“We did not underwrite for this.”

So said the managing partner of a top-tier middle market private equity firm. In a conversation last week, he spoke of the challenges and uncertainties surrounding the impact to businesses of COVID-19.

“We always model downside scenarios for any investment we consider,” he said. “But the zero revenue case wasn’t one of them. This is such a dramatic shift from anything anyone has ever encountered. We’re working 24/7 to figure it out.”

How are direct lenders helping their private equity clients navigate these uncharted waters? In recent updates with our peers, some common themes emerge.

The focus on new deals has pivoted sharply to existing credits. Lenders have quickened the pace of portfolio reviews. Same with sponsor dialogue about their strategies to battle the myriad COVID headwinds.