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 his secrets for successfully managing troubled portfolio financings. “First, you have to remain proactive as a lender. Advocate the direction you want to go to other capital providers, owners and management. Otherwise, you’ll be reacting to the strategy and direction of others, which can result in sub-optimal outcomes.
“Also, workouts require hands-on monitoring. Cash flows are more “fragile.” A relatively minor performance miss can have significantly negative liquidity implications...
“Any weakness or pullback that we see, it’s just in relationship to what inflation is doing and what the Fed reaction function is.” – Dan Close, Head of Municipals, Nuveen.
Featuring Charts
Chart of the Week: Reorg, Don’t Liquidate
Since the Fed’s rate hike regime began, more bankruptcies are reorganizations. Source: Torsten Slok – Apollo, The Daily Shot(Past performance is no guarantee of future results.)
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Chart of the Week: Returns Department
Global private fund returns of capital has begun to improve since early 2023. Source: MSCI – Private Assets in Focus(Past performance is no guarantee of future results.)
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Chart of the Week: Common Ground
Higher for longer has compressed leverage for both cov-lite and cov-heavy loans. Source: LSEG LPC(Past performance is no guarantee of future results.)
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Chart of the Week: Rate Expectations
Loan participants see higher defaults from 1.6% today, but not much higher. Source: PitchBook/LCD(Past performance is no guarantee of future results.)
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Chart of the Week: No Ifs, Ands, or Cuts
Market observers now think a rate cut at the Fed’s June meeting is unlikely. Source: The Daily Shot(Past performance is no guarantee of future results.)
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Chart of the Week: Honey, I Shrunk the Interest Coverage Cushions
The Fed’s “higher-for-longer” has compressed leverage loan coverage ratios. Source: PitchBook | LCD(Past performance is no guarantee of future results.)
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Middle Market & Private Credit – 5/13/2024
Fitch’s Privately Monitored Middle Market Portfolio Overview, 1Q24 Download FitchRating’s Report here. In the charts above, Fitch presents aggregate data for MM companies, defined as in the area of $500 million of debt or $100 million of EBITDA or below, that it privately rates for asset managers…. Login to Read More...
View ArticleLeveraged Loan Insight & Analysis – 5/13/2024
Global SLL issuance is down 5% year over year at less than US$190bn Having reached a high of over US$617bn globally in 2021, sustainable loan issuance has tapered off in the last two years…. Login to Read More...
View ArticlePDI Picks – 5/13/2024
Europe’s hot topics This week, we reflect on a few of the talking points from PDI’s recent Europe Summit 2024 in London. Are favoured sectors still good value?One panellist said the gradual retreat of covid brought with it the end of the honeymoon period for technology and life sciences, two sectors that had previously exploded…
View ArticleLeveraged Loan Insight & Analysis – 5/8/2024
Daily Analytic: US downward price flexes continue in 2Q24 After a record first quarter, the number of downward price flexes on first-lien institutional loans continues to be strong through early May…. Login to Read More...
View ArticlePrivate Debt Intelligence – 5/6/2024
Direct lending dominates first quarter fundraising Demand for direct lending strategies has increased consistently over the past 15 years, as private credit has evolved from niche products such as mezzanine and distressed debt to a mainstream source of finance for deals and companies…. Login to Read More...
View ArticleMiddle Market Deal Terms at a Glance
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Beginning in July 2022 The Lead Left published a series of articles on credit market. This report consolidates those articles.
Cov-lite trends Inflation & rising interest rates – LIBOR to SOFR transition Mega-tranche uni trend ESG takes center stage Login to view interactive report and download PDF version. … Login to Read More...
Beginning in September 2021 The Lead Left published a series of articles on supply chain. This report consolidates those articles.
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