Been reading about some of the “large cap” direct lending deals recently and it got me thinking. Why would a sponsor opt for private debt when the deal is realistically large enough to by syndicated? Wouldn’t it cost the sponsor more given that private debt yields are higher? Are these just deals that are too risky to have been syndicated by the big banks or just more bespoke than your run of the mill broadly syndicated loan? Is there some other advantage to tapping the private debt market vs the broadly syndicated market? Am I missing something here?
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Maybe leverage on offer is higher from direct lenders, maybe transaction dynamics necessitate speed/certainty, maybe the Company can’t be rated, maybe junior capital is harder to place so you do a big uni, maybe cost difference isn’t material and you prefer dealing with one or a few lenders rather than all of Wall Street, no market risk with syndication
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