Private Funds Finance: Big cushions offer protection against defaults

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The private credit market is about to face its biggest stress test yet: Borrowing costs have more than doubled in the past 12 months for portfolio companies, and the Fed signaled last week that additional rate hikes were in the works for 2023. KBRA DLD’s parent, Kroll Bond Rating Agency (KBRA), recently analyzed the effects of 12% interest on middle market borrowers and reported that managers are staring at a 16% increase in the number of companies that can’t generate enough cash flows to service interest.