Private Debt News Weekly Issue #67: The Great Pivot, NAV Creep, and Distressed Dawn
Banks lose deals to private credit while leverage spreads into every corner of private markets
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Private credit is not just competing with banks anymore. It's beating them outright. Three major refinancing deals this week saw companies abandon bank financing mid-process to embrace direct lenders: Vantage Specialty Chemicals swapped $800 million in bank debt for a $900 million private loan from Apollo and Silver Point, while Wrench Group ditched Jefferies to secure $1.3 billion from Blue Owl and Oak Hill.
The pivot trend accelerated as Justrite Safety pulled its $595 million leveraged loan after tepid investor interest, turning instead to Blackstone for over $800 million in private credit. All three deals priced at 4.75% over benchmark rates, suggesting standardized terms as private credit becomes the refinancing market of choice.
Meanwhile, NAV loans are spreading beyond traditional private equity into real estate and infrastructure funds, with 90% of lenders predicting growth in 2025. Partners Capital is eyeing the first distressed opportunities in 10-15 years as borrower-friendly terms from 2019-2021 create restructuring needs.
Ares is planning a €1.5 billion European credit secondaries deal while Logan Group and KWG secured $800 million at 10% yields for Hong Kong real estate, down from 13% previously. The market is rewarding private credit's flexibility while punishing bank rigidity.
Key Market Themes
1. Private Credit Completes Bank Market Takeover
Three major refinancing deals this week demonstrated private credit's decisive victory over traditional bank financing. Vantage Specialty Chemicals replaced $800 million in existing bank debt with a $900 million direct loan from Apollo and Silver Point, while Wrench Group secured $1.3 billion from Blue Owl and Oak Hill to replace bank financing arranged by Jefferies, according to people with knowledge of the transactions.
Justrite Safety provided the clearest example of market dynamics, pulling its $595 million leveraged loan after pricing widened from 3.5-3.75% to 4% over benchmark due to tepid investor interest, according to Bloomberg reporting. The company then secured over $800 million from Blackstone at the same 4.75% pricing as the other private credit deals.
According to Fitch Ratings, the agency withdrew its B- credit rating for Vantage after the private refinancing, citing "tightening liquidity and weak earnings expectations" but acknowledging the move away from public ratings and disclosures that buyout firms increasingly prefer.
Market Transformation
The 4.75% standardized pricing across multiple deals suggests private credit has achieved market efficiency while maintaining structural advantages over bank financing. Public rating withdrawals indicate a permanent shift toward opacity and flexibility over transparency and liquidity.
2. NAV Loans Spread Into New Asset Classes
Net-asset-value loans are expanding beyond traditional private equity into real estate and infrastructure funds, with 43% of lenders now backing real asset holdings, according to a Rede Partners survey. 90% of respondents predict NAV loan growth in 2025 as private company owners seek cash generation methods amid the three-year dealmaking slump.
Smaller funds are increasingly using NAV facilities, with lenders seeing "marked increases" in deals for funds €500 million or less, according to the survey. Continuation funds are becoming collateral as Bain Capital and Leonard Green use commitments to underpin additional borrowing for "extra investable capital."
According to 17Capital estimates, the NAV financing market is projected to grow to $70 billion from $20 billion in 2020, though regulators warn about leverage creeping into "nearly every facet of the private market." Pemberton Asset Management closed its first $1.7 billion NAV financing fund this week.
Structural Risk
NAV loans layer additional leverage onto already debt-heavy private companies while using portfolio valuations as collateral. According to Fokke Lucas of 17Capital, the technique "suddenly" creates capital needs for mature funds while regulatory concerns mount about systemic leverage accumulation.
3. Distressed Opportunities Emerge After Decade Drought
Partners Capital is examining distressed private credit opportunities for the first time in 10-15 years as weakened lending standards from 2019-2021 create restructuring needs. According to Emma Bewley, partner and head of credit at Partners Capital, borrower-friendly terms and new market entrants are causing "divergence" in returns despite solid headline performance.
Payment-in-kind deferrals surged to four-year highs in Q2 while default and non-accrual rates rise across the $1.7 trillion private credit market, according to recent analyst reports. Bewley expects "elevated default rates" creating "interesting opportunity sets" similar to 2001-2005 rather than "broad-based financial crisis".
The performance dispersion emerges as retail capital flows into perpetual vehicles like private BDCs and interval funds that offer periodic redemptions rather than five-to-seven-year maturity waits. However, these vehicles can suspend redemptions if necessary.
Credit Cycle
Distressed opportunities indicate private credit's maturation into normal credit cycles rather than the continuous growth phase of recent years. Retail capital entry coincides with quality deterioration, suggesting timing challenges for non-institutional investors.
4. European Credit Secondaries Accelerate
Ares Management is planning a €1.5 billion credit secondaries transaction for legacy European loans from its flagship direct-lending strategy, according to people with knowledge of the matter, with Campbell Lutyens advising on the process. The deal follows Ares's assembly of a €30 billion European fund, the largest regional direct-lending pool ever raised.
According to Evercore data, credit secondary volume is set to exceed $18 billion this year, up from $11 billion last year and $6 billion in 2023, making it the fastest-growing segment within the broader secondaries ecosystem. European transactions reflect regional market maturation and LP liquidity demands.
Ares's prominence in European direct lending positions the firm to capitalize on secondaries demand while providing liquidity solutions for investors in aging fund vintages that face extended hold periods due to limited exit opportunities.
