Bain & Company is suggesting a seismic shift happening in leveraged finance. Here’s our summary of the report:
Private credit has stepped up as traditional lenders shrink back. With syndicated leveraged loan issuance down 64% from banks amid economic uncertainty, private credit funds have filled the void.
Direct lenders now play a major role in fueling LBOs and refinancings, especially in the middle market but increasingly in larger deals. They can provide faster execution, flexible structures, and certainty of funding that companies need.
This shift has been driven by the contraction in bank lending that opened the door for private credit. With abundant dry powder and a strong risk appetite, direct lenders have capitalised on the opportunity.
As private credit managers gain scale, they can move into bigger deals traditionally dominated by banks. With superior execution and relationships, they have become preferred over banks for many PE firms and corporates.
The growth of this shadow banking system brings both risks and rewards. But, private credit is on the rise for now, rapidly becoming an essential partner enabling deal activity as traditional leveraged loan markets stall. The shifting liquidity landscape creates new opportunities for nimble capital.