Private credit is becoming a crucial tool for general partners (GPs) managing private equity, with the majority using it to refinance portfolios and perform recapitalisations for companies they already own, according to a new report.
The report by Dechert found that the most common use for private credit from sponsors is currently refinancing and recaps at the portfolio level, with 57 per cent of the 100 senior executives surveyed finding this.
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“The most common use for private credit from sponsors is refinancing and recaps at the portfolio level, with 57 per cent of respondents finding this,” the report said. “51 per cent of EMEA respondent allow LPs co-investment opportunities in private credit loans obtained by their portfolio companies.”
In the near term, almost half of respondents (49 per cent) said that geopolitical conflicts as a broad macroeconomic factor are expected to have one of the biggest influences on the deal environment over the coming 12-18 months.
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“At a regional level, however, 65 per cent of EMEA executives see them as one of the main challenges to dealmaking due to the region’s exposure to Ukraine and the Middle East,” the report added.
“Momentum is building as sponsors unlock liquidity and redeploy capital through innovative structures,” said Dr. Markus P. Bolsinger, co-head of Dechert’s global private equity practice.
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“Earnouts, continuation vehicles, portfolio-level private credit and expanded fund finance are now core tools to bridge valuation gaps, enhance DPI and widen the investor base, which includes retail.
“At the same time, geopolitics and the politicisation of merger control demand seasoned counsel across jurisdictions. Engaging experienced advisors early is critical to advancing complex transactions and safeguarding outcomes in such a dynamic regulatory environment.”
