Blog Post
Private credit’s next move: Trade or restructure?
Three months ago, I wrote about private credit’s emerging fault lines, namely BDC investors’ rising redemption requests and the impact of “SaaSpocalypse” on the asset class. A quarter later, the dust is settling as sponsors and lenders deploy strategies to act on this dislocation.
Private equity owners and their borrowers are developing strategies to return capital to LPs, deploying continuation funds and vehicles to realize exits. Webster Equity arranged a $2.5 billion continuation fund for portfolio company Bristol Hospice following a failed sale attempt, among a series of continuation vehicles Octus has covered in the second quarter.
At the same time, stress in portfolio companies stemming from bloated capital structures and meager performance has led to an increase in private credit defaults. Medallia is the largest proof point, but Curia Global and Loparex are among several other private credit-backed companies showing signs of distress.
The latest development? Trading among private credit firms. In response to a surge in redemption requests in some of the largest BDCs, private lenders are looking to trade holdings in large private credit loans, particularly in the software sector, as they rebalance. Thoma Bravo-backed Coupa Software and Anaplan are the latest privately held names where lenders are looking to resize positions.
The 2027-2028 maturity wall should spur further negotiations between sponsors and lenders. Expect more creative moves to preserve positions, with some companies having to restructure despite those efforts.
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