News Digest: Private Credit: An Opportunity Amidst Anxiety

May 13, 2024

News Digest:

Wall Street’s top bigwigs who convened at the annual Milken Institute Global Conference at Beverly Hills last weekend witnessed private credit managers bracing for a stress spike across corporate America who may have to deal with higher interest rates for a longer period.

Bloomberg reported that this could result in companies struggling with their debt loads as reports of the Fed indicated keeping lending rates high in case economic trends warranted it. They are concerned that borrowers’ liquidity could become a challenge, especially for those who binged on debt when rates were low.

These are now being masked by amendments to loan terms such as maturity extensions and payment-in-kind arrangements. However, some companies are hoping to take advantage of jitters in direct lending or leveraged loan markets by providing rescue-type financing for such troubled borrowers to bridge liquidity gaps.

Borrowers continuing to post revenue growth after absorbing higher rates is good news but cannot mask the struggles of weaker companies, delegates at the conference said while acknowledging that the private credit market’s assets have now grown to $1.7 trillion.

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