Private equity sponsors have several options when structuring a debt financing. They may partner with a single direct lender, assemble a small club of lenders, or access the broadly syndicated loan (“BSL”) market, where dozens of institutions may participate in a single capital structure. While each approach can deliver capital, they differ meaningfully in how risk is governed, how information flows, and how effectively lenders and sponsors can respond when conditions change.Continue Reading
Recent market volatility has renewed investor scrutiny around private credit’s exposure to software and technology companies. As public software equities have sold off and concerns around artificial intelligence (“AI”) disruption have intensified, attention has increasingly turned to private credit portfolios, where software borrowers represent a meaningful share of deal flow and portfolio exposure, particularly in the upper end of the market.Continue Reading
In 2024, 84% of all private credit capital raised flowed to mega-managers, many of whom compete for a relatively limited number of transactions in the upper middle market.1 As a result, capital supply in that segment has increasingly outpaced opportunity, intensifying competition and compressing returns.Continue Reading
The Federal Reserve cut interest rates again last week, a move that has many investors reevaluating their fixed income allocations. While private credit is often celebrated as a winning strategy in rising rate environments, it’s also uniquely positioned to perform well when rates begin to decline.Continue Reading
The recent Chapter 11 bankruptcy filing by First Brands Group, the global supplier behind popular aftermarket brands like FRAM filters and Raybestos brakes, is a stark warning about the vulnerabilities hidden within the modern leveraged loan market. The company’s collapse, fueled by massive debt and complex, opaque financing, highlights the consequences of the aggressive lending standards prevalent in the upper middle market.Continue Reading
Private credit remains attractive amid “Goldilocks” mix of elevated interest rates and resilient fundamentals Add-on acquisitions sustain private lending activity while public markets faced tariff-driven volatility Interest rate cuts likely coming soon; loan yields to remain historically attractive Capital concentration pressures mega funds to deploy capital at massive scale The core middle market advantage strengthens as competition intensifies in large-cap and syndicated marketsContinue Reading
PIK is a financing mechanism that allows borrowers to pay interest with additional debt rather than cash. While this tool can temporarily relieve liquidity pressure, it does so by increasing future repayment obligations and repayment risk. Historically, PIK was primarily associated with distressed credit. Today, however, given elevated corporate leverage and the higher cost of debt in an elevated interest rate environment, many private credit managers are increasingly introducing PIK even into senior loan structures.Continue Reading
President Trump has followed through on his campaign promise to introduce or increase tariffs on over fifty nations. Tariffs are more likely to impact large corporations with overseas supply chains, not our service-oriented companies in the core middle market. Only 7% of our firmwide portfolio has a significant direct exposure to tariffs. We emphasize the importance of disciplined underwriting and conservative loan structuring, even as other lenders have relaxed their standards to win business. For...Continue Reading
We believe effective management of leverage at both the portfolio company and fund levels is crucial for balancing risk and return in private credit investments. By focusing on companies with conservative debt-to-EBITDA ratios and employing prudent fund-level leverage practices, PennantPark seeks to mitigate default risks and pursue attractive risk-adjusted returns for investors.Continue Reading
With lower interest rates and spread compression, many investors are questioning the attractiveness of private credit as loan yields shrink and competition heats up. The core middle market has remained resilient to spread compression, driven by less competition compared to the crowded upper middle market and banks.Continue Reading
Middle market borrowers increasingly turn to private credit as banks tighten lending, with demand fueled by private equity growth and companies staying private longer. Private credit offers investors income stability through reliable contractual cash flows, built-in inflation hedging, low correlation to public markets, and consistent performance in volatile conditions. Growing demand and alignment with private equity expansion proves that private credit is essential.Continue Reading
Private credit is not a monolith; distinct trends emerge across market segments. The core middle market flies under the radar while competitive pressures mount at the top end of the market. Yields remain historically attractive even after spread compression. Deal flow bounces back with a buyout rebound on the horizon.Continue Reading
Investing in Business Development Companies (BDCs) provides investors with the potential for income alpha and lower volatility compared to traditional fixed income. Because of their exposure to private markets, BDCs can potentially increase portfolio diversification and reduce overall portfolio risk.Continue Reading
Private credit can provide investors with diversification benefits due to its low correlation with traditional asset classes. Unlike public markets, it has historically delivered consistent income regardless of market conditions, offering a potentially more stable investment opportunity.Continue Reading
Private credit, specifically direct lending, is gaining popularity in investor portfolios. With all of this talk about private credit strategies, how about a little refresher?Continue Reading
Perception Versus Reality: Despite the claim that bigger companies are safer investments than smaller ones, the data tells us otherwise.Continue Reading
Approximately 90% of loans underwritten today are considered “covenant-lite”(1). Covenant-lite deals expose the lender to increased risks as the lender has limited protections in place to ensure that their loan repayment is fulfilled and prioritized. This is particularly problematic in a rising or high-rate environment.Continue Reading
