Commentary

Where We Are (First of a Series)

A friend of long-standing and keen observer of capital markets for almost a half-century tells us: “When a rising Dow hits 10,000 increments, investors feel good, even though optimism may not be justified.” And so we find ourselves mid-second quarter of 2024 with the Dow having reached 40,000, a destination that was Shangri-La not long ago….

Best Practices in Private Credit (Last of a Series)

We’ve spent the last six weeks outlining best practices top direct lenders employ so portfolios generate the highest returns complemented by the lowest risk. Nevertheless, stuff happens. In fact, we count on stuff happening. You need to be prepared to deal with those eventualities. In a recent conversation, our head of workout, Brent Chase offered…

Best Practices in Private Credit (Sixth of a Series)

No one loves physicals. The battery of tests, poking and prodding, with routine check-ups are low on our bucket list. We therefore approached last month’s visit to the cardiologist with trepidation. Things got interesting when he spotted on the MRI what appeared to be a widening of the aorta: “Aneurysm.” A hasty Google search uncovered…

Best Practices in Private Credit (Fifth of a Series)

This week we continue our series on best practices of top private credit firms with a look at how underwriting teams partner closely with their internal colleagues to ensure the most favorable execution for their sponsor clients and investors. Clear communications with private equity partners at the deal screening stage is essential. Quick and decisive…

Best Practices in Private Credit (Fourth of a Series)

Understanding the connection between business and structural risks is one of the keys to successful credit investing. “Good company, bad balance sheet” is how opportunistic credit managers describe troubled but attractive situations in which to invest. It’s helpful to examine these transactions for clues as to how the borrower got a bad balance sheet to…

Best Practices in Private Credit (Third of a Series)

Why is portfolio construction such an important concept for analyzing private credit managers? The answer seems obvious, but it’s more than ensuring defaults and loses are minimized. As the asset class has grown to dominate the debt capital markets, questions persist around its durability. How will the asset class perform in a real downturn? Will…

Best Practices in Private Credit (Second of a Series)

This week we acquainted ourselves with fun facts about solar eclipses. One is the fortuitousness of size and distance. If the Moon was slightly smaller or further away from Earth, there would be no totality. This coincidence is also impermanent. Apparently, the Moon is creeping away from our planet at the rate of 1.5 inches…

Best Practices in Private Credit (First of a Series)

Last Thursday was opening day for MLB, a hopeful sign of spring. Catching up on some interesting 2023 statistics from our national pastime, we noted that Luis Arráez of the Miami Marlins won the NL batting championship with a .354 average. Astonishingly, this was Arráez’s second consecutive title. He topped the AL in 2022 with…

The New Order: Leverage Finance in an Asset Management World (Fourth of a Series)

Now that the liquid loan market is opening, albeit with mostly refinancings, larger issuers have more choices. This is actually a good and natural thing. For those companies willing to go through the ratings and syndication processes in the bank market, terms can be competitive. Because CLO equity investors benefit from much higher structural leverage,…