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Message: <blockquote data-quote="al97" data-source="post: 154518" data-attributes="member: 29424">16 Nov - Commercial Awareness - Private EquityTopic: Private Equity Being Creative<a href="https://www.ft.com/content/32dbf11f-0254-496c-8c77-c813987febeb" target="_blank">https://www.ft.com/content/32dbf11f-0254-496c-8c77-c813987febeb</a><a href="https://www.ft.com/content/ff1b5904-5210-4c56-9157-7f2b4c05a750" target="_blank">https://www.ft.com/content/ff1b5904-5210-4c56-9157-7f2b4c05a750</a>Hello, glad to be back. I’m aware that this thread has become more like a weekly rather than a daily commitment. My apologies. I did not expect the workload to kick in so quickly. If anyone has any experience at a PE firm as a paralegal, please please feel free to share your (actionable) tips on how to impress the associates/seniors, so you can pass your probation…Something I read the past week that really interest me was the direction that PE funds are going to survive the high interest rate era. First, it is the boom of private credit. I will touch on this briefly because this has been mentioned in my previous thread. Private credit is basically loans provided by a lender other than a bank. Unlike corporate bonds, private credit loans are not traded on the public market and they often cater to borrowers who are easily rejected by banks, which have very little risk appetite. A recent example of private credit growth is Blackstone. Blackstone recently raised $400mn to boost its private credit arm. The loan was securitised by the private credit fund that is worth $52bn. Second, PE firms are borrowing money from banks at a fund level. This is notable because the portfolio companies that PE firms own borrow money by securitising themselves. For example, if CVC IX owns Tinder (being CVC’s portfolio company) and if Tinder requires a loan, it will borrow money from the bank by collateralising its own assets. However, now that we’ve an era of high IR, banks are reluctant to lend to high-risk companies with little prospect of paying back. If these portfolio companies are unable to get a loan > they struggle to grow as a business > unable to generate lucrative returns for LPs > the GPs suffer. Therefore, some agree that it is a better strategy for the funds to do the borrowing because banks are willing to lend at a low interest rate to a fund with much money i.e. Blackstone. However, some LPs are not very happy because the funds are using their money as a collateral to borrow from banks. In the event that the loan is defaulted, it is the LPs money that would be used to pay back the debt.</blockquote>

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