Masters of Risk | Season 4 Episode 6 Video: Private Credit Under Pressure: Liquidity, Distress, and Opportunity in Today's Credit Markets

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00:00:02:04 - 00:00:33:00

Stewart

Today I'm joined by Lionel Jolie, partner and head of credit at J.F. Lehmann and Company. Lionel helped launch the firm's credit strategy and brings more than two decades of experience investing across the credit spectrum, from performing credit through stressed and distressed opportunities. Prior to joining J.F. Lehman. He managed a multi-billion-dollar portfolio of corporate loans and bonds, giving him a front-line perspective on credit markets across cycles.

00:00:33:05 - 00:01:06:09

Stewart

Lionel, thank you for joining the podcast today. Thank you for having me. And for our audience who doesn't know about your firm, can you talk a little bit about what your firm does, what spaces you invest in?

Lionel

Yes, of course. We are $9 billion alternative asset management company spread across private equity and private credit. With really specific about J. F. Lehman is we are sector focused and we invest in four sectors specifically which are aerospace, defense and government, industrials and infrastructure and maritime and environmental.

00:01:06:11 - 00:01:29:00

Stewart

That's very interesting to see. And I guess you're in the private credit and private equity space. So are you making loans directly or are you acquiring loans that already exist or most of your activities actually secondary activity.

Lionel

So, we're effectively providing liquidity to lenders. We need to raise cash quickly, quietly so they can be. And we're agnostic between the public and private side of the market.

00:01:29:01 - 00:01:49:23

So, we will lend to, we will buy loans from close on the public side from high yield bond managers. And on the other side, on the private side, we will source from the lender, from BDC, etc..

Stewart

Oh, absolutely. And speaking of BDCs and direct lenders, there are a lot of funds now who need your liquidity. So, you guys are actually kind of like saving the market now.

00:01:50:00 - 00:02:09:24

So, I guess, can you talk a little bit about your experience in terms of, I guess, the front line investors or the original direct lenders who need to actually who need that liquidity? So can you talk about the names that you have to purchase. Sometimes they may be distressed loans at this point. So how do you guys stomach that risk and how do you assess that risk?

00:02:10:01 - 00:02:35:17

Lionel

That's a great question. And really what's happening at the moment is that the BDC industry grew quite, quite significantly. I mean, BDC assets went from 100,000,000,00 5 years ago to 600 billion this year. And obviously as most of you probably know, the you know, BD sees have been I've been facing a wave of redemption requests. So many of them have put up the gates limiting distributions to 5% a quarter.

00:02:35:18 - 00:02:55:02

Now it means that, you know, it's changing their risk profile and their liquidity profile. So, what it does not mean, and I think what the disconnect is between the headlines and the reality is there's a bit of a of a of a perception that BD are forced to kind of forced into a fire sale, which is not the case.

00:02:55:02 - 00:03:19:07

They have time to, to effectively sell their assets. So, it's going to play out over a long period of time, probably many quarters. However, it still means that effectively they are not growing their asset base and they are still leaking some assets. And on top of it, as it's been widely reported, some of their banks that are providing leverage to these BDCs are also tightening the terms of these loans, particularly around software exposure.

00:03:19:08 - 00:03:41:18

So, what it means is that the BDC managers, some of them are looking for liquidity, looking to raise cash. You know, the obvious way would be to actually sell the software exposure, the software loans that have been kind of at the center of the problem or the perception problem, but obviously there's a little demand at the moment and little appetite for this software alone.

00:03:41:19 - 00:03:59:15

So, you're now in a position if you're a BDC manager on it, and if you need to raise cash, you're effectively selling what you can, not necessarily what you want. And so, it means that you're starting to sell loans that are not necessarily in software, in the software sector or in the building product sectors, which are more stressed.

00:03:59:15 - 00:04:17:24

And you're starting to serve in sectors like ours, where effectively we're starting to see some strong assets that we know very well, good companies. But again, that that BDC managers will sell because they need to raise the cash and they need to raise it quickly.

Stewart

Absolutely. And I envision that you guys are mostly in the leveraged loan space.

00:04:17:24 - 00:04:53:23

So, you're dealing with credits that are B minus, triple C plus. So clearly in that speculative side of the credit spectrum and the way S&P defines these companies were B minus is that they're vulnerable to economic conditions. Right. And the success of them are contingent on economic conditions being healthy and staying positive. So, what I'm interested in learning about is there is government expenditures in terms of deciding whether to spend the 1.1 trillion and aerospace and defense or 1.5 trillion.

