Debtwired! Rising distress in private credit with Interpath’s Robert von Finckenstein and Chris Hall
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Jul 7, 2025 In this engaging discussion, Chris Hall, Managing Director at Interpath, shares his extensive debt advisory experience. He examines the increasing distress in European private credit and how rising interest rates are pressuring sectors like automotive and manufacturing. Hall highlights concerns over default rates and the complex dynamics of debt-to-equity swaps. The conversation also delves into the resilience of private credit, particularly in tech, while addressing the unique challenges faced by lenders in distinguishing between distressed debt funds and traditional banks.
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Liquidity Drives Distress Triggers
- Liquidity is the main trigger for distress in private credit portfolios.
- When shareholders won't bridge liquidity needs, lenders may take ownership through debt-for-equity swaps.
Interest Rate Impact on Private Credit
- High leverage with rising interest rates has increased debt burdens on companies.
- Interest rates at 11-12% have been detrimental despite decent company cash flows.
Default Rates Still Modest
- Default rates in private credit remain low, around 1-2%, though slowly increasing.
- Rates above 2% would signal serious concerns needing more attention.