Traci Alloway

But as Craig said, that'll help on the liability management side of these fund structures.

It's not going to help on the asset side.

So if the default rates start hitting some of these levels that

people fear and or predict, it's not going to save you on the asset side of the equation.

And then maybe to open up another topic, there's two parts of a default, right?

There's when the company actually declares default and then what the creditors recover in bankruptcy.

I think there's big fears around some of these recovery values that will be seen.

Some of these are very highly levered companies with very few hard assets.

So that's going to be the next test when we start getting it to work out of some of these loans.

What do the creditors really have to protect them?

Joe, you hit the nail on the head here because this is the spot where really the high yield market and the private credit market started to diverge the most.

There have been issuers in the tech space and in the software space into high yields.

but it's definitely been a more recent phenomenon.

If you go back 10 years, there were not a lot of software issuers in the high yield space, largely because of that, because people couldn't get their arms around the typical, okay, I need to have two times asset coverage or two and a half times asset coverage.

We just never saw that.

So those companies financed themselves either in the equity market or they financed themselves in the convertible bond market.

So we used to see a lot of that in the convertible bond market because these are growth companies.

And so the convert market would say, okay, I'll accept a low coupon because I'm going to have equity participation on the upside.

And so my upside isn't capped at whatever my coupon is.

And I think that that's actually really been the area where it's diverged the most.