00:04:53:24 - 00:05:24:11

So, I'm interested to see how much of the success of these aerospace and defense loans are contingent on government spending.

Lionel

Yes. I mean, look. So, to your first point about about the leverage and the ratings, virtually, the secret loan market and the direct loan market tend to be markets that are focused on, on levered companies. So, to your point, they have less flexibility and they are more susceptible to changes in the macro environment on top of it.

 

00:05:24:12 - 00:05:50:08

I mean, many of these companies are companies that are very sensitive to changes in rate markets, because what we're seeing is you had a lot of loans that were issued in 2021, early 2022, when rates were close to zero with very of balance sheet. And whereas the rates have grown quite a bit over the past few years, a lot of these companies were hoping that rates were going back to zero, close to zero.

00:05:50:08 - 00:06:07:08

It has not happened. If anything. Now people are discussing a potential rate hike again. And so, what it means is that these companies have kind of spent the past few years using a lot of their liquidity, and some of them are finding themselves kind of at the end of the liquidity line. And so it's creating stress from that perspective.

 

00:06:07:09 - 00:06:35:11

So that's a macro. And for their own market. Now for us again, we're focused on sectors that are fortunately sectors that have a lot of a lot of tailwinds at the moment. I mean, whether it's aerospace, there's a shortage of aircraft in the world, there's a shortage of engines. And so there's quite a bit of demand, actually, for additional capacity and for the products that many of the companies in the aerospace sector are producing.

00:06:35:11 - 00:07:02:12

And then on the defense side, to your point, you know, the we have an administration that is looking to effectively grow defense spending from a trillion to potentially a trillion and a half. I mean, we'll have to see if it happens. We don't know. Nobody knows exactly what the final number will be, but it's clear that it's trending higher, which obviously is a strong a strong benefit and effectively a strong support for a lot of the companies in our space.

00:07:02:14 - 00:07:22:00

Stewart

Now, you mentioned these companies are highly leveraged, right? So, we're probably talking about debt to EBITDA that's greater than five X, interest coverage ratios that might be hovering around one X. Right. So, what type of I guess credit risk metrics or credit metrics do you rely on to decide whether or not to purchase these secondary loans?

Lionel

No, that's a great question.

00:07:22:00 - 00:07:41:00

I mean, look, we pay a lot of attention to the liquidity position of the company. How much is left? Because again, we're talking about companies that have typically been using a lot of their liquidity over the last few years, and companies that may or may not be free cash flow positive. So, what's their liquidity position? How does the outlook look from a liquidity standpoint.

00:07:41:00 - 00:08:05:15

So meaning are they free cash flow positive. Can they stand on their own legs or effectively are you starting and associated with it. Have they continued to invest over the past few years in their actual industrial capabilities? We see a lot of companies today that effectively, because of the stress on their liquidity, have been cutting back on investment, on R&D, on CapEx.

00:08:05:16 - 00:08:39:14

Now it works potentially for a year or two, but then you start paying the price effectively and it starts showing up in in weaker growth potential with potentially weaker margins. And so we're you know, the key is to really differentiate between the companies that are now in a position that kind of the death spiral where effectively, because of the underinvestment they've made over the years, they're going to find themselves in a  precarious position that's going to effectively destroy the enterprise value.

00:08:39:14 - 00:09:02:07

And on the other hand, companies that again, I've been able to probably cut back on spending, but I've still managed to invest in their business and have position for the growth, particularly in the sectors that we are discussing here.

Stewart

So, you're in the aerospace and defense space. There was a notable airline that went bankrupt a few weeks ago at Spirit Airlines.

00:09:02:09 - 00:09:22:17

What's interesting is I took a couple of flights as a student pilot, and my son is interested in being a pilot as well. And what we learned was that Spirit Airlines actually has one of the best pilot training programs. It's actually very tough to go through the spirit pilot program, but that doesn't that doesn't have to do with its financials, right?

00:09:22:18 - 00:09:49:18

So, there's operational risk there essentially. So, I guess my question is in terms of aerospace, how much does operational risk play in terms of risk?

Lionel

 No, it's about completely right. It's about positioning of these companies being in the right place at the right time. So, you know, I mentioned the tailwinds for the aerospace industry. I mean, you know, as I mentioned, you have a shortage of aircraft, you have a shortage of engines.

