john: welcome to bloomberg markets. alix: the s&p 500 down by 1.3%. that is regional banks, look at the kbw, off of a whopping 5%. every stock is lower and where you go for the safety? the yield is down, reversing the losses that we saw in the of bond market from yesterday and crude is down a whopping 5%.

as that a signal -- is that a signal or is that a reaction? jon: to your point, questions about the regional banks breaking into the edf announced, you are saying names like western alliance and a series of volatility holds down in the neighborhood of 23 and 16%. not at the weakest levels but sizable drops. zion, some of the analyst commentary, maybe there was a desire to hear more from the fdic on deposit insurance plans going forward, whatever the reason ahead of the fed decision we are seeing a lot of jitters within the banking sector. alix: the conference we heard tcw ceo discussed the importance of the sector. >> if you look at companies with

100 employees or less 70% of their commercial and industrial financing is dependent on banks with less than two hundred 50 billion in deposits. 30% is dependent on banks in with less than 10 billion deposits as we get the deposit will have a credit crunch and that will put downward pressure on jobs. we would be very underweight, the regional banks. alix: let us head to david breach, the president ceo of a bank. >> thank you for joining us on the euro it has been four months and you have spent about $40 billion worth of deals done already, the value of the total deal is a good so far and that is also in a market where we are not seeing many deals at all. how much conviction do you have applying money into the market. >> we focus on the enterprise software space and we think the value of the company's that we

by exist in any market, we look at what market we are in and where we see the best opportunities, in two went public markets were incredibly expensive we really pivoted to largely buying private deals, private companies, often times found her back companies and convincing them to partner with us on the journey, rather than going public. this is a completely different market, the real opportunities we believe are in the public market. just this year we have announced the acquisitions of done creek and we know before the public companies that were trading at significantly higher valuations two years ago, great companies, phenomenal products, very defensive products with the potential of a recession and we think that is where the value is, that is where we have been focused. >> i want to get back to the future dollars you are willing

to spend, you are in a recession, the is the undertone in a wide variety of views out here. what is your view on the outcomes? the range of outcomes and the worst case scenario? >> we talked about that at a panel almost eight or nine months ago when i think the world looked in some respects a little bit more certain than it does today, obviously the fed will have a major influence on where we end up but i think our view is that more likely to be a soft landing right mild recession as opposed to a deep recession, we are underwriting to a conservative case because we are very disciplined and put it in our underwriting. our companies are actually -- many of them have a growth rate, if you look at the estimates, id spending is going up in 2023 and software is saying the benefit of that we are seeing very good underlying performance in our portfolio.

we are being cautious about what the future market looks like and how we want to pursue opportunities. >> there is pressure in the market today but in general things that have held up ok even with all of the recession fears on the horizon? are valuations in certain places looking frothy to you? >> there is really been a bifurcation between public and private right now, private sellers, private companies got significant capital infusions in 2000 and 2021, they deep colloid the most capital they have ever deployed into these late stage growth companies. they enter 23 with a fairly good balance sheet, the ability to continue to operate. we believe later this year they will start to feel pressure and they will have to accept the market that they are in it.

right now private companies are hesitant to transact, those who did had a significant valuations, they do not want to take the reset. >> as a private equity executive you are telling me that private market valuations have a way to drop? >> they do. >> you have been doing a lot of take pride moments, investing in the public markets, how many more of those deals do you see don this year? >> it is hard to predict m&a, we are talking a number of companies that are companies we have known for many years and we think they are fantastic companies where we can bring value to them as a private enterprise and the real question is which companies can we get to engage in a transaction? i would like to see us do two or three more transactions this year. >> what about financing markets, are they opening up again for you or is it a lot of fear and backlog in terms of the banks? >> there has been a real growth

in the private credit market that has really filled that gap as the big banks and the barley syndicated market has been frozen for the last six months. i would not say we prefer it, it is the quantum of the leverage that you can get from the private markets is for $5 billion in the upper end. it defines the perimeter of what businesses you can look at. we historically have not relied on significant leverage to drive our returns, our average in our large cap fund, our leverage levels are still 20% loan to value. we are not really constrained, leverage is more expensive, that is more expensive right now, that does not constrain us because we are not relying so much on debt to drive our returns. >> we appreciate your time, thank you and alex, back to you.

