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Golub Capital Shares Credit Insights
By Isaac Taylor April 12, 2024 |
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Spyro Alexopoulos, the co-head of direct lending at Golub Capital, shares his views on private credit's increasing popularity and some of the challenges facing the industry. He joined the firm in 2007 and is responsible for overseeing origination, deal execution and capital markets. Alexopoulos previously worked for Silver Point Capital and GE Capital’s Global Sponsor Finance group. Responses have been edited for clarity. |
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WSJ: What is driving so much attention to private credit? |
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Alexopoulos: What's attracted investors' attention is [the fact that] you have, because of its floating-rate nature, unlevered returns in this environment in the 11% to 12% region. And that's to invest in a tranche of senior-secured debt that comes at the top of the capital structure. In attractive loan-to-enterprise-value ratio situations and in our particular case, with plenty of cash equity behind you and strong private-equity sponsorship.
So I think that the combination of low risk, attractive returns—and then overlay that with an asset class that has been stable over multiple cycles—that starts to get pretty interesting in a world where there is a lot of volatility and you're looking for stable, attractive returns with little to minimum downside. |
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WSJ: What are some of the biggest obstacles facing the private-credit industry? |
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Alexopoulos: With attractive spaces, there are new entrants and there's a lot of excitement and attention in the space.
We have more competition than we've had in recent times. So we've had more folks entering the space, and the M&A market is still relatively anemic based on historical norms. So, I think you kind of have a loan supply, demand issue, and there's been a little bit of spread tightening in our market in the last few months. And that's purely a function of too much demand going after too little supply.
I know sponsors have a lot of concern over the election year. There could be a rise in volatility or a challenge to get their deals financed. Where they can, they're looking to amend and extend any facilities just because they want to take the uncertainty off the table. |
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