00:09:49:18 - 00:10:19:00

But even within the subsectors you want to pick the right spots. You want to be where the worst bottlenecks are the moment you want to, to find yourself also in positions that are more resilient, you want to look for businesses that effectively have more real assets, hard assets with long life that effectively protect your downside. So, you're looking at kind of the trends to make sure that you have potentially some growth in the near term or the intermediate term for these companies.

00:10:19:00 - 00:10:40:24

But also in the end, we are credit investors, and any credit investor should be first and foremost focused on the downside protection. And in the end, your protection will be your assets. I mean, you talked about Spirit. We're not involved with Spirit, but Spirit at great pilots. They also used to have a great fleet of aircraft. They were they had a very young fleet.

00:10:41:00 - 00:11:04:06

Pretty much all the aircraft were the same. So, you could switch your pilots from one plane to the other very quickly, very efficiently, which allowed their business model to thrive for a while now. The problem is, over the years, they started burning more and more cash. They started effectively selling their real assets, their best assets, which were their planes against cash to fund their operating losses and their debt.

00:11:04:08 - 00:11:25:03

And effectively, they're finding themselves in a position now where, I mean, a few months ago, they found themselves in a position where they did not have any assets anymore. I mean, pretty much all the planes and engines had been sold or transferred to others. And so, they went from being an asset heavy company to an asset light company in bankruptcy.

00:11:25:03 - 00:11:57:01

And that's why that's partly why they struggled to effectively find a way out of the sea. But since it was the second bankruptcy, that's why effectively they liquidated the company and the assets. So, the key is really, you know, having a path. I would really thinking about inflection points for these companies, particularly if the macro trends are supportive, but also always thinking about your downside and particularly you expressed in terms of how the assets scarcity of your assets.

00:11:57:03 - 00:12:17:10

And, and honestly, the last piece being the management team and having a management team that's experienced and will be good stewards of your capital.

Stewart

Sure. Absolutely. Making sure they have sound fiscal policy. Right. Many of the B minus and triple C plus companies I looked at or triple C in terms of liquidity position, they depleted their cash.

00:12:17:11 - 00:12:39:01

Like you mentioned. There wasn't a lot of headroom in terms of the revolvers, for example. So, they drew a lot on their revolvers. And oftentimes the private equity sponsor would have to come in and contribute capital. So how often are the private equity sponsors now contributing capital. Are they willing to do that to help the company? And then also I've seen a lot of transactions where they're amend to extend.

00:12:39:01 - 00:13:09:03

And are we seeing that now in 2026?

Lionel

In the old days, the main source of liquidity was the sponsor completely. Right, now it has changed completely. I mean, some sponsors will still help with liquidity, but what we've seen over the past few years is more and more liability management exercises the enemies. And effectively, what it means is that now the sponsors are relying on the left holders, the lenders, to figure out a way to extend the world way.

00:13:09:04 - 00:13:34:24

And you know what? What we've seen is a lot of non-parade island activity where a group, a majority group of lenders that will own 50.1% of the loan will effectively take a better position at the table than the remaining 49.9%. Now, the problem with these transactions is that first we talked about Spirit and we talked about operational excellence.

 

00:13:35:04 - 00:14:00:21

Well, if you're doing an LME, you're not changing anything to the operating activities of the business. You're not fixing what was probably the first problem, which was an operating issue. So, that's the first thing. You're not touching it. Second thing is, and that's really growing the value of the company, you're just redistributing the stack. Right. And if you're on the wrong side of the 50%, you might find yourself subordinated with a much lower recovery.

00:14:00:22 - 00:14:26:15

Now, from the sponsor perspective, it's okay because many of these LEMs are done with a super senior tranche that comes on top of everybody with new money. And so, the sponsor, you know, the sponsors used to inject the equity at the bottom. Now effectively they're relying on the lenders to come in at the top with new debt, which effectively just will just push lower all the rest of the capital structure.

00:14:26:15 - 00:14:49:17

So, for the sponsor, it's a nice win because you're extending your runway without having to effectively come up with liquidity. So, you're keeping your options open. Now the problem we've seen is, you know, experience shows that most of these enemies actually end up failing. So, you solve the problem for a short period of time, and a year later you end up in bankruptcy.

00:14:49:18 - 00:15:13:01

The problem of the situation is once you're in bankruptcy, particularly if you were in the minority group, your recovery, you've been layered by so much additional debt that your recovery tends to be to be minimis.

