Octus Radio
Reorg Primary View: Columbia Threadneedle’s Ray & Shaifer on Leveraged Loans vs. Private Credit
May 20, 2024
Columbia Threadneedle's Stanton Ray and Mary Shaifer discuss the impact of spread compression on leveraged loans and private credit markets. They explore covenant flexibility in direct lending, compare syndicated loans with private credit, analyze ClO portfolios, and predict a convergence of covenants and behaviors between the two markets. The podcast also touches on legal proceedings, financial deals, and investor strategies in the restructuring world.
33:30
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Quick takeaways
- Private credit loans offer flexibility in covenants for borrowers, whereas leveraged loans show tighter spreads in new issue market compression.
- Differences in liquidity, leverage, pricing, covenants, and recovery rates exist between bank loans and private credit despite shared similarities in collateral and ratings.
Deep dives
Trends Impacting Private Credit and Leveraged Loans
Private credit and leveraged loans experience trends that influence the balance of power between the two asset classes. Market participants note reduced M&A deal flow due to high-rate environments, intensifying competition. The difference in spreads can reach up to 200 basis points between broadly syndicated loans for private market issuers. Moreover, flexibility in covenants is observed in direct lending, offering greater flexibility to borrowers.
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