Buyout Firms Score Big As Wall Street Banks Regain Loan Market Share
Companies are ditching private lenders for cheaper rates and looser terms from traditional banks.
This year, a whopping $16 billion in loans have moved from private credit funds to public markets like syndicated loans and bonds. Companies like Thryv Holdings and Encora Digital are taking advantage of the current market to lock in lower interest rates and shed stricter debt restrictions.
Why the Shift?
- Lower Rates: Public markets are offering cheaper loans than private lenders, allowing companies to save money.
- Looser Covenants: Publicly traded loans often have less restrictive terms compared to private credit deals.
- Market Conditions: Buoyant markets are making banks more comfortable offering riskier loans.
Wall Street Wins
This trend is a big win for Wall Street banks who are regaining a foothold in the high-yield loan market, a sector they were losing to private lenders in recent years. By offering competitive rates, banks are winning back business from companies like Wood Mackenzie and Ardonagh Group.
Private Lenders Fight Back
In response, private lenders are lowering their rates and offering sweeter deals. Traditionally, they charged a premium, but recent deals like Blackstone’s $250 million loan show a significant drop in pricing.
Who Benefits?
The real winners are buyout firms who are getting the best of both worlds: lower rates and more flexibility from lenders competing for their business. Companies like Thoma Bravo are leveraging this competition to secure better deals for their acquisitions.
The Downside
While this is positive for borrowers, some experts worry about potential risks. With increased competition, there’s a concern that lending standards may drop and investors could be exposed to riskier loans.
