News Digest: Private credit majors pare risk appetite in warning signs for LBOs
August 4, 2022
Private credit arms of leading alternatives investment management firms, which until recently had been enthusiastically backing large-scale leveraged buyouts, are understood to be turning more conservative in underwriting such transactions, amid rising recession risks.
Beside slashing the quantum of debt they provide per deal, leading direct lenders are demanding higher yields on financing packages involving less leverage, as well as securing stronger covenants to protect themselves against the risk of borrowers becoming insolvent, sources said.
This could adversely impact the outlook for LBOs and debt-driven corporate M&A, both of which have already registered a significant deceleration this year.