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The private credit world today makes me think of the ancient Roman god Janus, often depicted with two faces, one that looks to the future and the other that looks to the past.
Many in the private credit world predict this investment landscape will pave the way for a golden age of private debt. Private-debt managers say they are ready and willing to step in to fill the gaps opened by a pullback in leveraged loans from banks in recent months, in some cases by clubbing together on debt packages. What’s more, private-credit firms see an opportunity to secure investments at more attractive terms for themselves, and they have plenty of dry powder to back those deals.
But as managers look to the future, they will also have to keep some of their focus on investments made in the past. Loans issued to companies at peak valuations with heavy debt loads stand to encounter troubles of their own. Managers that failed to hedge, even if only partially, against rising interest rates may find themselves wrestling with mounting challenges in their portfolios.
As the investment landscape continues to change, we will continue to monitor how private debt managers adapt to the new challenges they face even as they seek to capitalize on the opportunities that those challenges yield.
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