ICYMI: Bloomberg Odd Lots Podcast Explores Value of Private Credit Industry
New Mountain Capital Managing Director Laura Holson highlights the safety, resilience, and flexibility of private credit
WASHINGTON, D.C. – New Mountain Capital Managing Director Laura Holson, who serves as COO of the credit platform, recently discussed the value of private credit during an episode of Bloomberg’s Odd Lots podcast.
The discussion, hosted by Tracy Alloway and Joe Weisenthal, highlighted the safety, stability, and attractiveness of the growing private credit industry for both investors and businesses. Holston underscored the asset class’s low default rates and its resilience, particularly during volatile periods like COVID-19. She attributed private credit’s strength to the fact that deals are often flexible, bespoke, and relationship-oriented – meaning investors work hand-in-hand with businesses for their mutual success.
New Mountain Capital is a member of the American Investment Council, whose members collectively manage two-thirds of the private credit assets in the U.S.
Listen to the full episode here. Key excerpts from Holson’s interview are below.
Bloomberg Odd Lots
Here’s What’s Driving the Boom in Private Credit
By Tracy Alloway, Joe Weisenthal, and Aashna Shah
November 20, 2023
New Mountain Capital Managing Director Laura Holson, who serves as COO of the credit platform, said:
Reliable Partner: “From a default loss perspective, actually private credit turned out to be more resilient during Covid. And I think it’s a function of how these deals are set up because they are meant to be a little bit more bespoke, more relationship-oriented. And so private equity sponsors were able to have direct dialogue with the lenders and talk through, like: here’s what we’re seeing in these underlying companies, here’s what we’re doing about it, let’s talk.”
Strong Performance: “Private credit and direct lending specifically offers very attractive and consistent yield. And it’s, I think, a very good thing to allocate as part of your fixed income portfolio. I think number one, it’s floating rate typically. So we move up and down with interest rates. In this period where we’ve had a significant runup, that has helped increase the yield of direct lending funds because the way the coupon is structured is you are tied to a base rate plus a spread.”
Safe and Stable: “It’s hard to attack the underlying fundamentals necessarily because we’re lower levered. We’re pretty matched from an asset and liability standpoint from a term point of view. We’re also largely matched from a floating rate perspective, a lot of our liabilities are floating rate. So there’s a lot of inherent safety in a lot of the structures of the private credit market.”
Low Default Rates: “Clearly default rates have picked up in the syndicated market. You haven’t seen it pick up materially in the direct lending market. … [A big piece of it is] the relationship between the lenders and the sponsor, that more flexible capital structure allows people to work through things a little bit more effectively and therefore don’t end up as frequently in kind of a default scenario.”