Private Credit Market Insights

Private Thoughts From My Desk ……………. #33 𝐓𝐚𝐫𝐢𝐟𝐟𝐬 & 𝐔𝐧𝐜𝐞𝐫𝐭𝐚𝐢𝐧𝐭𝐲: 𝐖𝐡𝐚𝐭 𝐈𝐭 𝐌𝐞𝐚𝐧𝐬 𝐟𝐨𝐫 𝐏𝐄 𝐑𝐢𝐠𝐡𝐭 𝐍𝐨𝐰 After five years of what I can only describe as "unique disruptions"—a global pandemic, unprecedented inflation, interest rate shocks—we now face yet another: a new wave of tariffs. For private equity, the impact of these policy moves isn’t just about the numbers—it’s about the uncertainty they inject into long-term models. Private equity lives and dies by its ability to predict the future—five years at a time, with leverage. So when policy shifts like these arrive without clear direction or a timeline, deal pipelines stall. It’s not that the tariffs themselves are necessarily fatal—it’s that no one knows what game we’re playing, or how the rules might change again next quarter. We entered 2025 with momentum. Intermediaries were busy, due diligence was in high gear, portfolio companies were readying for exit. But in February, the “T word” started surfacing. Tariffs are just another word for uncertainty—what I call the dreaded “U word” in private equity—and everything slowed. Activity now reflects what we’re hearing every day: it’s hard to make long-term bets when you don’t know what to model in the short term. For LPs, the liquidity crunch is especially acute. Liquidity is at levels we haven’t seen since the Great Recession. Many LPs are rebalancing through secondaries; some are exploring NAV loans and other creative strategies. The ones with dry powder—sovereign wealth funds, select family offices—see dislocation as opportunity. But for most, frustration is mounting. Fundraising is feeling the pinch, see the chart below for buyout fundraising trends. Exit activity is a leading indicator—and right now, that indicator is flashing yellow. Fundraising was always going to be challenged in 2025. Now, recovery may be deferred even further. So what can GPs do? It’s back to basics (again) with portfolio companies: secure the balance sheet, conserve cash, and avoid covenant or financing issues in the near term. There’s also renewed urgency to get EBITDA up—quickly—through pricing, cost reduction, and working capital optimization. Anything that opens the door to a liquidity event in the near term. This is also a time for firms to solidify their long-term strategy. Some are asking whether it’s time to double down on what they do best and exit non-core strategies. Consolidation is no longer theoretical—it’s a daily conversation, especially for firms caught in the increasingly challenging middle market. This isn’t a crisis. But it is a moment of reckoning. In a market defined by scarcer capital, talent, and investment opportunities—not everyone wins. Knowing what you do best, doubling down on it, and charting a clear path forward for your firm are more essential than ever. #privateequity #privatemarkets #privatethoughtsfrommydesk

The headline that caught my eye this week was "Moody's, MSCI to Offer Private-Credit Risk Assessments." Here's my take: This partnership represents a meaningful evolution in the maturing private credit landscape. While the market has grown (depending on how you define it) to an estimated $2.5 trillion, the analytical frameworks haven't kept pace with its increasing complexity and scale. This gap between market size and transparency tools has been particularly noticeable during periods of economic uncertainty. What's interesting about this collaboration is how it addresses a fundamental tension in private markets. The very opacity that creates alpha opportunities for sophisticated investors also limits broader adoption. By developing standardized risk assessments that weigh factors like leverage, profitability, and borrower size, Moody's and MSCI are effectively creating a common language for evaluating credit risk. The collaboration also highlights a wider trend: the growing institutionalization of alternative investments. As private markets scale, they inevitably adopt more of the analytical infrastructure that's long been standard in public markets. This represents both a challenge and opportunity for asset managers – greater transparency typically narrows information advantages but also expands the total investor base. The line between "alternative" and "traditional" investing continues to blur – mostly through the gradual institutionalization of private markets. https://lnkd.in/ezv67EWN

