There’s a quietly overflowing bathtub of market news about private debt . It’s growing quite rapidly, and the finance guys aren’t complaining. Private debt is sourced from non-bank lenders.
Private debt is seen as risky. The headlines about private debt , correctly for a change, paint a much more complex picture. Private debt is also seen as an opportunity for investors, private debt funds , etc.
You can be forgiven for thinking there’s more than a slight whiff of “payday loan” in the media image of private debt. There’s some basis for that. Defaults are at decade-long highs , It’s important not to minimize the complexities of this situation.
Much of this debt has been festering away since before the pandemic. The rise in interest rates has made the original debts more expensive. “Leverage” has been a four-letter word since the 1980s, when people could still read balance sheets.
The almost incestuous relationship between debt and those “great numbers” which usually precede every corporate crash and burn also needs to be understood. Debt first became fashionable in the 1980s. It became a plague in the 1990s.
Only the unnaturally low rates kept these huge debts viable in the corporate environment. Well, that and “creative accountancy”. It’s never been a particularly healthy environment.
Private debt, however, also include individuals, and small and medium businesses. That’s a sort of confetti-like motif of individual messes. The market never real.