Private Credit: Recurring Revenue Loans in a Rising Rate Environment

The $1.2 trillion private credit industry is likely entering the most significant period of credit stress it has experienced since becoming such an integral part of the U.S. and European corporate lending landscape. In a recent report, KBRA described the interest rate and economic headwinds impacting middle market corporate borrowers and noted that most private credit lenders are well positioned to navigate the more challenging environment and absorb an increase in loan workouts and defaults. Meanwhile, KBRA also noted that some borrowers will be more challenged than others as they grapple with higher interest costs. One example will be smaller or earlier stage recurring revenue companies that have limited capacity to absorb higher interest costs from operating cash flow. In this report, as part of a series focused on the private credit market, we provide…