![]() So we've seen a lot of our traditional private credit lenders and opportunistic managers launching special situations and credit opportunity funds, where they can step in, restructure the debt, and maybe put it on non-accrual or non-cash pay for a period of time to work these deals out. That’s starting to trigger a lot of the EBITDA covenants within their underlying credit and lending agreements. ![]() And with these legacy spreads and the current reference rates, some of these companies can't afford that debt service as part of their operating model. They were done when rates were low it was one floor or two for reference rates, and now it’s ticking up to the five range. First, there’s the legacy effects of a long-term zero interest rate environment, and the proliferation of dividend distributions from a lot of LBOs, especially from the sponsor finance community, or private credit funds. Incredible growth in distressed debt and special opportunity funds. Greg Myers Global Sector Head – Debt & Capital Markets at Alter Domus As such we have focused strongly on enhancing our investor experience by widening our digitalization strategy. In parallel we have also seen strong increase in the number of investors keen to increase their exposure to the segment. The core fundamentals remain intact therewith representing a strong alternative to fixed income investing, which continues to fuel this growth. In the current market of raising interest rates and high inflation, the sector remains highly attractive. We continue to observe that the private debt segment is contuing its growth trajectory. Daniel Engel Head of Business Development & Relationship Management, Edmond de Rothschild Asset Management (Luxembourg) However, private debt assets under management are expected to be in excess of $2 trillion by 2027*. Fund raising has been strong but is likely to grow at a slower rate than in 2022 as investors consider the macro implications of inflation and interest rates. ![]() Private debt remains an attractive asset class given its floating rate returns, risk diversification and structuring flexibility. Andrew Ritchie Vice President Alternative Asset Services at Brown Brothers Harriman, London Looking ahead at the opportunities, we could expect the continued convergence of public and private assets (hybrid funds) requiring Luxembourg depositaries to adapt and devise their operating models accordingly. ![]() Luxembourg private credit funds managed by specialist firms continued to witness growth with strong emphasis on credit quality particularly around the potential risks of less favourable economic outlook and/or increased default risks. Morgan Bank Luxembourg S.AĬonsidering the “higher for longer” interest rate environment in response to stubborn inflation, private credit funds have remained resilient despite emerging headwinds for underlying borrower costs. Shane Hurley Executive Director, Head of J.P. As such, originators are placing more reliance on administrators and asset servicers who can manage the full operational life-cycle, whilst providing a platform that provides for accessibility and curation of underlying loan data that is critical in making business decisions. Given the recent pull back in lending from the traditional banking sector, private debt markets continue to be a key source of funding and capital. Elaine Furnari Head of Loan Services Citco Fund Services (USA) Inc
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