The return of distressed debt

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Special situations are emerging as a key fund focus in the 2023 mid-market, as managers respond to growing signs of distress driven by macroeconomic conditions.

Interviewed for our PDI Mid-Market Lending Report 2023, Ed Testerman, a partner at New York-based fund manager King Street Capital Management, told us there are many mid-market businesses whose debt service costs have doubled or more than doubled in the last 12 months due to the movement in base rates. Some, he says, have experienced “pretty severe” margin pressure from inflation and the inability to push through price rises.