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Reuters — Business — Direct Lending — Interest Rates — Leveraged Buyouts — Private Equity

Private equity firms lend less as demand cools

Private equity firms are lending less as demand cools. Interest rates have made direct lending more lucrative, but borrowers are delaying refinancing due to the higher costs of a new financing.

1 min read
  • Private equity firms lent out $151.3 billion in 2022 for middle-market deals - 23% less than the $195.7 billion lent out in 2021.
  • Interest rates have made direct lending more lucrative, but fewer companies are knocking on the door of private equity firms.
  • The cost of a loan from a private equity firm has soared to up to 12%, up from 7.5% average in 2021.
  • Borrowers are delaying refinancing and repaying their outstanding loans due to the higher costs of a new financing.
  • Private equity firms have become more risk-averse amid a potential economic slowdown.
Private equity firms lend less as demand cools
Private equity firms that have for years capitalized on the regulatory woes of banks by becoming lenders to risky leveraged buyouts are doing less business just as higher interest rates have made that practice more lucrative.
Reuters

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