Shadow lenders playing wait-and-see game on restructuring experts - Business Insider

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AUDIO: The $800 billion shadow-lending industry is staffing up with recession pros who can sort out messy credit meltdowns

Private credit, also sometimes known as shadow lending or nonbank lending, has more than tripled in assets under management over the past decade, according to Preqin data, with record-low interest-rates and yield-hungry investors unleashing a glut of corporate borrowing.

Having professionals that can navigate the potential carnage when debt-saddled firms hit a rough patch is key, according to Mahoney. Hiring for restructurers hasn't been particularly active in private credit the last couple years, according to Jason Schulman, a partner at Long Ridge Partners, which handles recruitment searches for a variety of buy-side firms, including private-credit shops.

Ares Capital, one of the largest alternative lenders with $106 billion in credit assets under management, said at its investor day in May that it was growing its small team of restructuring specialists. "Senior restructuring professionals with the 'scars' earned from working through prior credit cycles are both scarce and coveted," Mahoney said. "The very best of those that do have either moved into investing roles already or they remain in highly compensated seats at leading advisory firms, neither of which are ideal recruiting grounds for restructuring/workout positions within direct lenders.

The same dynamic played out in 2008, Mahoney said, with firms caught flat-footed when economy collapsed. But back then, banks were under siege and buy-side investors had little trouble plucking their workout experts. There's the overall expansion in corporate borrowing and private-debt funds.

 

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