Private credit bridges the lending gap as banks pull back
Borrowers that financed cheaply in 2021 will soon hit a maturity wall. Many will struggle to refinance at higher cost. Some will default. Private credit managers – still magnets for institutional capital – are set to step in and bridge some of the financing gap left by the banks.
The credit market faces its first serious setback since the pandemic – and potentially the most severe since 2008. Default rates are rising and there could be hefty losses to come on loans to non-investment grade companies.
It is little wonder, therefore, that private credit is attracting so much attention. These lenders have been buying loan portfolios from struggling banks, raising more committed long-term capital from institutional investors and providing financing to borrowers from which traditional bank lenders have once again pulled back.
Going through an uptick in defaults is a very good time to lend money
“Going through an uptick in defaults is a very good time to lend money,” says Tim Flynn, chief executive of Hayfin, a European alternatives manager specializing in non-investment grade credit with €30 billion of assets under management.