alix: amazing work. that his fist equities president. restaurant brands international executive patrick doyle is joining us, the first quarter earnings results as price pressures persist. this is bloomberg. ♪

♪ (upbeat music) ♪ ( ♪♪ ) woah. ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall. jon: this is bloomberg markets, time for our stock of the hour, a down day for a lot of things, restaurant brands saw the earnings and revenue top estimates of the shares are higher right now, a boost in sales and several of the key core parts of the restaurant

brand's business which includes obviously the burger king franchise at a in canada and globally a business like tim hortons as well, let us bring in executive chair of restaurant brands, it is nice to have you back with us, the last time we spoke with you you were talking about one of your key goals coming in to the company accelerating growth. do you feel like you are achieving what you set out to achieve? >> system sales were up almost 15% year-over-year, tim hortons in canada was an absolute standout. that is 40% of our cash flow of our profits come from tim's. they had tops of 15.5%. we had a terrific quarter, international business with up double digits. we made really good progress in the other businesses as well including burger king in the u.s. and popeye's and firehouse,

everybody was up and we feel very good about the progress we have made in the quarter. jon: you talk about alignment with franchisees which are obviously a key part of the business. they are stakeholders whether we are talking about burger king or other parts of the empire and look, it is no secret there can be tensions with some franchisees. you talked about on the conference call today about wanting to work with franchisees who believe in the vision. can you elaborate on that? >> at the end of the day the franchisees own the vast majority of our restaurants. they are the face of the brands of the restaurants, to their customers. it is our job to provide them with a great economic opportunity, to operate our restaurants, it is their job to be in those restaurants, giving great service, making beautiful food, having terrific people work for them in those

restaurants. it is a partnership, our job is to improve their economics on average, their job is to be terrific, engaged operators. alix: how is it going for the franchisees when it comes to inflation? you have food inflation and labor costs. could you give me insight into how they are managing those things? >> everybody has had to take some bites in our brands and we have done that although you are seeing that moderate. you are still seeing increases year-over-year in the businesses but you have seen much less in terms of recent price actions by each of the brands in their markets. there are still some labor costs pressure, increases in canada on minimum wage, overall, i think it is getting a little bit easier on that front.

after taking some of the price increases that we did last year, it is to make sure we are returning to account growth, we did that really well in our international business in tim hortons in canada, sequentially it was improving in the first quarter in both burger king and the u.s. and popeyes and firehouse was just about flat on traffic slightly trauma progress there but i think a lot of the cost pressures are certainly not getting worse anymore. jon: the committed realities will keep you on your toes, you do not shy away from that, mcdonald's is enjoying a lot of success particularly with their loyalty program, you have talked since day one of joining restaurant brands by the power of the whopper to the burger king business, and you elaborate on why you think it is it a

competitive advantage for you? >> it is the best burger in the business, our view is as we have this one asset in the burger king franchise that is terrific, the whopper is fabulous food and as that is a real competitive advantage. the team is doing a very nice job in improving all of the service metrics over the last couple of quarters. we are doing a better job taking care of customers, cleaner restaurants, faster service, fewer complaints coming back from our customers which is an ultimately the proof in the pudding. the whopper is a real competitive advantage for us, it is something we have been talking about a lot in our advertising and it is moving the business the right way. jon: we will watch the story,

nice to have you with us, that is the executive chairman of restaurant brands, a stock that is higher today, we see challenges in the broader market including the banking sector. we focus on navigating credit conditions, jonathan lavine will be joining us and speaking of some of the volatility quick recap of some of the original banks that have been under tremendous pressure again today putting the bank index, we will track their performance and get more perspective next, this is bloomberg. ♪

jon: this is bloomberg markets with alix steel, this selloff in regional banks and the fed decision tomorrow there is a lot of focus on credit conditions right now. alix: higher rates for a longer is towering outlooks for the --

