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Editorial: The state of the debt markets, July 2016

Dear readers,

This past week, despite a lot of people being on vacation, had important news that may affect us for the years to come:

1.  According to the bond market yield curve and a Deutsche Bank model, there is 60% chance of recession. The interesting part is that the equity market, who erased the post BREXIT losses, doesn’t agree.

2. If we do enter a recession the Debt-to-EBITDA multiples for private equity deals with U.S. targets in 2016 has hit a whopping 6.8x. This is probably correlated with the general corporate and SME debt markets.  We all know what happens in an overleveraged environment when the music stops.

3. And on the unsecured personal side Morningstar published a report showing that the Non-housing debt is at around $3.5 trillion from $2 trillion in 2004. The report is titled “Please Sir, can you lend me some more ?”. Bad of you if you lend, bad of you if you don’t. On the bright side, default rates are not inching up yet except in sub-prime auto.

This week we also saw Avant planning to lay off 40% of their workforce. One may think this is a negative signal for the company. On the contrary, in my eyes this allows Avant to be profitable and to be ready for whatever the next 12 months throws at the overall market. In Chess, it pays to build a flexible position with many options of attack and defense vs throwing all your pieces on a single make or break attack. Avant is prepared for the worst and if the market turns around it can react fast in the same way we saw the company build $2bil in origination in only 3 years.

On the fundraising side EarnUp, a new fintech type of loan servicing which was bootstrapped so far and already has traction, raised $3mil in a seed round.

Events: As I am based in New York I will be attending the AltLend conference at the Princeton Club on Wednesday and Thursday, July 13th and 14th.

And last but not least I have put together a Press Kit for Lending Times. If you are interested in supporting Lending Times through advertising with us please ask for our press kit.

Thank you,

George Popescu
George Popescu

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

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