STORY CONTINUES BELOW THESE SALTWIRE VIDEOSLONDON - Direct lending, a key but expensive source of credit for riskier European firms that banks often shy away from, is running out of steam, a fresh sign that aggressive interest rate rises may be starting to cause funding stress and exacerbate economic pain.The European private credit industry, which flourished after the 2008 financial crisis as capital-constrained banks cut lending, has raised 26.
The European Central Bank has delivered 425 basis points of tightening this economic cycle and the BoE more than 500 bps. Now, those moves are beginning to bite. Deals are"taking longer than they have traditionally", he said, adding Deloitte was seeing an"uptick" in private lenders demanding debt-for-equity swaps, the practice of taking ownership of a business when borrowers struggle to repay debt.
Patrick Marshall, head of fixed income for private markets at Federated Hermes, anticipates tighter liquidity ahead. Faisal Ramzan, a partner at law firm Proskauer Rose who advises private credit funds, said he was not seeing default. But, he added, in the past"three or four months" lenders were starting to"get closer" to companies with weakening prospects to"try and head off anything that's coming down the line".Private credit fund managers express caution about deploying funds in their 300 billion euro market.
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