Volta's $5 billion AI loan sold at 95 cents. Direct lenders raised 35% more and lent 28% less. Nine retail credit funds still capped exits.
Prices ran hot this week. Long bond yields fell anyway.
Core prices rose 0.3% in September, a tenth above forecasts for a second month. Producer prices rose 1.3%, the most since March 2022. Still, the 10-year Treasury yield closed Thursday at 5.10%, down from 5.21% on Tuesday.
The hike scare came and went. Kalshi's October hike contract jumped from 18 cents to 55 within 40 minutes of the CPI report. By early Friday, it traded at 14 cents. The Fed goes quiet Saturday, before its Oct. 27-28 meeting.
Lower long rates did not make money cheap for all. JPMorgan (JPM) bought back a net $664 million of its stock last quarter, down from $6.2 billion in the spring. Its wholesale loans grew 16% in a year, to about $939 billion. "We're tightening up a little bit on credit," Jamie Dimon said.
The real price of money was set deal by deal. Here are the six themes that told us the most.
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Volta's AI Loan Found Buyers. It Took a Discount.
Volta's $5 billion AI loan sold Thursday at 95 cents on the dollar, reports said. JPMorgan and Goldman Sachs (GS) had first offered it at 97 to 98. It priced at 6.5 points over the benchmark rate. The yield ended above the 11% the banks had floated. To sell it, they added buyer protections and a prepayment penalty.
The banks underwrote only a $1.3 billion piece. It funds lease payments on a data center in Norway. The other $3.7 billion buys about 36,000 chips from Nvidia (NVDA), which back it. The banks would not commit to that piece. Anthropic has a six-year deal to buy computing power at the site, people familiar said.
Blackstone (BX)'s AirTrunk put off a Singapore listing of about $1.5 billion, people familiar said. It had weighed a payout near 6%, half a point above its first plan. The new target is early next year.
The Signal
Lenders will still fund AI buildings and chips, at their own price. The banks backed a lease but not the chips, which can lose value as newer ones arrive. Where Volta's loan trades once it starts trading will set the bar for the next AI cloud loan.
AI's Borrowers Paid More in Public Credit. The Rest of Credit Did Not.
Default insurance on Oracle (ORCL) debt hit a record 288 basis points early Thursday. CoreWeave (CRWV)'s passed 1,000. CoreWeave fell about 15% Wednesday. Two of its bonds yielded about 15% that day, though they pay less than 10%. On Thursday, some of its notes yielded more than 16%. The stock hit a 52-week low of $59.51, then bounced.
The scare stayed narrow. On Thursday, the high-grade bond fund LQD rose 0.8% and the high-yield fund HYG rose 0.4%, in step with Treasuries.
Riskier collateral paid even more. Strive (ASST)sold about $630 million of preferred stock at $90 for each $100 of stated value. With a 15% dividend, it yields about 16.7% at issue.
The Signal
Credit drew a line around a few AI builders with heavy debt. New debt would cost them far more than their old debt does. If bond funds ever fall on a day Treasuries rally, the strain would be spreading.
There's a HUGE Downside to This Bull Market (And It's Not a Crash)
It's hard to deny we're in a bull market.
Stocks, real estate, gold, and bitcoin are hitting record highs month after month.
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"There's a dark reason why so many assets are levitating—it's a sign we've entered the Most Terrifying Bull Market in History."
For the full story, click here.
Direct Lenders Raised More Money. Banks Won the Loans.
Direct-lending funds raised $129.15 billion in the first nine months, up 35% from a year earlier, Preqin data show. Their lending last quarter fell 28%, to about $49.77 billion, PitchBook LCD estimates show. About $16.4 billion of their loans moved into bank-led deals. Only $2.6 billion moved the other way.
Banks put money behind buyouts. CCC (CCC)agreed to a buyout by GTCR and Elliott at $7.75 a share, about $6.1 billion with debt. J.P. Morgan leads the financing. Penske Automotive (PAG)'s controlling owners will pay $212 a share, backed by up to $1.8 billion of bank loans. Thoma Bravo's Proofpoint agreed to buyVaronis (VRNS) for $49.75 a share in cash, with its debt committed.