‘Peak’ Private Credit? A prominent bank CEO in the news has stated Private Credit has peaked. With the highest level of conviction, I can assure you that is simply not the case. First, some imply that Direct Lending (DL) defines Private Credit (PC), however, it is just one of the three main pillars that represent private credit. DL is currently the largest segment of PC, it is still growing, and I expect it to grow proportional to PE, a business that will undoubtably be bigger 5-10 years from now than it is today. As corporate earnings grow, the corporate sector at-large will support more debt that allows a company to add operating leverage, a reasonable assumption since corporate earnings grow with GDP and earnings are only temporarily interrupted by an occasional recession that comes along ~1x every 10 years or so. Second, Assrt-Based Lending (ABL) is only getting started. Although Marathon has been in the ABL business for 20 years, having invested $30B+, investor interest in ABL is just ramping up now. A leading consulting firms released its survey of institutional clients with ABL representing the #1 allocation request for the coming year. The TAM for ABL is enormous with some estimates providing a range of $30 to $40 trillion. In the next 5-10 years, I believe the ABL business overall will grow by 30% annually as AUM for ABL becomes as large as DL. The ABL outlook should enable PC to grow 2x on its own. Diversification and low correlation to DL, makes ABL a terrific compliment for PC investors (institutional, insurance, wealth management). The third PC leg to the stool is Opportunistic Credit, which includes capital solutions and special situations. Capital solutions provide tailored financing to meet a company’s strategic needs, ranging from growth capital and debt refinancing to solve for liquidity or restructuring through credit or hybrid structures, structured as debt, often with equity upside. The return objective for Opportunistic Credit should allow managers to generate higher IRRs than observed in DL & ABL. As DL has slowed over the past year, capital solutions have picked up rather significantly. PC also includes infrastructure debt, data centers, and more. Specialty finance such as litigation finance and NAV lending are not sectors that Marathon favors, however, they do represent a growth for PC. So, while, certain skeptics may question the growth of PC, you should have no doubt the direction of travel—the size and scope are huge and getting bigger. As the global economy grows $3 trillion per year (global GDP now exceeds $100 trillion), the amount of credit needed grows proportionally. Private Credit peaking? Not even close; that’s like saying the internet peaked in 2001 à before smartphones, cloud computing, streaming, social media, and more recently AI has helped to re-define the global economy. The Private Credit markets are ~$4T today and I believe it will grow to $10T over the next 7 years.

What happens when a $2T asset class enters its first real credit cycle? Private credit expanded rapidly during one of the most accommodative capital market periods in decades. Low interest rates, tighter bank regulation, and a surge in private equity transactions allowed direct lenders to replace banks as a primary financing source for sponsor backed companies. The industry grew to roughly $2T in assets. The path to today unfolded over several years. 2020–2022 | Expansion Low rates and aggressive dealmaking fueled rapid growth in direct lending. Private equity relied heavily on private credit to finance buyouts, and the asset class scaled quickly across institutional portfolios. 2023–2024 | Wealth channel opens Private markets expanded into wealth portfolios through non traded BDCs and semi liquid vehicles. Firms such as Blackstone, Ares, Blue Owl, and Apollo built large credit platforms supported by retail inflows. 2025 | Early signals Publicly traded BDCs began trading at discounts to NAV, signaling that markets were questioning private credit valuations in a higher rate environment. 2026 | Liquidity pressure emerges Redemption pressure has appeared across several vehicles. Blue Owl restricted withdrawals in one retail credit fund. Public private credit funds are trading at wider discounts, and capital raising for non traded BDCs has slowed. Markets are also repricing risk inside the sector. UBS warned that private credit defaults could reach 15% in a severe downturn. Several listed credit vehicles have already adjusted. Apollo’s MidCap Financial Investment Corp. reduced payouts and marked down assets. FS KKR Capital reported rising troubled loans. BlackRock TCP Capital cut its dividend. Secondary markets are sending another signal. Liquid private credit funds are trading at roughly 18% to 19% discounts to NAV, compared with a 6% premium one year ago. Widening discounts often signal expectations for asset markdowns, rising defaults, and slower recoveries. Recent situations involving Tricolor Auto Group, First Brands Group, and issues tied to an MFS property bridge loan highlight governance and verification risk within a rapidly scaled asset class. Private equity faces its own liquidity pressure. Bain estimates buyout funds hold about 32,000 companies worth $3.8T in unrealized value. Average holding periods have stretched to 7 years, and distributions to LPs remain near 14% of NAV. Private credit finances many of those companies, which extends loan duration and slows capital recycling when exits stall. Family Offices are focusing more closely on underwriting discipline, covenant protection, and fund structure as liquidity expectations meet illiquid assets. Private credit remains a critical financing channel for the private economy. The cycle is turning.

