News Digest:

The recent turmoil in global markets has made private credit funds seek even tighter margins on their loans, going against the trend of charging less over the past months to snatch business from the syndicated loan market.

According to data shared by Bloomberg News, it looks as if the market upheaval is causing a rethink on spread compression, which might take some steam off the general trend. The $1.7 trillion credit industry has seen rapid growth in the past few years as higher rates caused buyout firms to seek new funding avenues that traditional lenders vacated.

Takeaway:

The data indicated that banks became more competitive in recent months seeking to retain leveraged loan market shares, which led credit funds to push their pricing down. It said interest above benchmarks sought by private credit loans fell by 1 percentage point in 2024.

However, the report notes that the recent turbulence highlighted an advantage of private credit for borrowers in that while the debt is more expensive, there is no risk of price increases through syndication, the report said.

End Notes

Source: https://www.bloomberg.com/news/articles/2024-08-10/private-credit-is-eyeing-bigger-margins-on-loans-credit-weekly