The Bridge Ep. 9 | Software's on Sale. Is the Correction Over?

Summary

In this episode, Sonali Basak speaks with Steve Tananbaum of GoldenTree Asset Management about the selloff in software, the role of AI, and where credit markets still offer idiosyncratic opportunities. Tananbaum says software looks inexpensive relative to past private-equity entry points and even to credit-market creation, but he still thinks the correction may not be finished because historical drawdowns often ran much deeper. He emphasizes a disciplined approach to industries in transition: do not forecast a single scenario, demand margin of safety, and favor management teams that adapt without trying to reinvent themselves. On AI, he sees both real demand for hyperscaler infrastructure and the possibility of overinvestment as energy and cost pressures rise. In credit, he argues the market is more about dispersion than broad systemic distress, with opportunities in stressed, distressed, structured credit, and private credit where liquidity and vehicle structure are matched carefully.

Notes

• Sonali Basak frames the discussion around software and credit market dislocations.
• Tananbaum says growing software can be bought at a steep discount to private-equity entry prices.
• His bear case is that the software correction may be only about halfway complete.
• He says the right first step in transitional sectors is to admit uncertainty and anchor on price.
• He uses newspapers as a classic example of secular decline.
• TV programming is his counterexample: value creation can persist for 10 to 15 years before disruption shows up.
• He sees valuation gaps between public software and credit-created opportunities as unusually wide.
• He says his transition-investing playbook is grounded in historical precedent and openness to being wrong.
• He draws a vivid analogy to horse-and-buggy disruption when evaluating whether an industry can survive.
• He prefers management teams that do not try to reinvent the business.
• AI infrastructure spending looks real, but he warns it could still become overinvestment.
• He says earnings dispersion is already widening between companies that hold reduced levels and those that miss.
• He describes distress as either industry-specific transition or broader macro stress.
• He argues software is a major transition sector, but the weakness is not as broad as the crypto blowups.
• He does not think the recent software underwriting cycle was broadly bad.
• Broad distress, in his view, likely requires a weak economy rather than just repricing.
• He defines opportunistic credit as a double-digit-return playbook across several strategies.
• He uses Michaels as an example of stressed credit where supply-chain concerns created dislocation.
• He describes a turnaround in Michaels bonds from the mid-50s to refinance, then a later move tied to war-related supply concerns.
• He cites Boots as another opportunistic-credit transaction with timing-driven entry conditions.
• Vehicle structure matters: illiquid assets should be paired with the right capital.
• He says broadly syndicated loans are crowded near par, which makes private credit more attractive on convexity.
• He explains DIP financing as first-lien working-capital funding in bankruptcy, but notes retail and roll-up situations can complicate the risk.
• His macro base case is low-to-mid-2% growth and mid-to-high-2% inflation.
• He says the bigger macro risk is inflation rather than a sharper growth slowdown.
• He is explicitly not a scenario investor; he underwrites to a base case with margin of safety.
• He argues less liquid and smaller assets should require higher returns.
• He says GoldenTree has been issuing CLOs for about 25 years.
• He adds that the firm also runs a large CLO equity fund.
• He wants standardization, not innovation, around pricing and marks.
• He says markets often answer winner-versus-loser questions faster than investors expect.