Good Morning! Inflation dropped below 3% for the first time since 2021 - and the Fed finally got the green light for a September rate cut. Mars bought Kellanova, the maker of Cheez-It and Pringles, for $36 billion. UBS is crushing it in the post-Credit Suisse era. Elliott is going nuclear in the Southwest board fight, after having already forced a change at Starbucks earlier this week. The portal connecting NYC and Dublin will permanently close in a few weeks. Plus hacks to have a great day at work, and how to sleep better if you have ADHD.

Read by Warren Buffet and other high-flying execs, Dry Powder shines a spotlight on Wall Street’s most consequential stories. Start your 2-week trial here.

_{SQUEEZ OF THE DAY}

Blood in the Debt Waters

In the high-stakes world of distressed debt, "creditor-on-creditor violence" is the new norm, where lenders are fiercely battling each other for the best terms in refinancing deals for struggling companies.

As businesses face increasing pressure to lower crushing interest costs, they’re turning to aggressive tactics, initiating selective talks with preferred creditors, and leaving others in the dark about their chances of recouping investments.

Hedge funds and credit-focused firms like Oaktree Capital Management are thriving in this chaos. They’re raising billions to secure their positions and profit from the turmoil, exploiting the loose legal covenants in loan agreements that have left many lenders vulnerable.

These funds are strategically offering rescue financing that forces other creditors down the repayment queue or outmaneuvers them entirely in restructuring deals, with some funds taking a lucrative 15% to 20% cut of any gains.

This aggressive approach has serious consequences for both lenders and borrowers. While top lenders once recovered significant amounts in distressed situations, many now face the grim reality of potentially getting nothing as the fight for recovery intensifies. Some companies, after navigating these contentious refinancing battles, end up bankrupt anyway.

Takeaway: This wave of creditor violence is transforming the distressed debt landscape, creating lucrative opportunities for hedge funds while leaving unprepared creditors at significant risk. As firms like Beach Point Capital and King Street Capital continue to amass funds to exploit these situations, the stage is set for even more intense and cutthroat battles in the credit markets.

_{PRESENTED BY PUCK}

The Newsletter Wall Street Can’t Stop Forwarding

Everybody on Wall Street reads Bill’s private newsletter, Dry Powder, religiously.

As a former investment banker, Bill has unparalleled access. Recent correspondences include Warren Buffett, David Solomon, and Leon Black. If you’re even loosely connected to the capital markets, Bill is essential reading.

Read Dry Powder at no cost with a 14-day trial to Puck.

_HEADLINES

Top Reads

• Inflation in line with expectations in July as investors eye rate cuts (YF)

• Mars agrees to buy Pringles maker Kellanova in $36 billion deal (CNN)

• UBS profit beats forecasts as investment bank shines, shares rise (Reuters)

• Elliott goes nuclear in Southwest board fight (Axios)

• Portal connecting New York City and Dublin to close permanently (Pix)

• A construction boom is sending rents lower and creating perks for renters (CNBC)

• Berkshire reveals new stakes as it retreats from Apple (YF)

• World's largest sovereign wealth fund posts $138B in first-half profit (CNBC)

• Cisco announces restructuring plan, stock pops (YF)

_{CAPITAL PULSE}

Markets Rundown

Stocks closed higher as inflation data came in cool.

Movers & Shakers

• (+) Victoria's Secret ($VSCO) +16% after the company announced a new CEO.

• (+) Kellanova ($K) +8% because the food manufacturing company agreed to get acquired by Mars.

• (–) Brinker International ($EAT) -11% after the Chili’s parent company missed on earnings.

Private Dealmaking

• Mars agreed to buy Cheez-It maker Kellanova for $36 billion

• Carlyle bought Baxter International’s kidney care business for $3.8 billion

• Performance Food Group bought Cheney Bros for $2.1 billion

• Kiteworks, an email security company, raised $456 million

• EliseAI, a chatbot developer, raised $75 million

• Humanity Protocol, an identity verification startup, raised $30 million

For more PE, VC & M&A deals, subscribe to our Buysiders newsletter.

_{BOOK OF THE DAY}

Everything Is Predictable

At its simplest, Bayes’s theorem describes the probability of an event, based on prior knowledge of conditions that might be related to the event. 

But in Everything Is Predictable, Tom Chivers lays out how it affects every aspect of our lives. He explains why highly accurate screening tests can lead to false positives and how a failure to account for it in court has put innocent people in jail. A cornerstone of rational thought, many argue that Bayes’s theorem is a description of almost everything.

But who was the man who lent his name to this theorem? How did an 18th-century Presbyterian minister and amateur mathematician uncover a theorem that would affect fields as diverse as medicine, law, and artificial intelligence?

Fusing biography, razor-sharp science writing, and intellectual history, Everything Is Predictable is an entertaining tour of Bayes’s theorem and its impact on modern life, showing how a single compelling idea can have far reaching consequences.

“A captivating and user-friendly tour of Bayes’s theorem and its global impact on modern life from the acclaimed science writer and author of The Rationalist’s Guide to the Galaxy.”

_{DAILY VISUAL}

Household Debt to Income

_{PRESENTED BY PERCENT}

Investing in Private Credit Could Help Hedge Your Portfolio Against the Next Downturn

The stock market is burning red hot these days, which has many investors wondering: If a market correction happens, where can we ride out the storm? 

A Bloomberg survey¹ reveals that many institutions now prefer private credit over bonds to hedge against economic downturns. 

Why? T. Rowe Price data² suggests that allocating 10% to private credit historically reduces volatility and improves risk-adjusted returns. 

But this ‘safe haven’ asset class isn’t just for Blackstone, KKR, and Morgan Stanley–now, everyday investors can diversify with private credit using Percent. 

• Low minimums: Start with $500

• Shorter durations: Maturity in 6-36 months (average ~9 months)

• Monthly cash flow: Most deals offer cash flow through monthly interest payments.

• Return potential: Percent boasts a net return over 14% in the last 12 months as of Q1 2024

Sign up with Percent and get a bonus of up to $500 with your first investment.

_{DAILY ACUMEN}

Rest

In our hustle culture, rest is often seen as laziness.

But rest is not a luxury; it's a necessity for peak performance and creativity.

How can you incorporate more meaningful rest into your routine?

Even machines need downtime for maintenance.

Your brain and body are no different.

Quality rest enhances productivity, creativity, and overall well-being.

Prioritize sleep.

Take regular breaks.

Practice deliberate rest.

Remember, sometimes the most productive thing you can do is relax.

_{ENLIGHTENMENT}

Short Squeez Picks

• 10 hacks to master your mental health

• How to have a great day at work

• 7 habits to boost productivity in a tough profession

• Our mistaken ideas about what makes us happy

• How to sleep better if you have ADHD

_{MEME-A-PALOOZA}

Memes of the Day