Private credit in the loan market: a new era of financing for corporates

In this blog, we look at the offering by private credit lenders of new financing solutions to corporates. Growth in this market is changing how corporates approach their financing needs. Where they might previously have tapped the traditional equity, bond or bank loan markets, there is a relatively small but growing segment of companies turning to the broader private credit universe.

Historically, private credit has been associated with sub-investment grade distressed lending and direct loans to middle-market, often privately owned, companies. However, in the past few years we have seen a surge in private capital targeting listed corporates. In 2024, we saw record deal volumes in the private credit market and worked on transactions increasingly tailored to the needs of large, stable companies seeking alternatives to traditional bank and public bond financing.

Why some corporates are turning to private credit

Three key reasons:

1. Access to funding in volatile markets: Where geopolitical risk and uncertainty has led to market volatility and retrenchment of the bank and bond markets, private credit has stepped in to fill a void. Private credit providers can offer a stable and predictable source of capital because they are looking at returns over a longer period. They may be more willing to step in to fund in sectors where banks have pulled back.
2. Investor willingness to understand complex company narratives: Private credit providers are often prepared (and want) to delve deeper into the detail of a company and understand the business. This means they might be willing to provide funding into complicated group structures, alongside corporate transactions, or to companies experiencing stress, where it would be more difficult to explain and sell the company story to bank or bond investors. They are able to provide funding more reliably in these situations.
3. Bespoke terms and flexibility: Private credit providers may have more flexibility to structure financings to meet specific borrower requirements. Examples include: delayed draw facilities, so borrowers can access funds as needed; tailored maturity and amortisation profiles linked with project timelines; and asset backed facilities. Private credit providers may be nimble and willing to move quickly, a key advantage in time-sensitive situations. Deals are likely to be written by one or a small group of private credit providers, which reduces execution risk and gives greater certainty for the borrower.

What attracts private credit providers to the listed company space

Private credit providers have record amounts of capital to deploy and are seeking out new types of borrowers to lend to. Broadening their offering to listed companies presents a unique set of advantages – here are three key reasons:

1. Opportunity to materially scale their business: This is all the more valuable in the context of managing a pool of fixed return investments. Last year, McKinsey estimated[1] that the asset class was approximately $2 trillion, mainly invested in sub-investment grade loans, but that the addressable market was approximately $30 trillion in the US alone. A significant proportion of that will relate to general corporate lending as well as various types of asset finance. This is in part driven by the ongoing diversification of the sources of private credit capital, most notably significant inflows of retail and insurance monies. Some asset managers have been putting very significant sums to work in single investments in the investment grade space as part of their high grade capital solutions strategy. 
2. High-quality credit with stable returns: Investors are attracted by large, established companies with strong balance sheets, resulting in lower default risks and predictable cashflows. This helps to diversify private capital risk profiles across a range of sectors and types of borrowers.
3. Attractive spread premiums: Where private credit providers are filling a gap in the market in complicated or stressed situations, investors are rewarded for increased risk, relative illiquidity and complexity.

Looking ahead

The private credit market is poised for continued growth, as corporates seek greater flexibility and certainty, and as investors pursue stable, diversified returns in an evolving credit landscape. Its increasing scale and sophistication signal a lasting shift in global corporate finance.

We have experience on the corporate and private capital side. Please feel free to contact any of the authors if you would like to discuss.

[1] Source: https://www.mckinsey.com/industries/private-capital/our-insights/the-next-era-of-private-credit