2025 Private Credit Trends to Expect, UK Restructuring Updates and More from THE CRED

2025 Private Credit Trends to Expect, UK Restructuring Updates and More from THE CRED

Originally published Dec. 23 on Dechert.com's THE CRED

Private Credit in PE: Will it Continue to Thrive in 2025?

By Markus Bolsinger , Sabina Comis , Chris Field , David Miles , Phil Butler , Eng-Lye Ong , Eliot Relles

This is an excerpt from Dechert's 2025 Global Private Equity Outlook. To read the full report, click here.

The global private credit market continues to grow at pace, having quadrupled in size over the past decade to exceed the US$2 trillion mark for the first time in 2024, according to Preqin; with BlackRock predicting that figure could reach US$3.5 trillion by 2028.

Indeed, the growth of private credit has been so rapid that the IMF now fears the market may pose a risk to financial stability – it issued a warning earlier this year, urging regulators to be more proactive and intrusive in their supervision.

For PE firms, this rapid evolution of the private credit sector comes with certain ironies. On the one hand, it effectively represents a rival asset class from a fundraising perspective, providing investors with a different type of risk and return profile; some funding that might once have found its way into PE funds may now have been invested in private credit instead, particularly during “risk-off” periods for investors worldwide. On the other hand, the private credit sector provides a variety of new opportunities for PE firms to secure financing at both the portfolio and the fund level. Blackstone Alternative Credit Advisors, for instance, signed a US$5.5 billion multicurrency senior secured revolving credit facility, which is considered top of its class for the BDC industry; and Centerbridge Partners acted as co-lender on a US$510 million asset-based lending (ABS) transaction with Blue Owl, acting as collateral manager, and Société Générale, as arranger.

Meanwhile, KKR has worked on more than 25 individual financing transactions in the past year totaling over US$13.76 billion, including asset-based facilities, rated notes issuances, repurchase transactions and other innovative structures.

Indeed, PE firms attracted to the agility, speed and suitability of private credit products continue to make more use of the industry as the search for liquidity goes on. In our survey, firms worldwide highlight several areas in which private credit has supported their activities.

Most commonly, almost two-thirds of PE firms (63 percent ) say they now use private credit to support acquisition financing in their portfolios; in the Asia-Pacific region, three-quarters of respondents cite this use case – perhaps surprising given the strong levels of bank liquidity available in the region for acquisitions, though India and Australia have seen significant private credit activity.

“The appetite for private credit remains strong across the product range currently being made available,” says David Miles, Dechert co-head of global leveraged finance, corporate and securities (London). “With a hopefully reducing interest rate environment approaching and an improving M&A market, it will be interesting to see how private credit deploys relative to other financing solutions.” Private credit is also underpinning refinancings and recapitalizations, with 62 percent  of PE firms worldwide using the sector’s solutions in this way. More broadly, almost half of PE firms (47 percent ) say they use private credit for general corporate borrowing at the portfolio level. Net asset value (NAV) financing is another area in which the private credit sector continues to make inroads into PE firms, with significant minorities of funds taking on debt. Such facilities, involving loans secured against the net asset value of the underlying assets in their portfolios, provide GPs with a means to generate cashflow without having to turn to the secondary market. In the current environment, where the slowdown in exit activity has been marked, that functionality is particularly valuable, enabling firms to return cash to investors. Texas-based Vista Equity Partners and Sweden’s Nordic Capital are among those to have used NAV financing this year.

Similarly, more than a third of PE firms in this research (36 percent ) say they have set up subscription lines. These are loans secured against the commitments to the fund made by investors – rather than on the underlying assets – and help the GP to manage capital calls on LPs more efficiently and LPs to manage their own funding requirements. The added advantage is that by shortening the holding period for investors’ capital, the internal rate of return (IRR) on investments that appreciate in value will naturally be higher (but cash-on-cash return will be lower).

However, in a falling interest-rate environment, it may be that private credit investors are inclined to divert their allocations to other capital strategies, including PE, warns Bolsinger.

“If rates are coming down, we may see private credit cool a little bit,” he says. “These lenders have wedged themselves into the space where the banks used to be before they retreated, and I don't think that's going to change. I do think, however, you will see banks trying to get into the private credit market, as Wells Fargo did when it partnered with Centerbridge.”


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Ares’ Mike Dennis on the Growth of Direct Lending in Europe: THE CRED Convos

What trends are driving the private credit industry in Europe? Mike Dennis, Co-Head of European Credit at Ares Management, highlights how private credit is catching up with private equity in European markets, the increasing retail and institutional appetite for the asset class, and private credit’s “huge runway for growth” in Europe. Watch here.


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Out-of-the Money – Watch Out for the UK Restructuring Plan

By Kay Morley-Evans , Chris Horrocks

During the course of 2024, the popularity of UK restructuring plans continued to flourish, providing distressed companies with an opportunity to restructure and be rescued while leaving out-of-the-money creditors out-of-luck and out-of-options.

