YouSaid · the spoken record

Victor Khosla

lines on the record: 91
first: 2024-09-19
most recent: 2024-09-19
sittings or episodes: 1
sources: podcast

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“So, you can't really grow into your capital structure, right? So easily. You marry the two things together, growth, but slow growth, modest growth in cash flow or EBITDA with much higher interest rates, like in terms of what you have to do. And by the way, remember, some of these businesses went through COVID where they had to take on even more debt to kind of tide over COVID, right?”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“And you are very levered. And by the way, these old economy businesses. They are not having that same growth like tech or software.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“It has been really tough for them, right? You know, you borrowed money when interest rates were zero. And you were paying all in 5% Now you're paying 10%, 12%.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“And things and everything shakes. You know, often we find some of the really good management teams, they get frustrated. Some of them leave, right? Because now you've got so much leverage. You've got a good business, but so much leverage and you can't figure out how you're going to pop your head up above the surface, right? So as a result of that, we find that when we are investing, sure, we have to recapitalize it so the leverage numbers go down dramatically.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“When you have a company which kind of hits a really rough patch, you know, leverage buyouts, by definition there's leverage. They hit a rough patch. They have really big financial problems. And when that happens, even really good businesses, Barry, shake. Right, you know, some of the businesses we are invested in, we own a toll road in Texas today, a toll road between Austin and San Antonio. We just bought a hornblower, which is we took majority control of it. Which is a ferry business, the New York City ferries. Oh, that's where I recognize that. The Statue of Liberty Ferry, right? But all these businesses, these are good businesses.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Teams. And what we also did over those years was we said, hey, look, there are all these real assets, airplanes, power plants, real estate, toll roads, right? These are all going through these kind of restructurings, these kind of problems with their capital structure. So as a firm, starting in 2008, from our roots in value, in distressed debt, we went into control, we went into kind of real assets, and we started lending money to people, not direct lending, much more the higher risk, higher return lending, right? But as a firm, we've gone through this journey from 2008, that transformation.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“To go out and improve and transform these businesses, right? So what we started to do in 2008 was not just to take control, but to take control in our very hands-on way, right? We strengthen management, we build new business plans, we call them value creation plans in our world, and we try and drive fundamental change even sometimes in these businesses. So for us as a firm, we went from buying and investing in debt after 2008 to taking control of businesses. We went from a firm in 2004 even. We said, look, there's this great growing opportunity in Europe. We set up a London office and our London investment teams today are almost the same size as the US.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, yes But you know, but if you just take control You could be the proverbial dog who chases that ice cream truck and find it. But what do you do when you catch it? Yes. You know, you need these operating skills.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. But buying enough debt to own 51% or more of the company, becoming a private equity investor, and then driving an operational transformation in the business.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“It was in 1991 we were there, I was there on day one as the business of buying and selling secondary debt, investing in secondary debt took off. In 2008, there was another one of those really dramatic changes. So what we told ourselves was, hey, this is a really great target-rich environment. Sure, but the business has changed. Our view was hey, these distressed debt cycles. Only happen every two years out of ten. It's not like a business you can do every year, right? It's a super cyclical business. So, as a firm, in 2008, we started to go down a different path. We said, okay, there are some really great businesses which have had a really rough time with bankruptcies with restructurings. There's a lot of low-hanging operational fruit. Let's go out and buy into these businesses and take control.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“We had some really good success in those years doing what we do. But you know what we found was 2008 was a really good you know i talk”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“No, really, you can't, right? So the early years were very much focused on this more liquid side of the world, the distressed debt side of the world. And by the way, we had success. That fund of, we started with the 110 million dollars. By the time 2008 came around, we had about $5 billion.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Taking contro When we did distress debt, we were focused on buying debt and restructuring it into equity, being on kind of boards of directors, trying to work with the businesses. But we mostly had minority equity positions because when you all you have is a hedge fund Parry. You need liquidity, right? You can't do private equity long term.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“And Ron. So, you know, we were never a dot com kind of person. And even today, we're really not a tech or a software focused firm, right? We are very much in the old economy businesses, service businesses, consumer brands. That's very much our focus as a firm. So in 2002, when we start, it's not the dot-com debris we are looking through. It's the recession and all the problems it's caused in all these old economy businesses.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“We were in the middle of a recession. WorldCom, if you remember, had filed for bankruptcy. AES, there were a couple of big energy companies in trouble.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“There had to be. You know, the performance numbers out returns were just kind of really great. Because it was a target rich world and that kind of set us up. When I think about those early years, right, and I think about kind of the firm we have become today,”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Markets crash, and as a result of that crash in markets, we think we are going to launch with 300, 400 million. And we launch with 110 million.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Just great track records, the whole thing, all that, but also just a great firm, right? But when I think about kind of why start something, you know, when I really cut through it, I really wanted to work for myself.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, Why not run my own ship? In those days, there were 10, 15 people who were probably well known. In this business, and I was one of the 10 15 people, right? By the way, when I think about kind of more capital. What a great firm, by the way, right?”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“More capital was much more institutional in how it worked. It had much more of a structure and process around it. And I worked with Cerberus, I worked with more capital between them for a total of about four years. It was my first foray from working in a proprietary trading business, which is what I did at Merrill, to working on the buy side, just the learning, what it takes to actually raise money. What it means to actually build a really strong infrastructure, a finance operations legal team, right? My first foray out of merrill into the buy side and learning kind of all these different kind of skills. And those were four incredibly growth oriented years for me.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, the nimble independent shops had a lot more money than the $2 billion. Really? I never would have guessed that. What I was overseeing at Merrill Lynch, right? But you know what I found was I think with Cerberus, you had a very strong, very well-known brand at that time.