Understanding Football

A friend heads private credit at a large public pension fund and his exposure to data centre went from 0 to 5% of overall portfolio in less than 18 months…. He is running out of capacity to add more exposure to data centres and on top of that the limits are now getting tightened because every exposure is now below water. I always believe that fixed income spreads are like canary in coal mine for equities, fixed income guys are logical whereas equity guys are emotional. Last week 2 interesting things happened. 1. Paramount Skydance Corp. raised a massive $52 billion in debt (loans and bonds) to fund its $110 billion acquisition of Warner Bros. Discovery Inc., which triggered immediate losses for bondholders and an uproar on Wall Street… as the bonds fell sharply inspite of over subscription. 2. Credit spreads on SpaceX's $25 billion bond offering have widened sharply following heavy secondary-market selling, with longer-dated spreads blowing past 230 basis points and touching near-junk territory. As per the article in startup fortune. Six months ago, banks were racing each other to underwrite data center loans tied to Oracle, Meta and the rest of the AI buildout. Now some of the same banks are trying to get that debt off their books. JPMorgan, Morgan Stanley, SMBC and MUFG have been exploring significant risk transfers, according to a report from the Financial Times. These are deals that let a bank keep a loan on paper while shifting its riskiest slice to outside investors. The banks are doing this because they are bumping up against internal limits on how much AI-linked exposure any one lender can hold.