"Barron's and other outlets have questioned the SEC's approach as private markets, including credit, eclipse public markets in size and opacity. Moody's highlighted concerns about private credit's expansion into retail and cautioned that leverage and retail-focused funds could introduce systemic risks. The Financial Times flagged deeper pressures beneath calm credit spreads, including rising payment-in-kind loan structures that may be masking borrower stress. And a recent viral video painted the industry as opaque, risky, and engineered to enrich insiders."
"Private debt is, at its core, lending by non-bank institutions directly to private companies. These loans are typically structured, negotiated, and customized, often as senior secured loans that rank first in repayment priority. In other words, this is not venture-style risk-taking. It's structured finance built on cash flow, enterprise value, and downside protection. It's also not new. What's changed is the role private debt now plays in the capital stack."
Growing skepticism has emerged around private credit, driven by scrutiny from media and ratings agencies over expansion, opacity, and potential systemic effects. Concerns include retail exposure, higher leverage, looser covenants, liquidity mismatches in certain retail vehicles, and rising payment-in-kind loan structures that may mask borrower stress. Rapid growth has increased competition for quality deals and widened structural variations across funds. Many critiques conflate distinct lending models and underappreciate risk-management mechanisms such as senior secured positions, negotiated covenants, and downside protections. Private debt primarily fills financing gaps left by banks, providing structured, cash-flow-based loans to companies with limited traditional access.
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