#265: Ali Hamed on Seeking Value in Today’s Private Credit Market
4/9/2020 · 63 min · transcript via mlx
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Key topics
— Private credit markets are reacting more slowly to COVID-19 than public markets because covenant breaches require actual non-payment rather than price speculation; public bond markets respond immediately to perceived risk changes.
— Borrowers should proactively communicate downside scenarios to lenders rather than hide information or feign optimism; transparency builds trust and opens dialogue around workable solutions.
— Venture-backed companies are cutting costs aggressively—reducing AWS, Salesforce, and rent; right-sizing headcount; and extending runway—while some are positioned to gain market share in sectors like streaming and e-commerce.
— E-commerce and lower-CPM ad platforms (YouTube, Snap) are likely to outperform traditional media and premium-CPM channels; views are up but CPMs and ad spend are down.
— Subscription businesses may prove more resilient than enterprise software because consumers prioritize services like Spotify and Netflix over discretionary enterprise purchases.
— COVID-related covenant language will likely enter loan documents permanently; future pandemic insurance and government trust funds may emerge for high-risk sectors like airlines and hospitality.
Market & price signals
— Bitcoin dropped 50% in a single day during the initial panic ("Black Thursday") and failed to act as a safe haven asset as previously assumed; it has since partially rebounded, but the rapid drawdown raises questions about its store-of-value narrative. Broader correlations between Bitcoin and equities spiked during the crisis. No specific price targets or forward guidance offered; Hamed emphasized a "wait and see" stance over two months to observe Bitcoin's behavior relative to other markets.
Actionable insights
— If you are a founder or borrower: contact lenders and investors immediately with base-case, bull-case, and bear-case scenarios; hiding problems or appearing overconfident damages credibility and forecloses future flexibility.
— If you are deploying capital: focus on companies with low variable costs (e-commerce, digital advertising, subscription software) and avoid premature speculation on market recovery; wait for two months of actual data before committing to offensive strategies.
— Monitor sector-specific trends in CPM collapse, churn, and LTV recalculation; companies relying on premium ad rates and enterprise software will face larger headwinds than those with lower-cost, higher-frequency consumer subscriptions.
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