Commentary

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,…

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

Readers of The Lead Left will be familiar with our impatience for the “sky-is-falling” brand of financial industry reporting (“risky loans!”). Recent news articles have further tested us. There’s plenty of room for well-researched pieces about real risks associated with leveraged lending and sponsor buyouts. Indeed, these can be valuable by highlighting managers whose practices…

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

We were perusing recently a piece on the future of private equity in an excellent state of the market study from Evercore’s private funds group. One of the paragraph section subtitles read: “The corporate governance fix that became an asset class.” The thesis was that private equity sponsors solve strategic problems for growing (or challenged)…

How to Stop Worrying About the Maturity Wall (Last of a Series)

It is a measure of the impact the GFC had on regulators, financial policy makers, and the capital markets that faith in systemic liquidity is now a foundational principle. We saw that confidence further underlined as the economy emerged intact from the global pandemic. And supported as well by the patience shown by financial markets…

How to Stop Worrying About the Maturity Wall (Second of a Series)

A recent report from KBRA’s research team (“Private Credit: 2024 Maturity Wall is a Myth”) outlined three conditions that need to exist for looming maturities “to present a challenge to the industry.” First, there have to be a “significant” number of maturities coming up. Second, if lenders have to take losses as a result of…

How to Stop Worrying About the Maturity Wall (First of a Series)

There are a few things about leveraged loans that create anxiety among those less familiar with the workings of that market. One is systemic risk. The other is leverage itself (“risky loans!”). Banks underwriting loans and getting stuck holding them was a concern before the GFC. Since then, regulators have helped shift loans to private…

Four for ’24 (Last of a Series)

In the absence of fully functioning public markets during the Fed’s intense anti-inflation campaign, liquidity was drained, not just from the economy but from bank reserves, trading desks, CLO formation and retail fund flows. Of course, this was in addition to the decades-long effort by regulators to discourage banks from holding leveraged loans on their…

Four for ’24 (Fourth of a Series)

Last week we wrote about the growing gap between private capital winners and losers. That will only accelerate as today’s winners emerge from the higher rate market. Experienced managers with healthy, high-quality portfolios can and will continue to play offense and take market share. Our own portfolio expanded nicely despite a marked decline in overall…

Four for ’24 (Third of a Series)

The current brew of macro pressures and broader uncertainty have combined to fuel an intriguing effect across multiple dimensions. In 2024, we expect to see continued dispersion across three key market participants: private capital asset managers, private equity firms and portfolio companies. As we navigate slowing economic growth, volatility, and geopolitical shocks, it is even…