The state of the direct lending environment in the US

The direct lending environment in the US has undergone changes in recent times. In 2021, there was a robust direct lending market with significant limited partner capital allocations and historically low rates and credit spreads. However, sentiments shifted in 2022, and direct lenders became more cautious in originating new exposures to sectors facing more challenging macroeconomic conditions. Despite the higher pricing, decent companies still have access to capital in the debt markets, and competition among lenders remains due to the significant dry powder available. The private credit space also offers more certainty of execution compared to liquid leverage markets.