Experienced private credit managers build all-weather playbooks designed to make it through any business cycle or headline risk. It’s critical for having a successful track record of low defaults and losses because middle market loans don’t trade the way broadly syndicated loans or high-yield bonds do. Even with resilient companies in defensive industries, once you book it, you own it. 

So, what happens when one of these ground-level deals runs into trouble? Less-cyclical sectors give you more time to react, but stuff still happens. And as we’ll discuss in later episodes, private equity ownership provides helpful oversight and professional management, but the higher leverage in buyout financings leaves less room for mistakes. 

HVAC, fire and security systems, commercial landscapers, and wastewater management are good examples of “old economy” core middle market businesses. They are essential, must-have services with recurring revenues, sticky customers, and strong free cash flows. They also tend to be less driven by consumer sentiment. The best performers are sustained by having an intense focus on customer service, creating moats around their client (and vendor) relationships.