Stewart

Well, now I have a question around. I guess I'll call it maturity risk. So, the loans that you guys are purchasing, the loans I looked at were typically five-year term loans, seven-year term loans.

00:15:13:02 - 00:15:30:11

At what year do you guys acquire that loan and how much time do you have until you're worried about refining refinancing risk, for example. And as you mentioned, many companies who are refinancing now, they're refinancing at a higher rate. Right. And if your interest coverage ratio was already low to begin with, how are you going to service that?

00:15:30:11 - 00:15:55:20

So, I'm just curious about maturity risk.

Lionel

And that's why by the way, that's why we're seeing more and more peak transactions where effectively, you know, with the old capital structure that might that might be a sulfur plus 400 basis points, a loan that's coming to maturity. The sponsor of the company manages to refinance, but effectively refinances at a higher rate, let's say an express 600 or 650.

00:15:55:21 - 00:16:19:02

But the company cannot support the additional deployed. So, what we've seen, particularly on the direct lending side of the market, the private side of the market is more and more new issues, brand new loans that are effectively peak loans, which we did not see in the past. We used to see some stressed or distressed loans that would be that would turn into peak as part of the restructuring.

00:16:19:02 - 00:16:45:13

But they want peak loans where we're kind of unusual and it's not the case anymore. So, sponsors and companies are managing their liquidity that way. Now in to the first part of your question about us most loans, to your point, most loans are six, seven years. We tend to come in. I mean, we're secondary buyers, as I mentioned. So, we will come in to the life of a loan or bond 3 or 4 years after it was issued.

00:16:45:13 - 00:17:08:17

So typically, it will have a life or a meaning life of 2 or 3 years. The key to your point is really to figure out, you know, is it a business that needs to exist? Is it a business that has real assets, scarce, scarce assets that have real value, that somebody else, let's say a direct lender or the syndicated lenders or the high heeled bondholders will effectively find attractive?

00:17:08:19 - 00:17:30:15

A year and a half, two years from now and we will we will look to refinance. You know what we're seeing in the market. I mean, even so, there's been there have been a lot of headlines around direct lending. There's still some liquidity in the market. And there's still a bit tight from particularly from non-BDC direct lenders to effectively finance good companies.

 

00:17:30:16 - 00:17:53:00

And with strong assets.

Stewart

 So, when you purchases these loans clearly there illiquid. So, I'm assuming that there's wide bid ask how do you guys I guess manage that in terms of trading. And what does your liquidity look like if you need to exit alone.

Lionel

No. So, we're agnostic between public and private. So, the public side is liquid.

00:17:53:02 - 00:18:18:02

The private side you know to your point there's limited price visibility because it's not a trading market even though it is changing. So, when you come in and you buy a direct loan in a secondary market, you really have to think about your intrinsic fundamental value. And then you also have to bake in effectively the price of illiquidity.

00:18:18:07 - 00:18:46:24

Your point, and I would say on top of it, you also have to include the motivation of the seller, understand why people are selling. I mean, in many cases the sellers are structure and sellers. They are selling because of the end of their phone life, because they are two level the need to raise cash, etc. and so they are somewhat highly motivated or forced sellers and you know, when you're in their shoes price become kind of secondary.

00:18:47:01 - 00:19:18:09

But I mean say that we are seeing growing liquidity in the secondary direct lending market. Some of the banks have started to trade actually direct loans. It took a while. They were different, different tries. It seems that it's finally starting to pick up. But I think with demand selling demand from BDCs and the volume of loans as definitely picked up quite, quite nicely, particularly over the past 2 or 3 years.

00:19:18:10 - 00:19:35:12

Stewart

What's interesting now, especially in the fixed income space, the logged in of the curve is starting to go up right? But what I'm seeing in terms of high yield spreads are actually pretty narrow and they're staying narrow. So, I'm curious to get your take in terms of why the spreads are so narrow at this point.

Lionel

So, you're right.

00:19:35:13 - 00:20:07:21

I mean, the high yield spread, the option adjusted spread at the moment is around 260 basis points. Okay. That's pretty close to the all-time tides for the high-end market. So, you're really not getting paid much to own high yield in terms of spread. Now, the reason there is still a tight and there's still money coming into high yield is from an all in yield perspective, the yield still looks attractive because to your point, you know, the yield on a high yield bond is effectively your spread plus the rate.

