Private Credit is better placed to avoid blowups seen in liquid debt.
- Sevriano Battista
- Oct 18
- 2 min read
Recent bankruptcies, including Tricolor and First Brands, are a reminder that easy money masked weak balance sheets. The headlines tried to speak of this as a Private Credit issue, yet the bulk of the exposure sat with banks and liquid credit markets.
Private vs public credit
Private lenders run deeper diligence and negotiate tighter structures. In liquid markets, speed often replaces scrutiny. Asset-backed finance's transparency, covenants, and analytics help avoid that concentration risk.
Two tracks trending in asset-based finance
1. Insurance channel: heavy demand in the last 5 years for private IG, where investors pick up 150–200 bps over public IG spreads (currently at 30-year tights).
2. Non-insured channel: opportunistic, non-IG loans that require flexible capital and real scale. The ability to bring both has started to drive transactions as much as the asset class itself. Fund finance is another rising theme as private equity seeks liquidity without exits.
How disciplined lenders think
Underwrite as if a GFC hits tomorrow. Can the asset pool support a 3-year lock and 3-year cash flows? Front-load cash flows and model losses first. If returns survive a recessionary case, proceed; if not, pass. Visualise the waterfall: ABF pays by contract, so principal and interest return through structure rather than terminal value.
Why ABF beats public formats
It’s a covenant-heavy world. Ratios, performance tests, and hardwired waterfalls that route cash to repay facilities as designed. Private deals add levers public formats can’t (including OpCo covenants), and diligence iterates until every question is closed.
Competing in a Crowded Marke®t
Rotate by industry and by ticket size. Scale lets you move from $50m to $1bn and stay out of the noise. ABF demand isn’t just M&A. Refinancing, inventory, and growth capex keep volumes steadier across deal cycles.
Bottom line
Credit quality is diverging. Private, asset-backed structures that prioritise diligence, cash-flow front-loading, and downside engineering look best placed to endure what comes next.
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