Octus Radio Reorg Primary View: Columbia Threadneedle’s Ray & Shaifer on Leveraged Loans vs. Private Credit
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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.
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Private Credit vs. Leveraged Loans
- Institutional investors are increasing allocations to private credit.
- Leveraged loan market grappled with a lack of new money supply in 2023 but saw a reversal in 2024.
Key Differences and Market Movement
- Three key differences between private credit and leveraged loans are pricing, covenants, and deal size.
- Direct lenders offer more flexibility to borrowers, especially regarding covenants, ahead of defaults.
Similarities and Differences
- Private credit and leveraged loans are similar in targeting non-investment grade borrowers, floating rates, and senior secured positions.
- Key differences include liquidity (bank loans are more liquid), leverage (typically higher in private credit), and covenants (more common in private credit).