The Signal
Steady borrowers can pick bank loans when banks will lend. That leaves direct lenders with more cash than loans. The next test is whether they loosen terms to win deals back.
The Exit Line for Retail Credit Shortened, Slowly
Exit requests fell at 13 of the 15 non-traded BDCs Fitch tracks. They still averaged 9.8% of shares. Nine funds drew more than their 5% quarterly caps. Fitch expects it to take "several quarters" for the average request to drop under 5%. An executive at Blue Owl (OWL)said this week that requests at its credit funds are falling.
A Fed staff note showed why exits wait. Non-traded BDCs held about $307 billion at the end of last year. Private credit was 93.4% of their holdings. Leverage averaged 0.9 times. Short-term liquid assets were 0.2%. Interval funds, which must buy back shares at set times, were nearly half private credit, up from about 20%.
Buyout cash is slow, too. Buyout funds are paying out about 12% of their starting value, Moody's says, using PitchBook data. In 2022, they paid out more than 30%.
The Signal
The caps are doing their job. Holders wait in line, so funds do not have to sell loans. If payouts above 5% became routine while new money stays soft, Fitch said ratings could come under pressure. Fourth-quarter tenders are the next count.
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Private Buyers Paid Up for Growth, on the Companies' Own Numbers
Ramp raised $1.85 billion at a $60 billion value, about 36% above its June price. It says yearly revenue passed $2 billion. So the price is at most about 30 times sales. Modal's value more than tripled in five months, to $15.75 billion. It cites a run rate above $1 billion. Neither figure is audited.
Anduril is letting staff sell at a price that values it near $90 billion. Sales are capped at about $1.3 billion, roughly 1.4% of that value. The buyers are not named. The tender closes Nov. 9.
The Signal
Equity is still writing big checks for growth. Ramp's steady card business drew about twice Modal's multiple. But each mark rests on a company's own figure or a small tender. A larger share sale would test them.
AI CEO Issues Code Red: Prepare for Meltdown
The CEO of this AI company (click here to get the name, 100% free) just issued a CODE RED in an internal memo…
Warning his employees that they’re dealing with a critical situation.
Another company executive even implied they might need a government bailout.
And now Jim Rickards is predicting this company is about to go bust, in a full-blown AI meltdown that could be 10 times bigger than Lehman Brothers.
Whoever Brought the Cash Set the Exit
Clear Channel's take-private closed on about $3.3 billion of equity from funds tied to Mubadala. The preferred from Apollo (APO) funds and the JPMorgan-led debt committed in February were not among its sources. About $1.3 billion went to shareholders. About $1.87 billion went to redeem its notes due 2028 and 2029.
At Getty Images (GETY), the founding family and Koch's investment arm plan to put in up to $533 million through a prearranged bankruptcy. They would own all of it. The common stock gets nothing. Bumble (BMBL) signed with Ithaca Holdings at $6.05 a share in cash, a $1.3 billion deal. Blackstone affiliates and the founder signed a written consent. Other holders get no vote.
Where no one brought cash, little was left. Character.AI filed for bankruptcy with a $20 million bid from Disney (DIS) for a license to some of its intellectual property. Backers had put in more than $193 million.
The Signal
At Clear Channel, equity did the job debt had been lined up to do. Holders with control set the terms, and public holders took what was left. Across the week, money was not scarce. It was choosy, and it charged most where collateral can fade or the exit is shut.
Rates Just Reset. Who Feels It First?
On January 2, the 10-year yielded 4.19%. By September 30, 5.29% — most of it in one quarter.
Some companies earn from higher rates. Some pay. Each runs on a different clock.
We traced three: IBKR, WRB and FIS. One has already reported. The other two report next, and the report tells you the exact line to check.
Free report, texted to your phone.