Cloud 9fin Private credit terms in the time of tariffs
8 snips
Apr 23, 2025 Sheel Patel, a partner and head of New York private credit at Mayer Brown, dives into the current landscape of private credit amidst fluctuating US tariff policies. He discusses how these changes lead to more borrower-friendly credit terms and the evolving dynamics between lenders and sponsors. Patel emphasizes the importance of Payment-in-Kind flexibility for direct lenders and outlines strategies to navigate risks associated with distressed portfolio companies. His insights shed light on adapting lending practices in a volatile market.
AI Snips
Chapters
Transcript
Episode notes
Shift Toward Borrower-Friendly Terms
- Early 2024 saw terms in private credit deals shift to be more borrower-friendly with CoveLite and CoveY increases.
- Lenders accepted watered-down protections due to supply-demand but remained cautious post big defaults in prior years.
Lenders Partner Through Stress
- Private credit lenders are partnering with sponsors to manage stressed portfolio companies rather than being strictly punitive.
- Higher interest rates and delayed M&A exits complicate refinancing and pose ongoing risks for lenders.
Assess Industry Risks Amid Tariffs
- Industry-specific risk assessment is crucial especially in consumer and manufacturing sectors under tariff uncertainty.
- Private credit’s service-oriented portfolios may be less affected by the ongoing tariff situation.