A Private Debt Crisis
Leveraged buyouts were once a precision tool, effective when used selectively and with discipline. Today, leverage has become a default setting.
Not to over indulge in contrastive negatives, but debt isn’t just part of the strategy, in many cases, it is the strategy. If more investors get experience not using leverage, the cloak of normalization can be lifted before it’s too late. Wait too long, the wake up may be harsh.
Where are troubles emerging? While not the same as leverage for buyouts, the way private credit has moved from the margins to the center of dealmaking is connected. By most industry accounts and publicly available data, private credit now funds a significant share of leveraged buyouts, particularly in the middle market. What was once an alternative to banks has become a core source of financing for sponsor‑led transactions.
I’m not a private credit specialist (though I can introduce you...
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