Direct Lenders See Uptick in Lending Opportunities to Corporate Borrowers

Companies with a large amount of debt are frequently bypassing traditional bank lending, and instead turning to direct lenders within the private credit industry to refinance their outstanding debt. To account for these higher-risk corporate borrowers, these private credit funds are offering loans around 5-7 percentage points above benchmark interest rates. The Financial Times notes that this shift to private credit can be in part attributed to fractures in the syndicated loan market as well as a large drop off in investments in leveraged loans by CLOs, due to concerns over increased corporate defaults resulting from higher interest rates and a weakening economy.

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