Wall Street’s doom-mongers spent years warning that private lenders would be the next bubble to burst when central banks tightened policy. Instead, the funds are becoming even more ubiquitous as companies scramble to refinance debt in a higher interest-rate environment, the Wall Street Journal reported. For example, Westport, Conn.-based PetVet Care Centers operates 450 veterinary clinics and hospitals across the U.S. and has been owned by private-equity giant KKR since 2018. It has been a successful acquisition, but the company is facing a wall of debt maturities that can only be refinanced at higher cost. KKR is providing $600 million of additional equity to ease the burden, while private-debt lender Blue Owl Capital will extend PetVet a $2.3 billion senior loan. In the middle ground between debt and equity sit other private-credit firms. Among them is London-based Park Square Capital, which said earlier this month it would commit over $100 million in preferred equity to the deal. This is an example of the “mezzanine” strategies keeping the private-credit boom alive. Even as mergers and acquisitions have ground to a halt, higher rates and a challenging market for private-equity exits have opened up new opportunities to lend. Private debt — where funds extend credit directly to companies — has ballooned from about $280 billion of assets under management in 2007 to $1.5 trillion in 2022, figures by analytics company PitchBook suggest. Private-equity firms such as KKR, Apollo and Blackstone are channeling an increasing share of their assets into these markets. This year, asset-management behemoths such as BlackRock, Fidelity and PGIM, owned by Prudential, have also invested heavily in the sector.