00:20:07:23 - 00:20:38:24

And if rates widen, at least for now, people are ready to take lower spreads because the overall yield remains attractive. Now, what's interesting as well in the market is, you know, I think there's a bit of a bifurcation between larger liquid capital structures that everybody wants to go after. And, and people are already not to get paid much in terms of spread, as you mentioned, which is really what we're seeing in the high-end market.

00:20:38:24 - 00:21:12:09

There's a chase after a large liquid benchmark names that trade extremely tight. So, the irony of the market is very well populated and and sought after. However, below that you're starting to see a real dispersion with a lot of often capital structures where effectively the CLOs the traditional lenders, the traditional bondholders have kind of sold their exposure or kept their exposure but can't really get out easily.

00:21:12:09 - 00:21:33:10

And as a result, we're seeing, you know, if you look at the overall market there's very little volatility. But actually, below the surface there's quite a bit of crosscurrents and quite a bit of activity in some of these names.

Stewart

Now who's your typical investor. Is it large institutions like an endowment fund or a pension fund or. I'm just curious because your space is highly illiquid, right.

00:21:33:12 - 00:21:56:01

So, it has to be some type of institution who can stomach that illiquidity.

Lionel

Yes. And again, I mean, we are we are agnostic between public and private. So, we have a good portion of the portfolio that's actually on the public side, syndicated loans, high yield that gives us liquidity. And then we effectively have the direct loans that to your point, are less liquid by nature.

00:21:56:01 - 00:22:17:07

So yes, we have an investor base that effectively is very well diversified with a lot of pensions and institutions that effectively can take in liquidity. But again, the portfolio, the underlying portfolio is actually not a pure direct landing portfolio.

Stewart

Absolutely. And I'm asking that because what I'm seeing now, is especially around the ETF space. Right.

00:22:17:08 - 00:22:37:16

There are more thematic ETFs. And one of them I'm seeing is a private credit ETFs. Right. So fundamentally what I'm seeing is you're taking an illiquid asset class and trying to make it a liquid investment vehicle. Right. And it seemed counterintuitive. Right. I'm just curious to get your sense in terms of a private credit ETF and that existence.

00:22:37:17 - 00:23:03:00

Lionel

Look, I mean, we've seen this play out with some of the BDCs, particularly with, with the non publicly traded of perpetual BDC. So historically direct lending was working very well because to your point, you had the liquid assets, but you had a liquid form structure that were basically drawn down from structure. And so, you had a match in terms of duration of a certain liabilities.

00:23:03:01 - 00:23:38:14

Now enter the perpetual BDCs. They kept the same assets, so illiquid assets. But now the, the introduced some liquidity on the front structure because basically investors were available or should are supposed to be able to redeem a portion of their capital every quarter. It worked very well on the way up. And then we've seen this year that it becomes more challenging once you're hitting a period of, particularly if everybody wants to take the money out at the same time, because you can’t, you can't sell your assets fast enough and you probably don't want to sell these assets.

00:23:38:15 - 00:23:59:16

I mean, you don't want to go into a fire sale. And so, the result is we've seen many of the perpetual BDCs basically raise the gates and say, well, sorry, we only redeem or allow you to redeem 5% per quarter. The ETF is kind of the next step. So, on paper it's interesting, it's attractive. It creates liquidity.

00:23:59:17 - 00:24:23:13

I think the question will really be what kind of assets do they have on the on the ETF side. Look, are they primarily large capital structure, investment grade, investment grade private assets. Or do you start going lower and effectively introduce really liquidity in this asset, which effectively would introduce a real mismatch in duration between assets and liabilities.

00:24:23:14 - 00:24:44:06

Stewart

Now the pressure that BDCs are seeing now, do you think that's contained at this point, or do you think it could be an iceberg effect where we're seeing the tip of the iceberg and potentially there's a blow up in a private credit space that's contagion rather than being contained?

Lionel

I think some of it is perception, and the perception is very negative at the moment.

00:24:44:07 - 00:25:07:08

I mean, look, the publicly traded BDCs, some of them trade at a 30 to 40% discount to nav. So Public Market tells you that they don't believe the nav might be right, might be wrong. But there's a perception issue and what? And the consequence is that we're seeing very large redemption requests. We saw them. We started to see them in the fourth quarter.

00:25:07:08 - 00:25:29:15

We saw them at March 31st. We'll see what happens in June, but most likely we will have another round of pretty negative headlines with large redemption requests. But again, it does not mean you might have a 50% redemption does not matter. The gate is at 5%. So, you will have. If you're an investor, you will have to wait for a long time before getting your cash back.

