With the presidential election looming as well as a Supreme Court hearing on the Affordable Care Act, BondCliq CEO Chris White joins Yahoo Finance to discuss how the debt of healthcare companies has performed.
Video Transcript
ADAM SHAPIRO: Let’s talk about health care. Let’s talk about debt. Let’s talk about bonds. Chris White is the CEO of BondCliq. We invite him into the stream joining us from the borough of Brooklyn, not too far from where I’m sitting right now.
Good to see you, Chris. I’ve got to ask you– so with Amy Coney Barrett now on the Supreme Court, the expectation that the Affordable Care Act will be overturned, what does that do for different kinds of health care companies as far as their debt outlook? Does it really– how is it going to impact, or will it have any impact?
CHRIS WHITE: Well, obviously, you know, the changes to the Supreme Court and what’s coming up in terms of the cases that they’re looking at– changes to the Affordable Care Act, particularly around pre-existing conditions, would completely change the outlook for insurers, because obviously, they could create a community of healthy people that they insure and deny insurance to other folks. So from an investment standpoint, that’s positive for the insurers. And what we’re seeing in the bond market over the past 30 days is that really, the insurance names, from a debt standpoint, have been rallying.
JULIE HYMAN: And you know, there’s so many things that could change after the election. You know, there’s the Supreme Court ruling, of course. But also, if there is, for example, a blue wave, even if the ACA gets overturned, you could see, in theory, other legislation to replace it. So does it feel like the health care debt market is fully capturing the sort of range of outcomes here?
CHRIS WHITE: Well, I think what the health care debt market right now is pricing in is it’s pricing in the potential for positive news around health care, because we’re not just looking at the Affordable Care Act, of course. There’s also the possibility of a vaccine for COVID. And whoever can come up with that first and really get it established in the marketplace, obviously– not just from a debt standpoint, but from an equity standpoint– is going to be the hot name in the industry.
So betting– placing bets on health care, whether it be for the insurers or whether it be for the drug makers, seems to be smart and contrarian to where the broader market’s going from a performance standpoint.
ADAM SHAPIRO: Chris, something caught my eye, which I was going to read this weekend. It’s from the Center for Economic Policy Research. And it has to do with private equity moving in and buying up different kind of medical centers, hospitals, but as well as launching businesses where doctors work for them.
I’m curious if you’re seeing, through the debt portfolios, any kind of action there that people might want to pay attention to so that they might be able to benefit from that? If it’s out of the bailiwick, that’s fine. I’ve got to read up on those articles this weekend. But is that something that’s drawing your attention?
CHRIS WHITE: Well, I think you’re actually bringing up a situation that’s occurring marketwide. And it’s really this quest for yield, because the traditional bond markets– at least, for the US corporate bond market– it’s becoming harder and harder for people to make direct investments in the bond market and get paid properly for it.
So I’m not surprised that private equity ventures are getting bolder and bolder in terms of what they’re looking for, especially in areas like health care– where, if you wanted to buy the bonds, the return that you’re getting is not going to match the risk. We’re also starting to see this in the municipal bond market.
I know in a previous time I was on, we talked about what’s happening with the muni market. It might be pretty dangerous. Well, recent legislation was put out saying that the Fed is now going to open up a direct lending facility for municipalities so they can borrow up to 10 years at about a quarter of a percentage point.
So while that may sound good for saving the municipalities, where do you go with your money? And so for your viewers out there, if you know somebody in private equity, you can get in on some of these deals, it might make sense to take a look. But it’s becoming harder and harder to actually generate yield and a return in these markets that have such direct intervention by the Fed.
AKIKO FUJITA: Chris, I want to get back to what you said earlier about the vaccine, because that’s clearly something that investors have been watching very closely. When you look at the moves in the bond market right now, what does that tell you about the expected timeline or who’s best positioned to benefit on the back of any kind of vaccine development that is ultimately approved by the FDA?
CHRIS WHITE: You know, I wish that bonds could give a little bit more insight around this, especially because all of us are hoping that things get back to normal. Though I do like participating on your show from my living room, it would be nice to come back to your beautiful bright studio. But I think that the problem, or at least what we’re seeing, is we’re seeing a lot of people buying long-term debt in the drug providers, because that’s going to be the part of the maturity curve in which you get the biggest bang for your buck, if you’re right, in terms of the bets that you’re placing.
So seeing a lot of positive customer flow in terms of investors buying the long end of a lot of the companies that are out there trying to find a cure or trying to find a vaccine. That seems to be something that investors have been doing for quite some time now. And it’s a positive on the long-term.
In the short-term, of course, it’s hard to predict, because finding the vaccine alone is just half the battle. It seems like, from a regulatory standpoint, making sure that that vaccine does what it says it’s supposed to do it doesn’t cause broader problems takes an inordinate amount of time relative to the urgency that people have for seeing a cure in the marketplace.
ADAM SHAPIRO: Chris, I think Moira Rose said it best when she said, don’t count your poultry before it incubates. Chris White, BondCliq CEO. Always good to have you here. We’re going to be right back.
