Why private-credit markets are due a growth spurt

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Competition from corporate buyers means that buyout firms must move quickly. Expect to see a sharp pickup in private credit

Its rude health owes a lot to the speed, as much as the extent, of recovery in asset prices. Buyout shops barely had time to mark down their portfolio companies in line with a falling stockmarket before share prices suddenly recovered. Dealmaking has picked up to a frantic pace. Competition from corporate buyers means that buyout firms must move quickly. Where they have an edge is in raising debt.

Private credit has elements of both bank and capital-market finance. It is like a bank loan in that it is tailored to the borrower and does not usually change hands in markets. It is like a publicly traded bond in that the end-investors are pension and insurance funds looking for regular fixed income. The border between private and public credit is blurry. The defining factor is how widely a loan is distributed.

 

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