Private Debt News Weekly Issue #58: Leverage Rises, Lawsuits Loom, and Family Offices Take Over
From stretched underwriting to retail NAV risk—private credit is expanding into everything, everywhere, all at once
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Welcome back to Private Debt News Weekly, where volume is up, structure is loose, and discipline is getting harder to find.
This week, direct lenders are cranking up leverage to win deals—with some buyout debt hitting 8–10x EBITDA. In parallel, risk warnings are rising: lawsuits are coming, insurers are leveraged, and retail investors are signing contracts that bar them from suing for mispriced NAVs.
At the same time, family offices are pouring in. BlackRock’s new survey shows private credit is the most in-demand asset class among the ultra-wealthy, beating out PE, real estate, and even public equities. L&G just linked up with Blackstone to route annuity flows into private credit, and deal pipelines are stacked.
Everything is working—until it doesn’t.
Key Market Themes
1. Family Offices Go All-In
According to BlackRock’s latest family office survey, one-third of global ultra-wealthy investors plan to increase their exposure to private credit in 2025—the highest of any asset class.
The reasons are simple: PE exits have slowed to a trickle, public markets are volatile, and private credit offers a stable stream of cash yields that don’t rely on IPOs or M&A. Firms like Hundle and BNY Mellon are calling private credit the “new core” for multi-family portfolios.
Why It Matters:
This is sticky capital—but it’s not passive. These investors are sharp, risk-aware, and used to having access. If performance slips or they smell NAV mismatches, they’ll be first out the door—quietly, but forcefully.
2. Lawsuits Are Coming
Oxford professor Ludovic Phalippou issued a blunt warning to UK regulators: semi-liquid funds are a ticking time bomb for investor lawsuits. His concern? NAV fees, vague disclosure, and contracts that bar retail investors from suing managers for mispricing.
He also pointed to insurance companies piling into levered funds with little understanding of stacked risk, calling it “a matter of emergency” if a tail event triggers redemptions.
Takeaway:
This won’t end in a crash—but when liquidity dries up or valuations snap, redemptions will spike and the lawsuits will follow. Retail capital doesn’t forget when it’s locked up.
3. Private Credit Loans Now Reach 10x EBITDA
To win deals, private lenders are leaning hard on earnings adjustments, PIK toggles, and delayed draw features—pushing leverage further than at any point in the post-GFC cycle.
Flexera’s recap includes ~$1B of incremental debt, pushing total leverage to ~7x.
The Jeppesen deal, backed by Apollo and Blackstone, reportedly lands between 8–10x.
Some software buyouts are clearing with 35–40% loan-to-value, which sponsors argue offsets high headline leverage.
Why It Matters:
Leverage math only works when growth materializes. According to MSCI, 45% of sponsor-backed deals are now at risk of tripping covenants—a threefold increase over 2010–2019 vintages.
4. Blackstone and L&G Formalize Insurance Partnership
Legal & General, the £92B UK insurer, has formally partnered with Blackstone to direct annuity capital into investment-grade private credit, and co-develop public/private hybrid strategies.
The structure gives L&G access to Blackstone’s origination engine, while Blackstone taps into steady insurance flows. It’s also a play to expand distribution to wealth and retirement platforms across Europe.
Why It Matters:
This is the model going forward: cross-platform hybrids with multiple distribution and return profiles. But it also introduces new operational risk—different investors, different liquidity timelines, same portfolio.
5. Secondaries Emerge as a Price Discovery Engine
Coller Capital closed its $6.8B secondaries fund last week—the largest ever dedicated to private credit. Blackstone is rumored to be close behind, with a new stand-alone strategy under Strategic Partners.
The appeal: mature assets, visible marks, and real buyer-seller negotiation, all in a market where most funds are 3–5 years into life and looking for liquidity or reset terms.
Takeaway:
In a world where primary NAVs are increasingly theoretical, secondaries offer the only real benchmark. Expect this segment to drive more fund re-rating and LP price anchoring over the next 18 months.
6. Retail Expansion Is Outpacing Oversight
GoldenTree just launched its new opportunistic interval fund aimed at individuals—one of dozens of new semi-liquid products hitting the wire this year.
But Phalippou and other critics warn that these products—often charging fees on NAVs and limiting redemption flexibility—are misaligned with what retail investors expect from a “credit fund.”
The Risk:
Regulators aren’t stopping the growth—but they’re watching. If NAVs diverge or drawdowns spike, gate clauses and vague disclosure could bring on class action exposure and reputational blowback.
Deals of Note
Flexera is marketing a $3B recap loan to refinance and dividend out its existing capital stack.
BetaNXT is pursuing a $950M refi to exit private credit and re-enter the syndicated market.
Jeppesen, bought by Thoma Bravo, landed $4B in buyout financing—reportedly with 8–10x leverage.
VinFast raised $510M from Deutsche Bank and SeaTown to support regional expansion.
Carlyle provided $400M to TPG to finance the carveout of Sabre’s hospitality tech unit.
Forward Outlook
Family office allocations will remain strong—but they’ll demand cleaner transparency and pricing.
More 2022–23 direct loans will get taken out by banks or refi'd at tighter spreads in H2.
Semi-liquid funds face a regulatory overhang, especially on NAV fees and redemption governance.
Secondaries will play a bigger role in fundraising, recycling, and LP portfolio management.
Structural leverage—at both borrower and fund level—is now a clear focus for insurers, regulators, and smart LPs.
Final Takeaway
Private credit is still in demand—but the foundation is getting more complicated.
With retail growing, leverage rising, and oversight still lagging, the market is expanding in every direction at once. But if one pillar fails—liquidity, marks, or confidence—the stress will cascade fast.
This isn’t 2008. It’s not even 2020. But it’s definitely not 2022 anymore.
Stay sharp.