In 2023, private lending will be a slimmer industry dominated by a few, plumper firms, say Unmack1 and JMAGuilford BVPredicts
Investors who funded private lenders may be in for a shock. The sector coped well in past crises, and returned just shy of 16% even in 2010, according to the. But that was a smaller, more disciplined industry. The real value of today’s loan portfolios will take time to emerge, because lenders may delay writedowns to avoid antagonising investors and the buyout firms who feed them deals. One clue is the valuation of business development companies, listed funds that invest in small businesses.
As reality bites, funds are already offering less leverage at higher prices and with tougher covenants. Pension funds and insurers who provide the investment fuel will demand nothing less. They will also favor those lenders big enough to pick the best borrowers, or with the skills and resources to help companies through a slower economy.
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