As concerns around default rates and macroeconomic instability remain top of mind across the private credit industry, ORIX USA’s Group Head of Direct Lending Nik Singhal spoke with Private Equity Wire to discuss the key factors that managers may consider to differentiate themselves when navigating growing dispersion in the current cycle in the outlet’s September Insights report.
Highlights from Nik:
- “Publicly available BDC results are a good proxy for dispersion. Previously, brand name and size mattered a great deal. Now, allocators are digging into firms that actually navigated the cycle well and firms that faltered.”
- Rising non-accrual rates in recent months have fueled default concerns, but even here a degree of balance can be brought to the narrative. Singhal says: “Non-accrual is an accounting concept, and it can potentially be mitigated by reducing the interest rate, or by switching to payment-in-kind and potentially returning a loan to accrual status. There is judgment involved in that classification, which is why headline non-accrual figures alone are not a reliable measure of the stress actually present in a portfolio.”