This is where it has the first brands. The first bankruptcy brands were presented on Sunday, but earlier last week Spes submitted for bankruptcy. The LLC membership chain was revealed on both sides, which is the same. The owner of the structure is the same.

This is a huge red science.

·This is the point, you had 10-ks and 10-SS to be able to pores, but if you are not a Clo manager or in a private credit box you don’t have it.

Facial is part of the process. This feature is not a mistake, they say.

We had a lot of time without significant credit losses on the market. Even when there are blades, most borrowers manage to “modify and demonstrate”. With the first brands, it was the first debt in trading near equality when we wrote our first story. It was traded in 33 cents before bankruptcy. There is blood on the street now.

right. As I said earlier, it is a repeated topic in the chapter I was studying. I can send you the curriculum, you may get a kick from it! It is old to the financial markets.

Thank you very much for your time, Jim, it was really pleasure to talk to you.

The fun is everything for me.

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Chanos may no longer run billions of dollars in capital, but it is still an intelligent monitor of the financial markets. However, other views of the OPM brigade are available.

We will leave the last word of the Blackstone founder Steve Schwarzmann, who was recent Digital interest On loans against the opposite parties for investment Nvidia Chip Arbitrationers.

Chairman of the Special Capital Company of 1 Terry in my wages, which I booked closed Huge losses Their first brands were given, the following note was presented to A. Parisian Investment Conference Again in the days of Halcyon from 2023:

“If you can earn 12 percent, perhaps 13 percent in a really good day in the debts of the supreme guaranteed banks, what do you want to do in life?” Swarzman told the conference. “If you live in an economy without growth and someone can give you 12 and 13 percent without almost any possibility of loss, this is about the best thing you can do.”