This podcast episode focuses on the private credit market, discussing its remarkable growth, resilience to interest rate hikes, and characteristics such as non-bank lending, unrated debt, and bespoke deals. The episode also covers the benefits of direct lending, the deal flow process, the impact of rising interest rates, and the future prospects of the private credit market.
Takeaways
• Private credit has grown significantly, reaching a size comparable to the publicly traded junk bond market.
• Private credit exhibited surprising resilience during the COVID-19 pandemic, outperforming the broadly syndicated market.
• Direct lending offers advantages such as easier execution, no rating agency process, and more flexibility compared to the syndicated market.
• Direct lending deals typically have attractive and consistent yield, interest rate protection, and diversification.
• The rise of private credit is influenced by changes in regulation, but the asset class is considered less risky than bank loans due to its lower leverage.
• The private credit market provides inherent protection due to its less volatile and reactive nature compared to public markets.
• Illiquidity may contribute to the resilience of the private credit market, but it also poses liquidity risk and payment waterfall risk.
