It was a pleasure moderating an insightful panel! Thank you #SuperReturn for another opportunity to contribute. In discussing the various segments of Distressed Markets, it's evident that nimble managers have identified and will continue to uncover attractive opportunities. While the Real Estate sector in both the US and Europe appears prominently affected, significant data points indicate that lower middle market companies face challenges due to supplier pressures, negative cash flow, and difficulties in securing financing. Examining Emerging Markets, as highlighted by #GennaLozovsky from #Sandglass, sovereigns frequently encounter issues, presenting ample opportunities even outside typical distressed cycles. A particularly intriguing discussion revolved around private loans, where companies grappling with higher rates and dwindling EBITDA face a significant decline in interest coverage ratio, exacerbating financing woes. The prevailing valuation practices in private loans suggest that the Direct Lending sector may confront a critical juncture if hopes of swift interest rate reductions aren't realized. While covenant waivers and loan extensions, often exchanged for PIK and resetting interest rate coupons, may temporarily mitigate financial strains, a prolonged high base rate environment could exacerbate situations beyond the efficacy of such measures. The apparent disparity in valuation raises questions about whether Direct Lending funds currently hold stressed or distressed assets in their portfolios while maintaining the appearance of stability. See for yourself how pricing differs ... which makes you wonder! Time will serve as the ultimate arbiter, shedding light on these dynamics and enhancing our understanding of these complex market dynamics.
Taking to stage at SuperReturn Private Credit Europe is Matthias Kirchgaessner, You-Ha Hyun, Genna Lozovsky and Robert Meyer zu Starten! This session takes a deep dive into capitalising on opportunities in distressed debt. Is there enough capital being raised for this strategy? #SRPCEurope
Karolis Kybartas
4mo
This was one of the best panels!
Quite insightful Matthias, and agreed that there are quite a few challenges on the horizon, but in some cases it will take time until the issue becomes apparent to end investors. Maybe of interest, I wrote about some of the headwinds of private debt recently: https://open.substack.com/pub/astraassetmanagement/p/coming-soon?utm_campaign=post&utm_medium=web
One of the best panels indeed!
Showbhik Kalra
4mo
Looking sharp!
Great having you speak!
Managing Partner at PLEXUS Research GmbH
4mo