Direct lenders in the US doubled their buy-out financing activity in the six months to June compared with the same period last year, according to a report published by Debtwire and Mergermarket in early August. Private equity companies are showing their willingness to take on more complex transactions, from larger ticket sizes to multi-billion dollar listed-company acquisitions.
“Direct lending became a critical source of buy-out financing in H1 2024 as corporate borrowers sought guaranteed financing in an uncertain market,” says Debtwire’s John Bringardner. “However, broadly syndicated loans have been bouncing back and the pendulum looks set to swing away from direct lenders, who are entering a period of contraction and consolidation.”
The former relates to the tighter pricing that direct lenders are having to offer, while consolidation has taken the form of banks looking to buy direct lenders and mergers among some of the bigger players in the private credit space, such as Blue Owl’s acquisition of Atalaya Capital.
Competition
Laila Kollmorgen, portfolio manager, collateralized loan obligation tranche, at Pinebridge Investments, says increased interest in syndicated loans can be partly explained by the fact that so much cash has been raised in private credit.
“That