As the darkness surrounding an economic downturn persists, dealmakers are making use of the past as a way to guide themselves. And with traditional capital routes drying up during uncertain times, opportunistic credit financing could save the day.
Direct lenders provide a one-stop-shop to cut out market execution risk and costs that come with underwritten bank transactions. Opportunistic financing differentiates itself in that lenders aren’t trying to time the market to take advantage of economic turbulence, but instead are working with borrowers to put a focus on complexity rather than distress.
Current economic conditions are requiring investors to acknowledge the dynamic environment and require flexibility through increasingly shorter investment windows or extended bull markets.
“Private lenders have been expanding their market share since the Great Recession when banks were increasingly regulated out of offering competitive loan structures to borrowers and PE firms,” Walter Owens, the CEO of Varagon Capital Partners told Mergers & Acquisitions. “As there is no expectation that regulators will loosen bank requirements near-term, we anticipate this trend will continue.”
This summer, firms have gotten in on the private credit and direct lending opportunities to counter the market conditions.
For example, Yieldstreet closed a warehouse facility earlier this month providing access to up to $400 million from Monroe Capital. “Not only will this deal expand our suite of offerings, but it will also give us the ability to work more closely with industry-leading asset managers, sponsors, and originators across private markets,” said Michael Weisz, Yieldstreet president.
Speed, flexibility, price and certainty offered in closing deals all contribute to the strength and popularity of private lending.