The return of risk appetite among banks is fueled by more favorable market conditions, making it easier to sell debt. With rising leveraged loan prices in the secondary market and signs of life in the collateralized loan obligation (CLO) market, banks are gaining confidence in undertaking deals.
For private equity firms, financing from banks offers advantages such as a more diverse lender base and greater flexibility in loan terms.
While the resurgence of banks is evident, it remains to be seen if it will be sustainable if market conditions turn unfavorable again. Rising interest rates could also pose challenges for highly indebted companies and may affect banks’ ability to offload their debt.
Nevertheless, the private credit industry, valued at $1.5 trillion, is expected to remain a significant player in the market, especially as it has gained popularity as a fast and effective funding option for buyout deals.