Private credit is broadening its reach beyond its traditional foothold in leveraged lending, with institutional-grade borrowers increasingly turning to direct lenders for capital solutions once dominated by banks, according to a report by Bloomberg citing a new research note from Barclays.
The $1.6tn private credit industry, long a go-to for highly levered companies seeking speed and flexibility, is now carving out a growing presence in the investment-grade segment – a shift that underscores the asset class’s rising prominence in corporate finance.
Barclays sees private lenders expanding into areas such as asset-based lending, mortgage, and auto loan securitisations, further diversifying their offerings and pushing deeper into what has traditionally been bank-dominated territory.
The bank estimates the total addressable market for private credit to be as high as $22tn, encompassing public credit markets and commercial bank balance sheets. Capturing even a modest 1-2% share of that market could unlock hundreds of billions in capital deployment opportunities over the coming decade, the report noted.
While private capital’s involvement in investment-grade deals has historically been limited, a number of recent high-profile transactions suggest that may be changing. Barclays pointed to Dow Chemical’s $2.4bn sale of a stake in an infrastructure entity and Rogers Communications’ CAD7bn ($5bn) divestiture in April as indicative of private credit’s growing appeal to high-grade borrowers.
Despite these gains, the investment-grade bond market remains highly efficient, with the ability to launch and price large deals within a single day. Still, regulatory constraints on bank balance sheets are opening new opportunities for direct lenders to step in – particularly for borrowers seeking long-dated capital commitments for assets such as data centres and other infrastructure.
