We continue our special series with the third of our “Five Biggest Private Capital Surprises of 2020:”

Surprise #3: Where Are the Distressed Loans?

Last April as the pandemic crisis unfolded, the CEO of a $20 billion asset manager cited $1 trillion as the volume of potential distressed credit investments. COVID has presented, he said, “a massive and broad-based opportunity to deploy capital at a critical time for the U.S. economy.”

Nine months later it seems as if the timing of that opportunity keeps getting pushed out.

The rapidity of the Fed’s liquidity rescue minimized the time for larger corporate borrower problems to fester. Similarly, private equity owners jumped in quickly to provide both equity capital and strategic management assistance. In many cases they also directed their portfolio companies to supplement their liquidity by fully drawing down their revolving credit facilities.