Private credit typically refers to non-bank, non-publicly traded debt financing.   The private credit market in the U.S. has grown substantially over the past two decades and has become a major source of financing. Private credit in the U.S. has grown exponentially, from roughly $46 billion in 2000 to about $1.7 trillion currently. The initial trigger was the tighter regulatory regime for banks post the Global Financial Crisis but that tailwind gained momentum from the growth of private equity which leveraged debt financing for acquisitions, investors chasing yield in a low-rate world and greater investor democratisation. Retail investors in the U.S in fact now access private credit with as little as $1,000, leading to growing retail flows into such funds. Private credit funds in the U.S and Europe have become large and mainstream and provide credit to a complete range of corporate borrowers, from large to small.   The Asian private credit market is still relatively small with less than 5% of global market share. The corollary of this is that bank led credit is about a third to half of the total credit supply in the US and Europe but is over 70% in Asia, including India. Whenever an asset class grows this rapidly there will be issues that would arise. The main issues around the rapid growth of private credit in the U.S centre around the illiquidity of the investments, relative opacity and the systemic risk, since banks often finance these non-bank credit providers.    The Indian private credit market has also grown rapidly. The categories of providers of private credit in India include NBFCs, Domestic AIFs, Venture Debt funds, Foreign private credit funds and, more recently, Family Offices and UHNIs. Insurance companies and pension funds, which are large players in the U.S, are limited participants here because of the regulatory guidelines. This asset class is seeing growing traction on the demand side. The drivers of demand growth are the growth of the space banks and NBFCs can’t or are not keen to finance, underdeveloped bond markets, the ability of private credit providers to create customised solutions for borrowers, growth of private equity led transactions and increasing investor appetite for higher yielding fixed income instruments, especially after the change in taxation on fixed income funds. As a result, we have seen an increase in activity on the supply side too, with more AIFs coming into existence.   As India grows, the demand for credit will have to be met by a wider range of providers and the opportunity for private credit funds is therefore going to be large and attractive. With growth comes greater complexity and issues like liquidity, top quality governance and a strong focus on borrower quality will be key as private credit funds strive to become part of mainstream portfolios and a large asset class by itself.

All hunky-dori in private credit land? 🫣 If you are also wondering whether the years of zero 🍩 rates may have created a bit of a private credit monster 👹 or at least led to significant misallocation of capital into the sector, here’s an interesting take from the global long/short equity portfolio managers at Lancaster Investment Management (James Hanbury & Jamie Grimston, ex-Odey/Brook): "One reason the economy may turn out to be weaker than expected is the significantly greater amount of private credit in the system – where opacity makes it harder for central banks and the market to track the impact of higher rates. Since 2️⃣0️⃣0️⃣6️⃣ private credit has grown 1️⃣3️⃣-fold and, according to the CEO of Apollo Global Management, Inc. only 20% of new debt in 🇺🇸 goes through the banking system, which is one of the side-effects of regulations brought in post the GFC. Some of the features of private credit, in its broader definition, are being covenant-light and having floating rate debt. Companies accessing private credit markets effectively only ’default’ when they actually run out of cash, giving less warning compared to traditional debt with covenants. We feel there is not enough scrutiny of how these companies are handling borrowing costs that, according to Refinitiv and KBW Research, have gone from c.6️⃣% to c.1️⃣2️⃣% over the last two years. The covenant-light profile of private credit is one of the reasons that default rates are still low in this asset class. H1 2024 should be a good indicator as it will see the first major wave of refinancings in the private credit and leveraged loans market start to bite. Certain US Senators share our concerns: '🗣️Unlike the traditional banking industry, the private credit market is subject to minimal, indirect regulatory oversight. The lack of transparency in this market obscures its true size and risk. Troublingly, there is insufficient insight into the private credit market’s key features, including loan terms, lenders’ funding structures, and borrowers’ financial health.' Letter dated 29th November 2023 to the Federal reserve from Sherrod Brown, Chairman of the Senate Committee on Banking, Housing and Urban Affairs. One of the ways we try to track the underlying health of the private credit market is by following the Business Development Companies, speciality finance companies that invest in private credit, where it is interesting how much their portfolio interest coverage ratios have fallen. FS KKR's portfolio interest coverage ratio in Exhibit 2 below is a prime example, down from 2.6 x in Q1-22 to 1.5 x in Q3-23. 1.5 x coverage when taken against EBITDA implies around 1x cash cover." ❓Do you feel those worries about the health of the private credit market are spot-on or exaggerated? (+++Opinions are my own. Not investment advice. Do your own research.+++) #markets #investing #money #wealthmanagement #privatecredit Enjoyed this post? 👍 Like 💬 Comment 💌 Share 🔔 Subscribe

