The LFI Levered Lines Podcast Unpacking Private Credit: Amendments and Market Influences with Nick Baldwin
Dec 17, 2024
In this engaging conversation, Nick Baldwin, Managing Director at Lincoln International, shares his expertise on private credit and illiquid investments. He explains how recent market dynamics have influenced pricing, with competitive lending driving down price increases. The discussion highlights the impressive performance of private companies despite rising interest rates, and Baldwin reveals the proactive strategies lenders use, like amendments and equity infusions, to ensure liquidity and health in their portfolios.
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Stability and Trends in Amendments
- Amendments in private credit mainly affect pricing and have remained stable at around 16% of companies over the past year.
- Pricing increases have decreased from peaks over 200 basis points in late 2023 to under 100 basis points on average by Q3 2024.
Impact of 2021 Vintage Leverage
- The 2021 vintage saw the highest proportion of amendments due to peak leverage during a frothy market with low rates.
- These highly leveraged deals faced more pressure from rising interest rates, leading to more amendments earlier.
PIC Pricing Trends in Amendments
- The use of PIK (Payment in Kind) toggles was high at peak pricing increases in Q4 2023, with 80% of amendments involving PIK.
- Currently, there's a shift back towards more cash pricing and less PIK usage, although PIK remains significant in amendments.