Special Report: Private Debt – Search for Transparency
In June 2019 The Lead Left published a series of articles on private debt. This report consolidates those articles.
Private Credit
Bones and Loans
The 21st century and our prehistoric past met near a parking lot at NASA’s Goddard Spaceflight Center. An amateur paleontologist spotted dinosaur tracks at the Greenbelt, MD facility, in an area slated for demolition to make room for an office building. Once unearthed, a 8.5 foot long sandstone slab revealed more than eighty prints of…
Special Report: Private Credit vs. Public Debt
Beginning in March 2017 The Lead Left published a series of articles on private credit and public debt. This report consolidates those articles.
The 80/20 Rule of Private Credit
“Capital is destiny.” We’re not sure this pronouncement will make it into the next edition of Bartlett’s Familiar Quotations, but the notion sprung to mind as we recently addressed a top business school class. Topic? How private equity sponsors finance leveraged buyouts. To show students how debt markets work, we discussed how issuers benefit when…
Private Credit vs. Public Debt (Last of a Series)
For high-yield bond investors, March has been the cruelest month. First oil prices – often linked to bond prices – took a dive, from $54/bbl to $48 in just three weeks. Then last week the Fed hiked interest rates, and signaled they weren’t done by a long shot. That combination of happenings compelled junk buyers…
Private Credit vs. Public Debt (Third of a Series)
The fundamental thesis governing credit risk for bond holders relative to loan holders is that the latter is advantaged by the seniority and secured position in the issuer’s capital stack. As our Chart of the Week shows, these two elements work together to give loan investors the best chance for the highest recovery in case…
Private Credit vs. Public Debt (Second of a Series)
In this series we are examining the characteristics of public debt, such as high yield bonds, compared with those of private credit instruments. Last week we covered interest rate risk and relative default rates. Now let’s turn to relative yields. As our Chart of the Week shows (reprised from last week), there’s been a steady…
Private Credit vs. Public Debt (First of a Series)
One of the more discussed charts we’ve run in this newsletter recently compared direct lending yields with that of high-yield bonds. Seems as if many were surprised at the significant spread differential between the two asset classes. For those who missed this chart, we reprise it below as our Chart of the Week. It made…
Private Credit Comes of Age
At a loan conference some years ago we referred to middle market loans as the Rodney Dangerfield of capital markets. These small, illiquid instruments were the poor step-child to high-yield bonds and large leveraged loans. But at Creditflux’s inaugural New York conference on private credit this past June, it was clear the situation has changed….
Private Credit and Business Cycles (Last of a Series)
The question of where we are in the business cycle may ultimately be answered only in hindsight. Similarly what triggers the next cycle will likely different than what set off previous downturns. Subprime mortgages, tech, or sovereign defaults will probably not be culprits, though fallen energy credits could certainly qualify. Given the mature recovery, credit…