Ep40 “Why the Private Debt Markets Have Exploded” with Laurence Gottlieb

06 Mar 2024 (8 months ago)

Private Debt

Private debt is a financing model where a fund raises money from investors and then invests in a company's debt.
Private debt differs from public debt, where individual bondholders buy the debt, and bank debt, where a bank provides a loan.
Private debt offers advantages in financial distress situations due to fewer debt holders, making it easier to work out solutions.
Private debt markets have grown significantly due to increased regulation in traditional lending institutions, steady performance in private credit markets, and specialization of lenders with industry knowledge.
Private debt provides a lifeline to smaller and medium-sized companies that cannot access traditional credit markets.
Private debt offers advantages over public debt, such as longer duration, specialized knowledge of lenders, and bespoke solutions tailored to borrowers' needs.
Private debt holders typically require covenants and restrictions to manage risk, which also serve as a signaling mechanism for borrowers to demonstrate their creditworthiness.

Private debt differs from public debt in that it involves a fund raising money from investors to invest in a company's debt, while public debt involves individual bondholders buying the debt.
Private debt offers advantages in financial distress situations due to fewer debt holders, making it easier to work out solutions.

Private debt markets have grown significantly due to several factors, including increased regulation in traditional lending institutions, steady performance in private credit markets, and specialization of lenders with industry knowledge.
The growth of private debt is expected to continue as more companies seek alternative or private debt markets due to constraints in public debt markets.

The growth of private equity, private debt, and efficiency gains in financing markets have contributed to the US economy's resilience.
The recent rise of private debt relative to private equity may be partly attributed to the higher interest rate environment, making it more challenging for private equity firms to lever up investments.