Private debt financing
Tomasz Wozniak 
June 1, 2023
Tomasz Wozniak
June 1, 2023 Private debt is a relatively new concept that gained traction after the 2008 financial crisis when banks and traditional lenders were forced to restrict their lending offering. That gap was filled by alternative lenders such as private individuals, family offices and private debt funds. According to Goldman Sachs, as of October 2022, the private debt market was worth a total of USD1.2 trillion.
In this month’s Newsletter we will specifically focus on:
From the borrower’s point of view, there are two main advantages of using private debt – speed and flexibility. That however comes at a cost as interest rate charges by private debt providers tend to be higher than the one charged by traditional lenders.
Private debt can take on many forms, most common ones are:
Direct lending – loans that are provided directly by the lender and are held on their balance sheet (with fixed duration and coupon),
Mezzanine debt – loans that sit between senior debt and equity in the capital stack (for more detail see our article here),
Real estate and infrastructure debt – Loans linked closely to real estate – can be used for acquisition as well as development of these assets,
Venture debt – a loan instruments offered specifically for early stage companies which are typically backed by venture capital.
Key benefits of providing private debt are:
Diversification of portfolio – performance of private debt loans is closely linked to performance of individual corporate borrower and less so to other asset classes (such as equities) and the general economic cycle.
Superior return profile – private debt solutions are priced higher than traditional loans as borrowers are willing to pay more for fast execution and flexibility. They are usually also secured by physical assets which provide more certainty around repayment.
Hedge against inflation and rising interest rates – private debt solutions are typically linked to a reference rate such as SOFR which means that the yield charged by the lender can increase in line with rising interest rates.
Private debt solutions are a key part of our offering – our network of private debt providers is capable of financing a variety of transactions, from large, institutional level infrastructure projects in emerging markets and working capital solutions for middle-market companies to tailored financing secured against international real estate.
We do not have any set criteria in place and consider each transaction on a case by case basis so do give us a call if you are looking for financing.
If you, or one of your clients, is interested in the private debt space and would like to learn more about our offering please do get in touch with us on [email protected] or +41 78 737 64 24.