#Banking | #FinTech | #Credit : The Reserve Bank of India’s latest Bank Lending Survey (Q2 2025-26) offers some valuable signals on how credit demand and lending conditions are shaping up across sectors. Here are the key insights 👇 🔹 Credit demand is strengthening: Banks reported a broad-based rise in loan demand in Q2 across agriculture, manufacturing, services, retail/personal loans, and infrastructure. Manufacturing and retail in particular showed strong momentum. 🔹 Optimism for the next quarters: Bankers expect loan demand to remain upbeat in Q3, Q4 of FY26, and even into Q1 FY27. Agriculture, infrastructure, and services are seen as the biggest drivers of demand going forward. 🔹 Easier lending terms: Most bankers indicated “no major tightening” in lending terms during Q2. Looking ahead, loan conditions are expected to remain easy, supporting credit flow into the economy. 🔹 Sectoral view: Agriculture – demand is expected to rise sharply in Q3. Manufacturing – steady optimism, with strong credit appetite. Infrastructure – sentiment is improving, especially beyond Q3. Services – consistently strong, expected to pick up further. Retail/Personal loans – remain robust, reflecting consumer confidence. 💡 Why this matters: The survey underscores that India’s credit cycle remains healthy, with both demand and supply conditions aligned for growth. For #startups , #SMEs, and large corporates alike, this means access to capital is likely to stay supportive in the near term — an encouraging sign for investment and expansion. 👉 The bigger takeaway: If credit is the fuel for economic growth, then India’s engines look set for a strong run into FY26 and beyond.

Covenant-lite is entering private credit — but don’t confuse that with lenders losing control. Proskauer’s latest data (450+ deals; $124 Billion) shows covenant-lite deals rising sharply to 21% in 2025 vs. just 4% in 2023. On the surface, that looks like private credit drifting toward the syndicated loan playbook. In reality, the shift is far more measured. Even when maintenance covenants are loosened, private credit lenders are holding onto structural protections that matter when credits weaken — tighter additional debt limits, stronger liability management safeguards, and springing covenants for revolving credit facilities that allow lenders to step in if a borrower's liquidity tightens. The cov-lite trend is also concentrated where borrowers have leverage. > 91% of these deals involved companies with $50Mn+ EBITDA, although strong sponsor relationships are increasingly pushing flexibility into slightly smaller credits as well ($30Mn+ EBITDA-level borrowers) Beyond covenants, the broader data reflects a market quietly tilting toward borrowers — but not dramatically: • Leverage: Edging up to 5.1x, with about 1.2x incremental debt capacity post-close • Flexibility: Larger incremental debt baskets, with 81% of deals allowing meaningful add-on debt without conditions • Equity: Headline 50%+ equity checks have dropped, but most deals simply shifted just below that level (45-49% equity capitalization) • Pricing: Margins have tightened to ~5.6%, highlighting intense competition for quality credits At the same time, slower exits are shaping sponsor behaviour. > Dividend recapitalizations have doubled to 10% of deals, and PIK toggles appear more often — practical tools to generate liquidity for PE sponsors while holding assets longer. Sector preferences remained consistent, with Healthcare, Manufacturing, Software, and Business Services dominating deal flow — a reminder that private credit still prioritises visibility of cash flows over cyclical upside. So what does all of this really mean? Private credit is evolving. Borrowers are gaining flexibility, but lenders are embedding protections in more nuanced ways — through structure and loan documentation rather than traditional maintenance covenants. The real test of whether these structural protections are sufficient should come during the next stress cycle. Krishank Parekh | LinkedIn Source: PitchBook data

