Insight
Converting cash-pay debt to PIK is a definitive signal of distress
“If you're restructuring your deals where you're converting some of your current cash into PIC, there's only one reason you're doing it. You're doing it because the company doesn't have the free cash flow to service your loans.”
Opinion
Kantowitz: Public equities unlikely to yield 10-15% in the near term
“It's hard to see our equity markets growing 10, 15% from here in the near term, given all the vol in the markets, but if you choose to invest in this asset class and you can deploy, you're going to be sitting there generating low double-digit returns, hopefull…”
Prediction Not checkable as stated
Commercial banks will inevitably find ways to re-enter direct lending
“They should, and they will find a way to get involved in this business, but it's hard. They're not really able to take these assets on their own balance sheet. All the issues that we all lived through during the GFC, they're muted today, but they still resonat…”
Assertion Not checkable as stated
AUM growth forced former middle-market direct lenders to migrate upmarket
“If you look at the entities that were dominant in the middle market 10, 15 years ago, They don't play in the middle market anymore. As their AUM, their capital base has grown, deployment pressures become so significant that they've had to find more efficient w…”
Opinion
Mezzanine debt investing is difficult outside the smaller end of the market
“It's been a difficult market to play in mezzanine, unless you're playing really at the smaller end of the market where it's not as common.”
Disclosure
Invesco's direct lending team refuses secondary loan pieces from competitors
“If we were to get a call from another direct lender who said, hey, we've closed the deal. We're long, fifty million dollars. We'll send you our IC memo. Would you guys want to buy it? Not for any reason other than that's just not how we conduct business. We wo…”
Insight
Multi-page EBITDA definitions in credit agreements render leverage covenants completely toothless
“You can find the best business in the world, but you can blow the investment on the documentation. Think about a leverage covenant. The definition of EBITDA in a credit agreement is two pages long. If you get that definition wrong, the covenant may be toothles…”
Insight
PE sponsor rotations disincentivize direct lenders from competing on aggressive pricing
“None of us are really incented to go in there with aggressive pricing, because even if you win, you lose. We're all going to be in the deal regardless. You compete on things like relationship. You compete on things like sector expertise.”
Assertion Partly supported
Overall U.S. gym membership grows annually despite massive customer turnover
“When you look at the macro dynamics in the U.S., gym membership grows every year.”
Disclosure
Invesco caps fund-level leverage at one turn across its direct lending vehicles
“Across all of our vehicles, even where we have leverage, we tend to be more conservative. We won't put more than a turn of leverage on a vehicle.”
Assertion Supported
Invesco's private credit platform manages approximately $50 billion in assets
“Invesco's private credit platform, which today is about a fifty billion dollar credit platform.”
Assertion Supported
Five-billion-dollar unitranche private debt deals are now routinely getting done
“Today, I mean, you know, billion dollar unit tranches, there's nothing unique about them. You know, five billion dollar unit tranche deals are getting done.”
Assertion Supported
Private equity firms sponsor at least 70% of direct lending transactions
“Today, at least 70% of all direct lending is sponsored.”
Assertion Supported
Direct lending loan-to-value ratios currently average in the mid-forties
“Typically, loaned values today are running in the mid-forties.”
Disclosure
Invesco partners with peer direct lenders on almost every private debt deal
“With maybe the exception of one or two, on every deal we do, we will partner up with one or two other direct lenders.”
Assertion Supported
Capital inflows have compressed private credit spreads by 50 to 75 bps
“We have seen spreads come in, 50, 75 basis points, but the reason you're still seeing so much capital coming into the market is, On a relative basis, it's still an incredibly attractive asset class.”
Assertion Partly supported
Gym businesses lose 40% to 50% of their clients every year
“The thing about gym businesses, on average, you lose 40 to 50% of your clients every year.”
Insight
One turn of fund leverage generates over 300 basis points incremental yield
“A turn of leverage will generally afford you somewhere in the neighborhood of 300 basis points plus of incremental yield.”
