Direct Lenders Staff Up Portfolio Monitoring Teams as Covenant Holidays Increase

Welcome to Octus’ roundup of signs of distress in direct lending portfolios where we summarize news and regulatory filings relating to distress and restructuring for companies with outstanding private debt facilities. This edition covers developments since the last monitor was published in the second quarter of 2025. European direct lenders are increasing the size of their portfolio management teams to add additional restructuring expertise as their assets under management, or AUMs, grow along with signs of stress in their underlying loans. Ares, Blackstone Credit and CVC Credit have all been hiring for these roles this year, poaching mostly from other private credit firms, special situations desks of banks and restructuring advisory firms, sources said. While the number of debt-for-equity swaps involving direct lenders has continued to stay low, several indicators of stress have emerged from available data. “We track both covenant defaults and covenant holidays,” said Nick Baldwin, managing director in the private markets valuations group at Lincoln International, adding “we have noticed an increase in both, but the vast majority is holidays.” Another industry source explains that a covenant holiday is the most likely outcome where the business is in need of interest relief rather than new money. Direct lenders[...]