The retreat of banks from leveraged lending has handed the mid-market buyout to a new set of financiers. Direct lenders, flush with institutional capital, now write the loans banks once syndicated.
Why banks pulled back
Capital rules made holding risky loans more expensive, and the memory of being stuck with hung debt taught a hard lesson about warehousing risk. The borrowers they once served looked elsewhere.
The open question is how this market behaves under stress. Private credit has grown enormously without facing a deep default cycle at scale.