The leading private credit firms Blackstone, Blackrock, KKR, Carlyle, Apollo, Ares, Blue Owl, TPG, Partners Group, EQT, CVC etc. disburse loans often 7 % to 15 % interest rates to clients, many of which a mid sized technology firms.
Many of these firms are considered risky and unbankable by money center banks as JPMorgan, Bank of America, Wells Fargo, Citi, Goldman Sachs, Morgan Stanley, etc.
The high interest rates of private credit create operational leverage, whereby if the firm that receives the loan, develops very well, grows revenue fast and reaches profitability the private credit loan enhances the profitability and growth of the company. Contrary, if the firm goes into trouble, stops growing revenue and becomes loss making the high interest rates of 7 % to 15 % on the private credit loan stifle the firm even further, a sort of negative compounding.
So private credit is a natural amplifier.
The private credit industry manages 2.5 trillion USDs.
Barring a technology, AI lead bust the private credit industry should weather the current storm of First Brands, Tricolor, MFS and the redemption wave.
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