Understanding Private Credit
It's the golden age of private credit. Private credit, synonymous with direct lending, refers to debt financing and loans provided by non-bank institutions. This can include private credit funds, asset managers, and other non-bank investing arms.
Due to increased regulatory burden on banks, private credit has been a fast-growing asset class. Direct lenders often negotiate financing solutions directly with borrowers and private equity sponsors.
Types of Private Credit Solutions
Unitranche Financing
Combines senior and junior debt into a single facility, simplifying the capital structure and offering faster execution.
Mezzanine Financing
Subordinated debt that sits between senior debt and equity in the capital structure, often including equity-like features.
Asset-Based Lending
Loans secured by specific assets of the borrower, such as inventory, equipment, or accounts receivable.
Notable Direct Lenders
Notable direct lenders include Ares, Apollo, Blue Owl, Blackstone, Carlyle, Golub, and HPS. These firms have established themselves as leaders in the private credit space, offering various financing solutions to middle-market companies.