đ„No Medals for Johnny (Links #11)đ„
Medallia, AI, BDCs, Cannabis, Sam Bankman-Fried + More
Have you ever heard of a company called Medallia? We sure as sh*t hadnât.
Note the past tense.
A few months ago this turd started popping up on our radar, just like it had for many others. Indeed, it seemed like the poster child of mismatched marks across the private credit universe. Note the dates on these đ:
Well guess what?
The enterprise-level âexperience managementâ company ran into a buzzsaw this week when reports surfaced that the companyâs software-oriented private equity sponsor, Thoma Bravo (âTBâ), is, in fact, preparing to hand over the keys to the companyâs lenders (e.g., Blackstone, KKR, Apollo Global Management, Antares, HPS Investment Partners and Ares), wiping out, as homeboy đpredicted, $5.1b â yes, thatâs a âbâ for BILLION â in equity that TB invested in connection with the $6.4b transaction made back in the frothy heart of the pandemic in â21. For their part, the lenders will equitize some if not all of their $2.8b of debt outstanding, making for one of the most disastrous private credit downfalls in recent memory (if not ever). Kirkland & Ellis LLP is reportedly representing the company while the lenders are working with Latham & Watkins LLP.
Weâre sure itâs the only troubled private credit loan though.
Rut roh âŠ
Gosh darnit!
Letâs just get to the damn links already.
đWhat Weâre Reading (7 Reads)đ
1. Artificial Intelligence (Long Undeterred Law Firms). Have to hand it to Freshfields for some interesting timing. Mere days after the Sullivan & Cromwell AI incident discussed here âŠ
⊠here is an FT piece describing how Freshfields ââŠhas agreed [to] a deal to help Anthropic build specialist legal AI tools that could later be sold to rival law firms, as the âmagic circleâ law firm seeks to increase its use of the technology.â The FT continues:
âUnder the deal, the maker of the Claude AI tool will draw on expertise from Freshfieldsâ lawyers to build products that attorneys can use for tasks such as drafting documents, reviewing contracts and carrying out due diligence on companies.
Freshfields will roll out Claude across its offices globally and gain early access to future Anthropic models and tools, though not the Mythos model whose ability to find vulnerabilities in cyber defences has sent shockwaves through global business.
The agreement, the first of its kind that Anthropic has made with a law firm, deepens Freshfieldsâ relationship with the fast-growing technology company, which is already a client.â
Harvey must be reading that like đ.
But did you catch that last part? Why does it seem like so much of the growth in AI is one big circle jerk? Amazon Inc. ($AMZN) invests $5b in Anthropic, expanding the total investment to $25b all-in, but Anthropic also has to spend $100b on AWS cloud services over the next ten years etc etc. Soooooo Anthropic will spend $X on Freshfieldsâ legal fees and, in turn, Freshfields will be making payments to Anthropic as it helps Anthropic bolster its offering ⊠an offering it will then turn around and sell to other firms âŠ? Make it make sense. Back to FT:
âUnder the agreement, Freshfields will pay Anthropic an undisclosed sum. Anthropic will not be able to use Freshfieldsâ data to train its models.â
LOL, just like Mythos was supposed to be contained to just the select few given access by Anthropic.
2. BDCs (Long Chicanery). âHow to make a troubled loan disappear.â
3. Cannabis (Long Reclassification?). In this reader fave âŠ
⊠we noted, in the context of the CCAA + Chapter 15 bankruptcy filing of The Cannabist Company Holdings Inc., that the federal governmentâs failure to reclassify marijuana was one of many things that killed that ganja goose. Dissatisfied with said failure, President Trump is personally pushing reclassification forward (after an earlier EO) and, per Bloomberg, the US Department of Justice is now poised to reclassify marijuana down from Schedule I (super restricted) to Schedule III â a move that ââŠcould remove burdensome taxes that companies currently face for selling marijuana in states where itâs legalâŠ.â Cannabis stocks soared on the news earlier this week.
4. Music (Long Fakeries). Holy hell, AI is coming for your favorite artist and protections are inadequate to deal with it.
5. Retail (Long What is Dead May Never Die). Just f*cking die already, Party City.
6. Sam Bankman-Fried (Long Copycats). Weâve said it before and weâll say it again (and again, and again) because weâre pretty sure we were the first to point this out:
7. Software (Long Synergies). Here is Jason Thomas, Carlyleâs Head of Global Research & Investment Strategy with a brief synopsis of the state of SaaS.
đResourcesđ
We have compiled a list of a$$-kicking resources on the topics of restructuring, tech, finance, investing, and disruption. đ„You can find it heređ„.