Regional Dynamics
European credit secondaries growth indicates market sophistication and LP portfolio management needs as regional private credit matures. Large fund sizes create natural secondaries opportunities while limited exits drive liquidity demand.
5. Real Estate Credit Shows Renewed Appetite
Logan Group and KWG Group are refinancing their $1.05 billion Hong Kong luxury project loan with an $800 million facility at 10% yields, down from 13% previously, according to people familiar with the matter. RRJ Capital and Davidson Kempner will provide $400 million and $250 million respectively, while Pimco dropped out from the original deal.
The Corniche development refinancing demonstrates rising investor willingness to extend credit to Hong Kong real estate despite sluggish market conditions. According to project sales records, only 80 of 295 units sold since 2023 despite price cuts of nearly 50% last year.
Deutsche Bank and Dignari Capital will contribute $75 million each to the new 30-month facility with a 15-month make-whole option. The deal helps Logan avoid default on a HK$10.2 billion bank loan while supporting the company's $8 billion offshore debt restructuring.
Market Recovery
Lower pricing and institutional participation suggest selective recovery in Asian real estate credit markets. Project-specific financing allows lenders to avoid broader market exposure while capturing higher yields than traditional markets.
6. Data Center Financing Expands Geographically
According to Bloomberg reporting, Blue Owl's Stack Infrastructure is considering up to €600 million in debt financing for Milan data centers, potentially structured as commercial mortgage-backed securitization. The deal could close as early as Q4 2025, expanding data center financing beyond traditional US markets.
CMBS structures for data centers reflect institutional appetite for AI infrastructure investments while providing non-recourse financing backed by facility cash flows rather than corporate guarantees. Italian expansion demonstrates global demand for data center capacity.
The transaction follows massive data center deals including Meta's $29 billion Louisiana facility and JPMorgan's $22+ billion Vantage Data Centers loan, suggesting standardized financing approaches for hyperscale infrastructure projects.
Infrastructure Evolution
European data center financing indicates global infrastructure opportunities beyond US markets while CMBS structures provide scalable financing for asset-backed transactions. AI demand drives geographic expansion of specialized infrastructure.
7. Hong Kong Refinancing Tests Regional Credit
Logan and KWG's $800 million refinancing serves as a "bellwether" for Hong Kong real estate credit viability amid ongoing market stress, according to people familiar with the transaction. The $250 million reduction from the original $1.05 billion facility reflects partial debt paydown while maintaining project financing at improved terms.
Investment firm participation including RRJ Capital, Davidson Kempner, and Deutsche Bank demonstrates institutional confidence in specific projects despite broader Chinese developer distress. The 15-month make-whole clause ending in November triggered refinancing timing.
10% yields represent 300 basis points improvement from 13% previously, indicating market normalization for quality assets with strong collateral characteristics. 30-month tenor provides medium-term stability while maintaining refinancing optionality.
Credit Assessment
Project-level financing allows lenders to separate quality assets from sponsor credit risk while yield compression reflects improved market sentiment for Hong Kong luxury residential properties with demonstrated sales.
Deals of Note
Vantage Specialty Chemicals - $900M private loan from Apollo and Silver Point replacing bank debt
Wrench Group - $1.3B Blue Owl and Oak Hill financing at 4.75% over benchmark
Justrite Safety - $800M+ Blackstone private credit after pulling bank loan
Logan/KWG Corniche - $800M Hong Kong real estate refinancing at 10% yields
Ares European Secondaries - €1.5B continuation vehicle for legacy loans
Forward Outlook
Bank-to-private credit refinancing trend accelerates across sectors
NAV loan expansion into real estate and infrastructure funds continues
Distressed opportunities emerge as 2019-2021 vintages face stress
European credit secondaries volume grows with market maturation
Data center financing expands geographically through CMBS structures
Standardized pricing at 4.75% over benchmark becomes market norm
Final Takeaway
Private credit has moved beyond competing with banks to systematically replacing them. Three major refinancing deals this week at identical 4.75% pricing demonstrate how standardized terms and superior execution are driving permanent market share shifts away from traditional syndicated lending.
According to the Rede Partners survey, NAV loans spreading into real estate and infrastructure with 90% of lenders predicting growth reveals how leverage creeps into every corner of private markets. Smaller funds and continuation vehicles becoming collateral sources indicates structural changes in how private capital operates.
Partners Capital's first distressed focus in 10-15 years signals credit cycle normalization as 2019-2021 borrower-friendly terms create restructuring opportunities. Retail capital flowing into perpetual vehicles during quality deterioration periods suggests timing challenges for non-institutional investors.
Ares's €1.5 billion European secondaries deal and Logan's $800 million Hong Kong refinancing at improved 10% yields show how regional markets mature while credit conditions normalize for quality assets. Blue Owl's Italian data center financing extends AI infrastructure opportunities beyond US markets.
The great pivot from banks to private credit appears permanent rather than cyclical. Flexibility, speed, and relationship focus have proven structurally superior to public ratings, disclosure requirements, and committee-driven decision-making. Private credit's victory is banks' institutional failure to adapt to modern capital market demands.
Market leadership now belongs to platforms that can execute quickly, structure creatively, and price competitively while managing increased leverage, geographic expansion, and credit cycle transitions. The standardization at 4.75% pricing suggests market efficiency without sacrificing flexibility that originally defined private credit's competitive advantage.
That 4.75% pricing is interesting - Apollo's got a leg up because they own an insurance company, so their cost of capital is lower. Silver Point and Oak Hill don't have that same advantage.