Bloomberg Quotes Ranesh Ramanathan on Private Credit Funds as Business Owners
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Akin special situations & private credit practice co-leader Ranesh Ramanathan was quoted by Bloomberg for the article “Private Lenders Take Control of More Companies as Rates Surge.”
The article looks at private credit funds’ move to deal with the downside of what Bloomberg calls “the easy-money era of the past decade” by increasingly taking control of businesses struggling with loan agreements.
Ranesh said, “That is really a sign of the times more than a change in attitude of private credit funds. For the last 12 years or so, there has been so much cheap money in the market that refinancings were largely available and few defaults were seen, other than where the sponsor threw in the keys.”
On the topic of lenders now, contrary to initial expectations, becoming business owners rather than simply getting interest payments and seeing the return of their principal, he said, “The upside is potentially higher returns if they can turn the business around, but this is generally not the objective of private credit lenders—they would prefer to just get paid what they are owed and move on.”
