Fairholme's Debt Picks
Bruce Berkowitz discusses the fund's high-yielding senior credit positions.
Bruce Berkowitz discusses the fund's high-yielding senior credit positions.
Michael Breen: Speaking of capital allocation, last fall you took positions in debt in a lot of firms, a lot of senior debt. Maybe you can explain that. Was it a one-time opportunity? What type of deals you were getting. A lot of them overlap with the equities you own, same names.
Bruce Berkowitz: We like the ideas of mixing the debt and the equity of a company, especially a company that is levered. Because we thought the equity quite good, and when the company shrunk its business, let's say in the case of a rental company, or a...
<TRANSCRIPT>
Michael: United Rentals.
Bruce: United Rentals (URI), or say a Hertz , which is a better example. We'll shrink the business down, de-fleet, cash starts coming in fast, pay off some debt, everything is fine, the economy recovers, moves on. But really, if you can find the senior debt of companies that you believe in, and that senior debt, in the case of Hertz at one point, was yielded close to 30% per annum yield to maturity, what more can you want from life?
If we can get a senior credit position for our shareholders and achieve 20%, 30% yields...
Michael: Better than equity-like.
Bruce: Excess equity returns in a senior position in the company. Of course the implications of that, if we are right about the company, then Hertz's stock is going to go up multiples. So we like that package play. We can't find it that often. We're involved in a lot of companies now, we'd love to build up that part of the portfolio. It's a unique environment. I don't know how long it's going to last, but as long as it is we'll try and take advantage of it for our shareholders.
[END OF RECORDING]
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals
and individual investors. These products and services are usually sold through
license agreements or subscriptions. Our investment management business generates
asset-based fees, which are calculated as a percentage of assets under management.
We also sell both admissions and sponsorship packages for our investment conferences
and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.