Best Buy’s Doctor’s Orders

Plus: Rising rates are bad for lending, unless you need billions. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

March 8, 2023

Read in Browser

TOGETHER WITH

Good morning.

If you think Oprah was good for Weight Watchers stock, then oh oh oh Ozempic, have we got news for you!

Stock in the weight loss company soared just over 79% on Tuesday on news that the company had acquired Sequence, a weight-management medication platform. The wild popularity of GLP-1 drugs for weight loss has created shortages for diabetes patients who depend on them — as well as huge margins for Big Pharma. That in turn created an existential crisis for lifestyle brands like Weight Watchers, for whom drugs were not the answer. But admitting that science is winning is the best thing for WW stock since Oprah herself bought 10% of the company in 2015.

Morning Brief

•

Private credit lenders set a new record.

•

Best Buy wants to hook you up to the hospital.

•

Lego reigns supreme in ToyTown.

Credit Markets

The Fed’s Rate Hiking Campaign Creates Ripe Conditions For Private Credit Lenders

Jerome Powell pulled no punches on Tuesday, telling Congress directly, and Wall Street indirectly, that inflation is still running hot. So he’s not done hiking rates just yet.

While no major player in finance likes inflation, the spate of recent rate hikes has created an opening for private credit players to edge out big banks in loan financing deals. This week saw private credit lenders preparing for their biggest deals ever.

Extra Credit

After years and years of ultra-low interest rates, the upsurge has dampened the value of banks’ existing loans. As rates rise, the value of bonds, corporate or otherwise, decreases, increasing the risk of defaults and leaving banks with assets that look more and more like liabilities. Some $40 billion of difficult-to-offload corporate debt was a major reason US banks scaled back their lending operations last year. Expanding their loan books further would have been unwise — and in some cases even legally non-compliant.

That same ultra-low rate environment, meanwhile, left private equity firms fat with more capital than they know what to do with, making private credit alluring, especially with banks ceding the field to PE amid the rate spikes. The new landscape has allowed private credit loans, tailored to each deal, to regularly occur at as much as 7 percentage points above the floating benchmark interest rate. That’s quite a windfall for lenders, and that was before Powell threatened even more hikes.

Thus, private credit groups keep blowing past previous benchmarks:

•

Blackstone, Apollo, and Ares are poised to write a record $5.5 billion loan to assist buyout group Carlyle to acquire a 50% stake in healthcare analytics company Cotiviti, sources told the Financial Times.

•

Private credit groups managed roughly $1.4 trillion worth of assets globally in 2022, up from just $500 million in 2015, with research firm Preqin expecting the market to hit $2.3 trillion by 2027.

“Banks have reduced their appetite to arrange and underwrite, and the direct lending market has naturally moved in to fill that vacuum,” Andrew McCullagh, Hayfin Capital Management managing director, recently told Bloomberg.

Don’t Bank on It: In the past, private credit loans usually peaked at $2 billion. But last year saw Blackstone back a $5 billion loan to fund an acquisition of Zendesk. Can banks bounce back? “A lot of underwriters are on the sidelines and so to get a syndicated deal underwritten at scale is challenging. But . . . people will come back,” Rob Fullerton, global head of leveraged finance at Jefferies, told the FT. Sounds… promising.

– Brian Boyle

Retail

Best Buy Makes Home Hospital Tech Play

You might trust the Geek Squad to mount your TV on the wall, but do you trust them to hook up your dialysis machine?

Best Buy announced on Tuesday it’s teaming up with North Carolina healthcare system Atrium Health to install hospital-at-home equipment for patients. That means it will be sending out its trusty Geeks to set up devices that monitor things like your heart rate or blood oxygen level. At least they’re already familiar with plasma… or was that plasma TVs?

We Are The Geek Squad And We’re Coming To Heal

The current macroeconomic wilderness has left consumers with less cash to splash on a new TV, straining Best Buy’s brick-and-mortar business, so getting into telemedicine makes sense. Plus, Best Buy has already made a few strategic acquisitions in the sector over the past five years.

The retailer-turned-healthcare provider space is starting to get a little crowded. Major pharmacy retailers including CVS and Walgreens, and the omnipresent omnichannel Amazon, have made in-roads into healthcare with their own multi-billion-dollar acquisitions. But Best Buy is actually getting paid an undisclosed amount by Atrium to provide the requisite medical devices and installation service:

•

The source of the money will come straight from the US government, as Atrium is a Medicare/Medicaid provider.

•

Atrium developed its hospital-at-home system early in the pandemic and currently serves 6,300 patients, chief innovation and commercialization officer Dr. Rasu Shrestha told CNBC.

