As part of our ongoing commitment to alternative lending, Cambridge Associates (CA) has begun creating a database of stress and credit loss in one of the largest private credit strategies, Senior Debt (i.e. direct credit). Our first mission to the US and Europe revealed data from 11 priority credit funds that followed substantial changes to documents (which we use as a proxy for credit stress, specifically the details below) and loss rates on bilateral and clubbed loans to SMEs. Read more ” At one end of the spectrum, some of these provisions stipulate that all payments made by a borrower to lenders under the agreement must be allocated on a pro rata basis. Often, all relevant lenders must accept any changes to this requirement, which is a high bar. Such a narrow language would prevent a borrower from following a Dutch auction, unless expressly permitted. This applies whether or not all lenders are subject to an offer of repayment at a level below or below face value. More than a decade has passed since the last cycle of decline. As a result, there is a lack of experience on all sides of the table.
Workouts are incredibly time-consuming. Internal capacity building is not only a practical solution, but an important risk management tool. It is equally important to establish external relations with the right people. For more than 25 years, our multidisciplinary team members have been practicing both transactions and restructurings for alternative lenders. There is no doubt that developing the necessary skills requires time and real experience. For direct lenders who have flexible capital and can act opportunistically, restructuring advisors who understand the Schufa model, know their fund structures and other unique considerations, and have experience in restructuring for alternative lenders, are essential for risk management and the opportunity to seize opportunities. Some priority debt funds have shown remarkable resilience within the CGP and we expect the best to survive the next downturn. Nevertheless, each senior debt fund will experience some degree of credit deterioration that PRs can monitor. These include: In this podcast, we focus on one of the topics that is of interest or could be of interest to investors at fault.
Today, we will focus on so-called “stock plans” in credit agreements. 1. . .