by Brooks Crankshaw
Highland Ridge Capital is an IMA member bank and advisory law firm…
For a prestige publication that caters to large institutional investors, it’s not often that Pensions & Investments Newspaper (“P&I”) offers a special report dedicated to the private debt market. Their report on April 17th was encouraging for companies looking to raise debt capital.
P&I reported that institutional investors dedicated $18.3 billion in 2016 to alternative credit strategies. That includes distressed debt, special situations, mezzanine, structured credit, direct lending and other credit strategies. For the first three months of 2017, investors dedicated $7.4 billion.
“The promise of higher investment returns and risk reduction are the primary drivers behind the determined institutional push into alternative credit strategies,” reported P&I contributors Christine Williamson and Arleen Jacobius. Higher returns to the investors don’t necessarily mean that borrowers are paying a high price; institutional investors evaluate the tradeoff between risk and return, and are finding private debt returns to be good value. P&I reports that a startling 93% of investor return expectations either met or exceeded their expectations. The large amount of demand indicates that the users of debt capital have more sources to consider.
Prequin, a London-based researcher, is quoted by P&I as saying that “most institutions – 57% – told them they intend to increase their private debt investment in 2017, while 32% said they will invest as much as they did in 2016.”
For companies looking to finance growth with private debt, or refinance existing credit, the market provides a robust solution. It’s a good time augment bank credit with private debt, which may offer higher amounts of credit and better terms than expected.
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