To understand the dynamics of buyout finance today, you need to appreciate the difference in what drives the public credit markets versus private credit. The biggest change since the GFC has been the shift away from the investment banking model. For both corporates and private equity-backed deals, borrowers often relied on investment banks to advise…

We were perusing recently a piece on the future of private equity in an excellent state of the market study from Evercore’s private funds group. One of the paragraph section subtitles read: “The corporate governance fix that became an asset class.” The thesis was that private equity sponsors solve strategic problems for growing (or challenged)…

It is a measure of the impact the GFC had on regulators, financial policy makers, and the capital markets that faith in systemic liquidity is now a foundational principle. We saw that confidence further underlined as the economy emerged intact from the global pandemic. And supported as well by the patience shown by financial markets…

A recent report from KBRA’s research team (“Private Credit: 2024 Maturity Wall is a Myth”) outlined three conditions that need to exist for looming maturities “to present a challenge to the industry.” First, there have to be a “significant” number of maturities coming up. Second, if lenders have to take losses as a result of…

There are a few things about leveraged loans that create anxiety among those less familiar with the workings of that market. One is systemic risk. The other is leverage itself (“risky loans!”). Banks underwriting loans and getting stuck holding them was a concern before the GFC. Since then, regulators have helped shift loans to private…

In the absence of fully functioning public markets during the Fed’s intense anti-inflation campaign, liquidity was drained, not just from the economy but from bank reserves, trading desks, CLO formation and retail fund flows. Of course, this was in addition to the decades-long effort by regulators to discourage banks from holding leveraged loans on their…

Last week we wrote about the growing gap between private capital winners and losers. That will only accelerate as today’s winners emerge from the higher rate market. Experienced managers with healthy, high-quality portfolios can and will continue to play offense and take market share. Our own portfolio expanded nicely despite a marked decline in overall…

The current brew of macro pressures and broader uncertainty have combined to fuel an intriguing effect across multiple dimensions. In 2024, we expect to see continued dispersion across three key market participants: private capital asset managers, private equity firms and portfolio companies. As we navigate slowing economic growth, volatility, and geopolitical shocks, it is even…

The US economy continues to roll along. December’s labor report showed 261,000 new jobs, a vigorous uptick from the 173,000 number in November. Market observers took this as a sign that the Fed’s projected three rate cuts for 2024 may be more back-ended. The current QT policy, draining liquidity from the financial system and bank…

2023 was characterized by several key themes in the capital markets. The Fed’s battle against inflation, the resulting impact on issuers of higher for-longer interest rates, a much slower M&A pace as buyers and sellers deal with mounting borrowing costs and compressed equity returns, and the steady disintermediation of buyout financings from public to private…