Private Credit Primer: Three Part Series

Private credit has exploded in popularity over recent years with increasingly large deal sizes funded solely through direct lending, new funds established and even traditional banking giants like JP Morgan are looking to partner with asset managers to access the burgeoning market. According to Preqin, an alternative assets data provider, the size of the US direct lending market in terms of assets under management has grown 2.8x (35% annualized) to $470.8 billion as of June 2023, outpacing growth in the outstanding HY bond and leveraged loan markets, which grew ~1.2x (3%-4% annualized) over the same period.

The global private credit market, including all strategies (i.e., direct lending, mezzanine and special situations) and asset classes (including securitizations), is estimated to have reached $1.7 trillion in 2023 and will grow 65% (9.5% annualized) to $2.8 trillion by the end of 2028. Google search trends confirm broad-based interest in the somewhat opaque asset class as queries for ‘private credit’ are at an all-time high (see chart below). In this three-part series we look to identify what the private credit market is, the benefits it provides for both lenders and borrowers, potential risks associated with the rapid growth of the market and thoughts on where the market is headed. Throughout this report, we leverage robust coverage of the private credit market already offered by our colleagues in Covenant Review, LevFin Insights and Fitch Ratings.

dress the covenants of these private notes in this report.