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“I was not. I was starting to dabble in it. This was before the Thai bot, the Thai crisis. So it was before that. I was starting to look at it. Yeah. But it wasn't kind of the focus. It was really US, Europe, Japan.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“So, and what they did was they encouraged me. So I had a couple of very supportive people I worked with, you know, success begets more success. So we ended up getting the resources to hire a bigger and bigger team, ended up setting up a business in London. We were literally one of the first people into Europe buying and selling debt, investing in debt in Europe. And then in 97th set up a business in Japan to buy debt from Japanese banks in Japan, right? So for me at Merrill, from that hundred million in 1993, by the time I left in early 98, we had about $2 billion of proprietary capital. And I had 40 people, 40 people working with me in New York, in London, in Tokyo.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“A little So, was it that simple? It was early. People could see the explosive growth taking place. And as somebody who was a well-known commodity, well-known player in that business already, right? They hired me to go run it. So when I started at Merrill, it was one of me. And they said, okay, Victor, here's a hundred million dollars. Right? It's kind of where I started in 1993.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Metal never really had very much of a proprietary culture, right? As a firm. It's just not in the 90s. It was very much a brokerage house with a growing, expanding investment bank. It wasn't really a proprietary investing trading culture, right? In those years.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“I was working at Citibank for a couple of years Working on kind of the secondary prop investing trading side. And then I was hired by Merrill to start the business.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly right so Barry, can I tell you one thought though? I wanted to make sure it just came through. Early 90s was the start of the modern high yield leverage buyout business done at scale. It was the start of the high yield business exploding dramatically in size to where it is today and still growing dramatic, right? And it was the straight of the secondary market to kind of buy and sell kind of pieces of debt. And what I was lucky enough to be. In the early 90s, I was one of the first people in this business, right, overseeing a trading desk like I did at Merrill Lynch.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the obvious reason, right? But then also the economic reason that, hey, I have it marked down, I have all these non-performing loans in my balance sheet. It's creating a drag the way equity analysts look at my balance sheet. I should be selling. I should be getting out, right? So, and by the way, it continues to today. If you have a bankruptcy filing, you have a restructuring, right? They will sell the debt. They'll sell it at a price which is probably too low. There's a very sound economic reason for the banks or the CLOs to want to sell.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“And the central bank which governs you, like the one in Japan, or like the one in the United States, They make you take reserves, mark it down.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“They are aggressive sellers and foreign banks, foreign institutions tend to be more aggressive. But there's also a very economic reason for it.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“They drive it. Then the European banks want to sell because US bankruptcy in those days was not as well understood, right? And then, boy, it was almost like bankruptcy filings, boom, debt for sale, boom, boom. And it just took off.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“in the early 90s right so now you have these restructurings you have these bankruptcies and the Japanese banks want to sell the debt”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Immediate success, right? We are starting to get in the middle of some of these secondary sales of debt. It's almost like liftoff, right? Because the moment in time, you know, in those days, Barry, a lot of debt was owned by Japanese banks. I recall European banks, right?”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly right. And by the way, most of the businesses we invest in. There's much more value, even like today, there's much more value in fixing it, in transforming it, in selling it for parts. Because these are really good businesses which got levered. They got leveraged through these leverage buyouts, right? But that valuation to be able to come up with the valuation, to be then able to work in a restructuring process, bankruptcy process, and say, hey, I think at the end of this, we are buying debt at 50 cents. It could be worth $18. It could take two to four years to kind of get there. That's how this business started. It was just not well understood. Even the fact that there was a bankruptcy process which could be two years long or three years long, right? It was just not well understood in the early 90s”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, it's a business we should be bigger in. We should grow in. And there were a couple of people inside Citibank who were pioneers in trying to buy and sell loans. I get folded right into that group after writing the business plan. And boy, we are off to the races. Now, you know, when you look at something like a Bloomingdale's, What you have to ask yourself is Bloomingdale's restructuring. It's going through a bankruptcy. It's got the debt itself which banks want to sell. You have to price it. And at this point in time, the bankruptcy processes, the restructuring processes weren't that well developed, right? You had to really say, hey, it's a two-year stint in bankruptcy. We're going to cut costs. We'll make this business much more efficient, right, as we do it. And then you say, what is the business worth?”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Banks are wanting to sell. I have worked at Boose Allen and Hamilton. I'm a strategic planning guy. I get hired by Citibank in planning. I work for a really senior guy in the investment bank. This business is just starting. I write a business plan for it.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Is just riding that wave as it got bigger, as it got more complicated, as it became US and Europe, not just US. As it went from buying and selling distressed debt. To going out and taking control of businesses, operating them and improving them, it was all set at that moment of time in the early nineties.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“At city and at Merrill, I ran a proprietary trading business. and proprietary trading is using the firm capital to kind of buy it and also to distribute it to syndicated more broadly at the same time. But I think if I was to go back through my career, that moment in time, you know, when there is this big wave coming, because it was the start of the high yield market, the leverage loan market grew dramatically, you know, from 200 billion in the mid-90s to $5 trillion today, high yield and leverage loans, right? And these deals, which never used to trade in the secondary market, they started to change hands. I was there right at the beginning of that big wave And what has happened to me career-wise.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“That was what really got it going. There was no price. You had to kind of analyze it to come up with a price. And at the same time, there were very few buyers, more and more sellers. So the pricing was really good where you could buy these loans.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“early 90s right when it happened yes i worked in all the places barry you described right the two places i think what's really interesting is i was there at the beginning At the creation of a loan trading business”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source
“Finance and business was always in the career plans. Running a $19 billion private equity opportunistic credit firm was not, right? It isn't like that was the plan 40 years.”
2024-09-19 · Masters in Business · Building a Global Private Credit Firm and 'Trading' Planes with Victor Khosla · IDENTIFIED FROM THE TRANSCRIPT · source