If you’re a family office planning to step into private markets, I’ll nudge you to ask one question before anything else: If we can’t exit tomorrow, what’s the plan? Because we talk a lot about what family offices invest in, especially the growing shift beyond mutual funds and listed equities into private markets. Taking direct stakes. Co-investing alongside managers. Influencing decisions.  And yes, sometimes enjoying those 50x, 100x stories everyone posts about. That part is exciting. But here’s the part that never makes the headline: Private markets are illiquid. There is no “sell tomorrow.” When you go private, you’re committing to 7–10 year lock-ups, cash flows on someone else’s schedule, and valuations that don’t update as frequently as you would like. This is where families either compound or get stuck. And the difference is almost never the quality of deal flow. It’s how they design liquidity. It's the ability to hold. Behind the scenes, the families that thrive: 1) Stagger commitments so capital calls don’t collide 2) Use secondaries strategically, before it becomes a fire sale 3) Build governance to preserve long-term conviction and avoid reacting to market volatility So yes, private markets can be an engine for generational wealth. But only if the liquidity strategy is as intentional as the investment strategy. That’s why, before asking “Is this a good deal?”, ask “Can we afford to hold this for years without flinching?” If you’re unsure of the answer, that’s where you need to focus. And while illiquidity is a given and can’t be eliminated in private markets, there are smart ways to navigate it. If you’d like to explore that via our network and selective secondary pathways that support long-term holding, reach out. Sunita Maheshwari Subhash Agrawal Nitin Jain Akio Moti Suman Majumder, Sena Medal Beenu Sapra Yash Raj Tripathi CA Vinod K Prajapat

Contingent Liquidity Planning: Preparing for the Day You Hope Never Comes Liquidity risk is rarely visible—until it is. And by the time it becomes obvious, it is often too late to respond. This is why contingent liquidity planning matters. It is not about predicting the future, but about preparing for scenarios where normal funding channels become unreliable or unavailable. Many banks meet regulatory metrics like LCR and NSFR, yet remain exposed in practice. Why? Because stress rarely behaves like regulation. Real-world liquidity stress is non-linear, fast-moving, and deeply behavioural. Here are three aspects of contingent liquidity that are often overlooked: 1. LCR buffers do not equal liquidity readiness A strong LCR is necessary but not sufficient. The LCR assumes an orderly unwind of assets and outflows over 30 days. But real stress rarely follows that timeline. Markets gap. Customers act unpredictably. Even central bank facilities can become harder to access. Contingent liquidity planning must go beyond the metric and assess actual execution feasibility—how quickly assets can be monetised, where friction points exist, and how the firm would operate in practice. 2. Internal coordination matters as much as funding lines In a liquidity crisis, decisions need to be made quickly and calmly. Without pre-agreed roles, clear escalation procedures, and internal liquidity stress protocols, valuable time is lost. The best contingent liquidity plans are operational—they define who does what, when, and how. They are drilled like a fire drill, not just documented in a PDF. 3. Market perception drives liquidity outcomes Contingent liquidity is not just about internal buffers—it is about external confidence. The perception of preparedness can shape access to funding and customer behaviour. This means disclosures, investor communication, and proactive engagement with counterparties all play a role. Banks that appear in control retain more options during a stress event. So what does good contingent liquidity planning look like? It starts with realism. Realistic stress scenarios, conservative assumptions, and an honest look at operational constraints. It involves pre-positioning collateral, understanding haircut dynamics, and testing access to central bank facilities. It links treasury to crisis management, to communication plans, and to board-level decision-making. It also ties into broader treasury strategy—ensuring liquidity costs are embedded in FTP, product pricing considers liquidity risk, and that funding strategies are not over-reliant on short-term wholesale markets. Contingent liquidity planning is not about fear—it is about readiness. It allows banks to act with control when others panic. And in those moments, having a plan is more valuable than having a buffer. To learn more about liquidity risk, stress testing, and funding strategy, visit the Global Banking Hub for expert-led courses and practical resources.