souring outlooks for the banks. how does that all affect the alternative investment world? especially the likes of private credit? we welcome back jonathan lavine, comanaging manager of bain. also scarlett. >> good to see you in person here, we have to start with regional banks because jamie dimon this is where getting near the end of the regional banking crisis and jp morgan's takeover over republic helps stabilize everything, that does not appear to be the case today with regional banks doubling. was he wrong? >> i will not think so, he would have way better information than any of the three of us. there is also a difference between the stock prices tumbling and the deposits and it is in fact when the deposits come out. thanks ra -- banks are a institution of confidence, they

deposit and they land long-term weather that is one year, three years, five years. i think that we can take some comfort in the fact there is a playbook developing that when this happens and there is a bank run the fdic knows what to do, the bank has some experience stepping in, there was more than one bidder for first republic. i hope it is slowing down and we need to look at the deposit information and our getting their deposits? the banks who have had the biggest risks are the ones who had lots of depositors with greater than the fdic insurance. one of the interesting statistics which is a real shame about first republic is i saw the fact that while their deposit numbers were coming down, the depositor numbers were not coming down would you suggest if you increase the fdic insurance where people had more confidence it was not that they didn't like the bank or that

they thought the bank had done something wrong, there were not going to have uninsured deposits. alix: the last time you were on with us it was early february, you are looking at 3% default rate, you liked asian and private credit in europe, before the banking crisis, where are you now? >> we think the default rate is still in the range, it has not been huge this year. different than past cycles, it is not industry like an entire industry goes under, it is credit by credit, we have find a number of ccc investments get paid off at par recently, it is about credit selection there. asia has been one of our best performing markets because in our special situations business because there is a lot of growth , credit conditions are actually pretty good and there is a need for capital. what is developing in the united states right now is there will be companies that are perfectly

good companies that may need some refinancing and that is one type of credit. then the ones we are looking out for that could need more dramatic help like equity investments or distress are the companies that levered themselves with some presumption of access to a capital market or access to a refinancing at a certain level, you can imagine somebody sitting in an investment committee going if sulfur goes to 6%, the whole world has ended. that is what we are looking out for and we are seeing interesting transactions in europe, more structured than traditional private credit. >> the fed has been raising rates and we will see tightening lending standards from local banks and big banks, katie caution was telling us that crocks are starting to show in the private credit market and investors should prepare for

some major accidents in the next 12-18 months, what my toes accident look like -- might those accidents look like? >> there are middle-market lending, senior and junior, hold coal lending, megacap lending, it is not a single thing, it is not as monolithic as it may have been in 2008. the places we are looking at where there may -- we think there could be weakness are places where people lent before expecting access to capital markets. cases where people lent against enterprise value and went against tech company and super high-growth companies, a huge re-rating. the third place is floating rate capital structures where they have for their interest rates hedged but do what alex and earlier of it is higher for

longer, when the hedges rolloff are they going to have a huge increase in interest rate expense? i do think one of the beauties of private quite it -- credit is it can restructure, it can negotiate solutions in a way that is harder in traditionally syndicated banks. alix: commercial real estate? you like or you hate? [laughter] >> cannot do it quickly! >> there are pockets where there are interesting opportunities and pockets where there are difficult opportunities and it is much more nuanced than people say it is right now. what are lee's roles going to look like? a offices versus b offices, i would not do a lot of the locations in urban centers but i do not think that all commercial real estate in the united states is going away. >> the new state is coming out according to janet yellen, how do you see aided standoff

spilling over into private quite it -- ca debt standoff spilling into private credit? >> even if they fix it by june 1, the behaviors and the tone of the negotiation is going to set what happens in the market. alix: there could be an aftermath even if it is not a direct impact? >> our confidence in the ability to do this we will have another debt ceiling a year later or two years later. alix: it was really great to see you again, the comanaging partner of bain capital. back to you. jon: great conversation and we want to get back, tied to that, the uncertainty we are saying in

the regional banks, across the board we have seen it weakness, the represents that group on pace for the worst day since march, for the s&p 500 more broadly speaking we are seeing a notably down day, not at our weakest cycle, we are also tracking oil prices under pressure, a lot of continued tracking, more market coverage ahead. this is bloomberg. ♪