As attractive as the healthcare industry may look during a recession, a January report from seed fund Rock Health suggested overall funding in healthcare, particularly in digital health, has dried up a bit. “For the digital health sector, 2022 was a downhill ride — one that we think signals the tail end of a macro funding cycle centered around the COVID-19-era investment boom,” the report said. In other words, focusing on hardware is not a bad idea.

Health Guru Pikachu: Big Tech has invented a cornucopia of devices to watch how you eat, walk, sleep, and all-around exist. Now even Pokémon wants in, as it plans to release a new app this summer called Pokémon Sleep. The company says you can just place your smartphone on your pillow, or you can buy its handy GO Plus + (yes, that’s two pluses) device to collect sleep data, and when you wake up you’ll see which Pokémon have turned up while you slumbered. Gotta catch all the z’s.

– Isobel Asher Hamilton

Sponsored by Caliber

Sitting On Capital Gains? Here’s How To Re-Invest Them, Tax-Shielded

Celebrating six or seven-figures of capital gains? Before you book that reservation at Nobu and break out the Veuve, there’s an important consideration to keep in mind.

The US government can take a significant portion of your capital gains via taxes. Unless, you learn to use the US Tax Code to your benefit by reinvesting your capital gains into tax-advantaged alternative investments.

Here’s how this little-known tax incentive works:

•

Invest in tax-shielded real estate in up-and-coming US communities.

•

Defer your capital gains tax until April, 2027.

•

Unlock additional tax-exempt growth potential on your investment.

This is the 100% IRS-approved investment vehicle that savvy investors have used to unlock major tax incentives since the program’s bi-partisan approval in 2017. And if you’re ready to join them, Caliber can help you get started.

Defer your tax bill and keep your capital working for you. Download Caliber’s investor guide and unlock impressive incentives before the upcoming deadline.

Toys

Lego Posts Slim But Impressive Profit

(Photo Credit: Benjamin Esham/Flickr)

There’s a painful tax that parents the world over pay for their kids’ happiness — one that originates in Billund, Denmark.

Lego’s parent company reported its 2022 earnings on Tuesday, revealing a 17% rise in revenue and a 4% rise in profits. CEO Niels Christiansen said despite consumers feeling the pinch, there was plenty of demand for big, complicated sets. Turns out affordable luxury looks like a Lego Death Star.

Playtime Is Over (For Everyone Else)

There appear to have been a few key elements building up Lego’s fortunes last year, most notably an expanded physical presence in China. Lego opened 155 brick-and-mortar shops (with extra bricks) last year, and half of them were in China. Christiansen said the foot traffic to physical shops had even begun to exceed 2019 levels.

While 4% profit growth might not seem huge — and way down from the 31% profit growth Lego chalked up for 2021 — it’s still an impressive achievement, especially when you look at its rivals:

•

Barbie maker Mattel came in below expectations with flat sales for 2022, and the CEO said this was because “the macro-economic environment was more challenging than anticipated.”

•

Hasbro, which is behind a broad swathe of brands including Monopoly, Play-Doh, and Dungeons & Dragons, reported a 9% drop in revenue for 2022.

Collecting Dust: Toys on the more collectible end of the spectrum — i.e. ones you don’t actually get to play with — have also fallen on hard times. Funko Pop, the company that makes pop-culture icons from Batman to Bob Ross into bobble-head toys, announced on Sunday it’s got a crippling surplus inventory problem. The company had to rent extra warehouse space last year to store the pile-up of dolls and now plans to throw $30 to $36 million worth of its figurines in the garbage. Think Toy Story 3 without the deus ex machina…

– Isobel Asher Hamilton

Extra Upside

•

Wine heist: couple steals $1.7 million worth of wine during Michelin-starred meal.

•

Attack of the Clones: Reddit is testing new TikTok-like features.

•

Designed to be private and secure.* Other credit cards don’t protect your privacy like this one. Apple Card is built with the advanced security of Apple Pay — Face ID and Touch ID — so you can shop with peace of mind. Plus, you’ll also enjoy all the other benefits of Apple Card like unlimited Daily Cash back, no fees, and more. Apply in as little as a minute and use right away with Apple Pay. Terms apply.

*Sponsored by Apple.

Just For Fun

Surf’s up.

Teamwork.

ADVERTISE // CAREERS

No longer want to receive these emails? Unsubscribe here.

//campaignmonitornewsletter.everestengagement.com/ea/BntD2QJCyg/?e=postie@btcnews.com.au’ width=’1′ height=’1′ style=”margin-top:0 !important;margin-bottom:0 !important;margin-right:0 !important;margin-left:0 !important;padding-top:0 !important;padding-bottom:0 !important;padding-right:0 !important;padding-left:0 !important;border-width:0 !important;height:1px !important;width:1px !important;-ms-interpolation-mode:bicubic;” />