 

00:25:29:16 - 00:26:05:08

And what it does is it serves as somewhat of a stabilization mechanism for the BDC industry, where they can effectively spread out the redemption over a longer time. So, the perception that so there is a perception issue, but the perception that things are really collapsing is not correct either. There is time. And look, I mean, I think the real question will also be that, you know, is it just an isolated event to the BDC or does it spread out to the broader direct learning community?

00:26:05:09 - 00:26:31:24

Again, it's going to take time and for it to happen, even if it does happen, because most of the other direct lenders form structures that are much longer, I mean, that are long term structures and that are more illiquid, that effectively match their assets. So, there is I mean, we're seeing definitively some changes in behavior in terms of deployment by BDCs.

00:26:32:00 - 00:26:52:00

I mean, it has come down quite a bit because they they're focused on managing their own liquidity or for the publicly traded BDCs on buying back their own shares. If they are trading at a big discount to Nav, they might as well just use their cash to buy back their shares instead of deploying. So, there is definitely a pullback in terms of investment activities by the BDC.

00:26:52:01 - 00:27:11:22

We'll have to see how long it lasts and what impact it has on the rest of the direct lending community.

Stewart

I want to take a step back and ask your thoughts on the current macroeconomic backdrop. So, we're seeing equities at all-time highs. A lot of that's being driven by capital expenditures. I talked about the long end of the curve increasing dramatically.

00:27:11:22 - 00:27:21:07

Crude oil prices are going through the roof because of the Middle East war. Even though that the for curve, it looks like, you know, the price per barrel.

00:27:21:09 - 00:27:39:14

Might drop by December, but that is putting pressure on the consumers pockets. Inflation looks like it could be taking up again. And because of that you know the Federal Reserve can raise interest rates. So there seems like there's a lot at play here. Right. And I'm just curious to get your thoughts on what we're currently seeing in the macroeconomic environment.

00:27:39:15 - 00:28:07:21

Lionel

Yes. I mean, there are a lot of moving parts to your point, and we're worried about the consumer. Your point, the consumer is directly impacted by higher prices, higher food prices. Look, we went through a period in 2022, 2023 of heightened inflation. And I think everybody thought we were it was behind us. And your investment community was kind of waiting for rates to come back down for the fed to keep on cutting.

00:28:07:23 - 00:28:37:06

And it's not happening now. Again, we're talking about potential rate hikes. So, you know, it is, it's true that financial markets are not showing the real signs of stress yet. But we are concerned about the consumer. Your kind of seeing it also around the housing market. And by the way if you look at credit I mean building products space is trading a pretty distressed level.

00:28:37:08 - 00:29:05:24

So, there are definitely pockets where you're already starting to see the stress. You know, for us it's a bit different. We, that's partly why we don't invest in industries that are consumer facing. We have industries that actually, you know, are in an environment where the outlook looks pretty good. And more important, whenever we underwrite a credit, we obviously stress test the credit quite a bit.

00:29:06:01 - 00:29:33:16

You know, even if we don't have a direct impact, do we have an indirect impact if something happens with oil, if something happens with the consumer, etc., or some regulatory changes. It's all about stress testing your investment, being comfortable with the enterprise values, with the potential downside and understanding that you're buying it at a price, and a creation valuation that that effectively protects you on the downside.

00:29:33:20 - 00:29:56:03

Stewart

Oh, absolutely. And it seems like just a couple of years ago, the fed was cutting rates, and we were concerned about whether or not there would be a soft landing and hard landing. And it seems like that language no longer exists. Right, right, right. Yeah. No landing. Right. Going back to the Spirit and Airlines example. Right. I guess for my last question, what risk concerns you the most to the next 12 to 18 months from now?

00:29:56:05 - 00:30:17:06

Lionel

I mean, going your prior question, it's probably the consumer, the state of the consumer and the transmission mechanism to the consumer. Look, nobody knows what will happen with the situation in the Middle East. Maybe it's results tomorrow, maybe not. However, you know, when you have a spike in all like we've had, it impacts. It's not just the price, it impacts the supply chains.

00:30:17:06 - 00:30:37:15

It impacts a lot of supply chains around the world. Even if you have a resolution tomorrow, it will probably take time to really see the true impact on the consumer. And so that's something we're keeping a very close eye on.

Stewart

Wow. Fantastic. Well, thank you very much, Lionel.

Lionel

Thank you for having me.