Recap on the UK Restructuring Plans

Restructuring plans were introduced in the UK in 2020 pursuant to the Corporate Insolvency & Governance Act 2020. In brief:

  • A company can propose to its creditors and shareholders a plan to restructure some or all of its financial liabilities;
  • For the purposes of voting on the plan, creditors and shareholders are divided into classes;
  • The approval threshold is 75% in value of those creditors and/or members voting in person or by proxy;
  • If every voting class does not vote in favor of the proposed plan, the company can ask the court to impose a cross-class cram down (a “CCCD”);
  • To impose a CCCD, the court must be satisfied that:

(a) none of the members of the dissenting class(es) would be any worse off if the plan is sanctioned than they would be in the relevant alternative; and

(b) the plan must be approved by 75% in value of a class of creditors (or members) voting at the meeting who would receive a payment or have a genuine economic interest in the company in the event of the relevant alternative.

  • The ‘relevant alternative’ is what is most likely to happen to the company if the proposed restructuring plan is not approved – for many companies, this typically means administration or liquidation (or any similar insolvency proceedings).

Key Trends in 2024

  • Real Estate: Restructuring plans continue to grow in popularity as a means of restructuring commercial real estate portfolios, particularly in the retail and leisure sectors, with examples including Superdry and Cineworld. In this context, restructuring plans are being used as an alternative to company voluntary arrangements to substantially restructure leasehold obligations, impose reductions in rent, release third-party guarantees and write off historic debts owed to landlords, rating authorities and other unsecured creditors;
  • PFI Projects: In Consort Healthcare, a restructuring plan was proposed for the first time to amend a PFI contract with the NHS;
  • Private Credit: Ares recently successfully proposed a restructuring plan in Scotland in respect of the Dobbies Garden Centres in order to right-size its leasehold estate and liabilities;
  • AIM Listed Companies: Project Verona Limited involved the first Restructuring Plan successfully proposed by an AIM-listed company; and
  • Cross-Border: Foreign companies continue to view the UK as a desirable destination to restructure their liabilities. Adler, being a German real estate company with German law debt, sought to restructure its liabilities in the UK. To create a ‘sufficient connection’ to the UK (so that it could utilize a restructuring plan), the governing law of its finance documents was changed from German law to English law; andIn the case of Project Lietzenburger, a Luxembourg-incorporated entity with real estate investments in Germany, also proposed a restructuring plan to restructure its German and Luxembourg governed debt documents. A sufficient connection to the UK was established following a ‘COMI’ shift to the UK.

As new cases are proposed and approved by the English courts, precedent continues to evolve, providing greater certainty and predictability for participants. However, for out-of-the-money creditors, the harsh reality remains that for companies facing imminent insolvency where, absent the restructuring plan being approved, the company will be placed into a value destructive insolvency proceeding, the scope to challenge and recover value remains extremely limited. Creditors in distressed situations therefore need to be proactive and alive to the fact that restructuring plans are here to stay and are being used in a broad range of situations with increasing levels of creativity. Creditors who fail to recognize these growing trends very much risk being sidelined and left out in the cold for some time to come.


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Street CRED: Highlights from the Milken Middle East and Africa Summit 2024 “Investing in a Shared Future”

By Amanjit Kaur Fagura

Dechert’s Street CRED offers first-hand, street-level takeaways from key private credit conferences around the globe.

Earlier this month, the Milken Institute hosted an impactful event in Abu Dhabi, gathering world-renowned thought leaders, senior executives, investors, government officials, and philanthropists. The summit aimed to address global challenges and develop strategies for a prosperous future for all. Here are a few highlights:

A Changing Global Economy

  • Economic Outlook: Chaired by Mike Milken, a panel discussed the substantial economic potential of the Middle East and Africa, emphasizing significant investments in infrastructure and sustainable development.
  • Alan Schwartz's 4 D’s: Alan Schwartz of Guggenheim Partners introduced the 4 D’s (Demographics, Debt, Deglobalization, and Dysfunction) as pivotal factors that could position the Middle East as the next global financial hub.
  • Geopolitical Challenges: Sessions addressed the region's geopolitical instabilities, highlighting issues such as political instability, security crises, food and water scarcity, border disputes, and domestic disruptors, while expressing hope for resolution.

Private Credit and Asset Management

  • Private Credit Growth: The importance of private credit in global economies was underscored, noting its growth alongside caution regarding pending maturity dates and potential credit quality deterioration.
  • Syndicated Loan Market: Experts flagged a potential resurgence in the syndicated loan market.
  • Innovation in Asset Management: Discussions focused on the evolving asset management space and the ongoing innovation driven by stakeholders.

Technology and AI

  • AI in the Region: Engaging discussions on the rise of AI covered its pros and cons, emphasizing the need to prepare for its next phase in both professional and personal lives.

Social Impact and Healthcare

  • Sports and Social Impact: The social impact of sports in the Middle East was assessed, along with increased investment in healthcare.
  • Women’s Health: First Lady of the United States, Jill Biden, highlighted the critical need to focus on and invest in women’s health.

The event provided excellent opportunities to exchange views and insights with stakeholders from across the region and beyond. We look forward to Dechert’s continued support of the Milken Institute at their Global Conference in May 2025.


More From Dechert

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2025 Global Private Equity Outlook: Explores growth opportunities and emerging trends as we head into 2025

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Join the Dechert Team at Upcoming Conferences

Members of the Dechert team will be available to meet and discuss market opportunities with you at:

Fund Finance Forum — January 23 — London, UK

Funds Congress — February 6 — London, UK

Private Credit Summit — June 10 — New York, NY


THE CRED Editorial Board

Claire Bentley , Matt Carter , Jonathan Gaynor , Angelina Liang , David Miles , Nathalie Sadler


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