Direct loans from private lenders are now commonplace in company financing due to the expansion of private credit. Following the Global Financial Crisis, changes in regulatory framework forced banks to turn away from private lending and toward syndicated financing, which marked the beginning of the rise of private credit.
The increase in assets under management in Exhibit 1 indicates a significant shift toward private credit as a result of non-bank lenders’ assistance in closing the lending gap. Due to the closure of the syndicated markets throughout the past two years, borrowers have turned to private lenders for funding.
In evaluating the current state of the market, some are concerned about how private loans would fare in the face of longer-term, higher interest rates, slower economic development, and ultimately the reopening of capital markets. This is because of the private credit industry’s explosive rise.
We recently had a conversation with Dan Pietrzak, Global Head of Private Credit at KKR, to find out why he believes that the climate for private lending will be favorable in the upcoming years, as well as to learn about the possibilities and dangers he sees and the asset class’s prognosis.