With the recent interest rate rise both in the US and UK and expectation of further steep increases in the next couple of years how do you foresee the debt and buyout markets being impacted?
As cost of debt rises, it will likely slow down the buyout frenzy of recent years. But will the impact be material as base rates are still likely to remain within 2%-3% range in the medium term.
Potentially, better returns for private credit as more investors deploy their capital with PC given lower risk and better returns?
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PE firms have so much dry powder to deploy that I doubt it'll slow them down significantly
I’d say the same argument applies to both syndicated and direct lending; as long as people have capital to deploy, capital will be deployed. These markets really do go hand in hand; sponsors can’t buy companies without access to said debt markets, and if the sponsor has money to deploy chances are these other managers will have money to deploy too. I think the interesting part will be how distressed opportunities pick up given how shit this was in 2021.
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