The private credit market is flying high, and its tailwinds soon may be strengthened by a federal appeals court in New York City.Beginning Thursday, the Second Circuit will hear arguments over whether syndicated bank loans should be treated as securities.
Specifically, it could decrease the use of syndicated bank loans and increase the use of private credit.The case ties back to a $1.7 billion syndicated term loan in April 2014 for Millennium Health, a San Diego-based drug testing company that at the time was owned by private equity firm TA Associates.
What those lenders apparently hadn't known was that Millennium for years had been under government investigation for Medicare fraud. The banks, however, first became Millennium lenders back in 2012 and allegedly were in the loop. Moreover, investors allegedly weren't informed of material developments in a civil case where Millennium was the defendant.