Forward Guidance

The Rising Risks In The Private Credit Lending Bonanza | Andrzej Skiba

Feb 16, 2024

Financial expert Andrzej Skiba discusses the rising risks in private credit lending. Topics include the definition of private credit, the risky nature of the deals, the lack of data on performance during defaults, the illiquidity of the asset class, and the interplay between private credit and the rest of the fixed income universe.

01:12:42

Episode guests

Andrzej Skiba

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Quick takeaways

Private credit provides an alternative for refinancing obligations and helps smooth the credit cycle.

The competition between the high yield bond market and the leverage loan market includes private credit as another player.

If rates stay high and the economy slows down, the default outlook could worsen, especially for private credit and leverage loan spaces.

Deep dives

Widespread High Costs of Debt in Private Equity Space

01:30

Private Credit Growth and Risk

01:56

The Transformation of Private Credit

01:20

Different Markets within Capital Structure

01:41

Introduction

3min

Risks and Drawbacks of Private Credit

24min

The Interplay Between Private Credit and the Fixed Income Universe

5min

The Relationship Between Leverage Loans and High Yield Bonds

26min

Yield Curve Normalization, Rate Hike Worries, and the High Yield Maturity Wall

4min

Trends in High Yield Issuance and Investment Opportunities in Other Market Segments

4min

Risks and Opportunities in the CMBS Market

3min

Common Mistakes in Fixed Income Investing

5min

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Timestamps:

(00:00) Introduction

(00:50) What Is Private Credit?

(07:51) Private Credit Is Doing The Riskiest Deals In Leveraged Finance

(16:04) How Will Private Credit Perform If Defaults Pick-Up? (Very Little Data In Previous Cycles Because The Asset Class Has Grown So Much)

(19:24) Private Credit Is Very Illiquid

(20:54) Debt Covenants In Private Credit Are, Admittedly, Usually Very Strong

(26:31) VanEck Ad

(27:14) Interplay Between Private Credit and Rest of Fixed Income Universe

(32:35) Private Equity Is Using Private Credit To Pay Itself Via Dividend Recaps

(35:13) Private Credit Is Refinancing Some Of The Riskiest Deals In Leveraged Loan Market, Which Perhaps May Be Bullish For Leveraged Loan (& High-Yield Bond) Market

(38:00) Default Outlook In High-Yield Bond And Leveraged Loan Market

(43:09) Moderately Bullish View On Duration (I.e. Rates)

(58:43) Maturity Wall High-Yield Bond Is Very, Very Termed Out

(01:02:56) Opportunities In Securitized Products Market Appear Interesting

(01:04:57) Single Borrower Commercial Real Estate Loan Market Offers Interesting Opportunities To Fundamental Credit Investors

(01:07:48) Most Common Investing Mistake In Credit: Herd Mentality

Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.

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Forward Guidance

The Rising Risks In The Private Credit Lending Bonanza | Andrzej Skiba

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Private credit stealing deals from leverage loan space

High yield bond market and leverage loan market dynamics

Widespread High Costs of Debt in Private Equity Space

Private Credit Growth and Risk

The Transformation of Private Credit

Different Markets within Capital Structure

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Forward Guidance

The Rising Risks In The Private Credit Lending Bonanza | Andrzej Skiba

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Private credit stealing deals from leverage loan space

High yield bond market and leverage loan market dynamics

Widespread High Costs of Debt in Private Equity Space

Private Credit Growth and Risk

The Transformation of Private Credit

Different Markets within Capital Structure

Get the Snipdpodcast app

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Save anymoment

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