$16B in Private Credit Deals Return to Wall Street

Wall Street banks have secured nearly $16 billion in private credit market deals so far this year, according to a report by Bloomberg citing Bank of America data.

According to the report, Thryv Holdings — a software-as-a-service company founded through a merger of yellow pages publishers Dex One and SuperMedia — has indicated its preference for traditional leveraged loans, despite another Bloomberg report earlier this month saying the company had held discussions with private credit lenders regarding $350 million in funding to refinance syndicated debt.

Companies switching to the public side can secure lower rates and shake off debt covenants that tend to be more restrictive than in syndicated arrangements, with many doing so long before private loans come due through call options that can be triggered after just one year, Bloomberg noted.

“Private credit has been more expensive for companies and carried more stringent covenants,” Marina Cohen, a high-yield portfolio manager at Amundi SA, told Bloomberg. “Now they can refinance at a lower cost in the public market, with looser covenants so the competition is tougher for private credit.”

The deals highlight how Wall Street banks are reclaiming high-yield, high-fee loans lost to the rapidly expanding $1.7 trillion private credit market in recent years, with leveraged loan prices near a 22-month high, allowing these banks to extend cheaper debt to companies than direct lenders can offer.

In response, private credit funds are improving terms and reducing pricing. Traditionally, private credit could charge about 6 to 7 percentage points above a base rate, but this has dropped significantly in recent months.

Earlier this year, Blackstone secured a $250 million loan at a rate of around 4.75 percentage points over the U.S. benchmark to finance its purchase of Rover Group — one of the cheapest rates on record for a private credit loan, according to Bloomberg’s data.