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The Rising Risks In The Private Credit Lending Bonanza | Andrzej Skiba

Forward Guidance

NOTE

Widespread High Costs of Debt in Private Equity Space

The prevalent issue in the private equity space is the high costs of debt, with most companies paying double digit costs of funding. Although some recent transactions saw slightly smaller margins due to intense competition, the majority face significant challenges. While private equity sponsors may provide temporary financial support to individual companies, if a large portion of the portfolio is struggling with high debt costs and low cash flow, a critical problem arises. The sustainability of providing assistance to all companies becomes questionable, potentially leading to severe consequences.

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