Capital structures that are currently being created with lower leverage, in an environment where interest rates are not zero, will likely make for an excellent vintage, says Stephen Ketchum, founder and CEO of Sound Point Capital Management, a global credit specialist with USD 45bn in assets under management, on the latest episode of Credit Exchange with Lisa Lee.

Ketchum discusses the macro economy, inflation (and his long-held contention that we are in a higher-for-longer environment), and artificial intelligence.

“I get more concerned about the cost of our federal debt, which is ballooning,” he says. “That to me is of more concern than the implications it has for the cost of capital for the companies that we lend to.”

The addressable market for AI, and the ability to finance data centres and the ecosystem around them, is monumental. Ketchum says he has tended to be somewhat cautious regarding Sound Point’s consideration of data centre or GPU financing, and the firm has elected to focus instead on the businesses that derive benefits from the data centres. There will be winners and losers, and Ketchum explains how he is already distinguishing between them.

“There’s counterparty risk; there’s geographic risk; there’s all sorts of fundamental credit things to think about” in relation to data centres, he notes. “And then, perhaps most importantly, there’s documentation.”