News in brief

Private credit investors hail ‘golden age’ of rapid growth and low regulation

The “golden age” of private credit has arrived as investors take market share from banks, according to Scott Rosen, partner at Ares Management.

Speaking at IMN’s ABS East 2023 conference, which was held in Miami in October, Rosen said: “[The banks] ask you questions that don’t have to do with your business. They’re checking boxes. The private credit lenders are creative; they tend to solve your [financial] problems.” These solutions could be in the form of direct lending, equity, leveraged loans, bespokes, unitranches or distressed services.

According to a September 2023 report by Morgan Stanley Investment Management, the $1.4trn private credit industry is expected to grow to roughly $2.3trn by 2027.

Joel Kodish, senior vice president, C&I lending at Axos Bank, agreed that private credit is “more borrower-friendly” than banks. But he does see challenges ahead.

“As private credit grows, I think there’s a regulatory reckoning a few years down the road,” he said. Potential challenges may also come as interest rates fluctuate and borrowers are tempted back to traditional banks.

“Right now, we’re very much in a transitory period with interest rates,” Kodish said.

Managers eye opportunities as real estate struggles

Difficulties in the US commercial real estate market are providing opportunities for adventurous investors.

According to Greg Friedman, founder and CEO of Peachtree Group, the collapse in the credit available to CRE borrowers is providing an opportunity for companies such as his, which can provide credit and equity capital to underperforming names.

Friedman is also targeting CRE CLOs. “There’s $90bn of CRE CLO debt, and 80% of the loans in it are impaired,” says Friedman. “We can step in and provide creative capital solutions.”

In CMBS, heated battles have begun between senior and junior investors. These stem ultimately from the pandemic, when tenants were given a variety of COVID reliefs.

With no sign of the real estate market improving, many senior note-holders are now asking servicers to start enforcing remedies, so that notes can start to pay off. The junior note holders, in contrast, generally prefer to extend reliefs rather than crystallizing their losses.

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Global credit funds & CLO's

November 2023 | Issue 259

Published in London & New York.