Opportunistic Credit and Distressed Debt report

An in-depth look at the key trends reshaping the opportunistic credit space

Distressed debt and opportunistic credit strategies are at a significant developmental crossroads, with fundraising down year-on-year but opportunistic vehicles seeing a recent boost. In this special report we explore five developments market players expect in coming months, sharing their outlook for rising defaults and changing interest rates, the rise in co-operative agreements and asset-based lending strategies, and how LP appetites are changing.

FIVE KEY TRENDS

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From higher interest rates to challenges in commercial real estate, a host of factors have conspired to push more borrowers into financial distress in recent months. And with a significant maturity wall looming, investors in the evolving opportunistic credit and distressed debt space could be ideally positioned to step in.

Opportunistic credit finds favour as distressed loses its appeal

Several big hitters are now in the market with ambitious opportunistic credit strategies, hoping to capitalise as LPs turn away from conventional distressed plays. So, what has prompted this change of tack?

10 key trends: Higher-for-longer interest rates

Persistently high rates have transformed the landscape for opportunistic credit strategies, as borrowers seek cheaper refinancing solutions.

10 key trends: ‘All-weather’ approaches

GPs are increasingly pitching opportunistic credit strategies as an evergreen investment option for every part of the cycle.

10 key trends: The commercial real estate opportunity

A challenging property market is making for just the right amount of distress for opportunistic GPs.

10 key trends: The looming maturity wall

A swathe of borrowers searching for refinancing over the next few years presents fresh opportunities.

10 key trends: Bank capital releases

As banks seek to shed liabilities, there’s an opportunity for GPs to step in and pick up some bargains.

10 key trends: The shape of European stress

Weak European growth and rising defaults are tipping companies into the sweet spot for opportunistic credit.

10 key trends: Changing dynamics in US credit

The prospect of a rising default rate in the US is opening new avenues around liability management solutions.

10 key trends: Asia-Pacific’s distressed bonanza

There is plenty of capital for distressed debt strategies in the Asia-Pacific region, but putting it to use raises unique challenges.

10 key trends: The rise of credit secondaries

More and more LPs are embracing opportunities in credit secondaries, but the sector remains undercapitalised.

10 key trends: Difficult questions for distressed

A lack of genuine distressed debt opportunities is leading some GPs to consider whether this strategy is still a valid play.

Will there be a horde of UK zombies?

Tough times may lie ahead for the UK – but will expectations for distressed activity be realised this time?

Data: Distressed fundraising driven by economic cycles

Fundraising for distressed debt strategies continues to follow broader trends, after a poor 2023 for fundraising across the private credit space.

Why the struggling, high-quality firm is not a contradiction

Some US mid-market borrowers are finding things tough, but there can be a lot of value in helping them through their problems.

WeWork: A former unicorn in a real-world bankruptcy

SoftBank’s March 2023 uptiering has met resistance in the wake of WeWork’s November chapter 11 filing.

The distress and special situations market has seen plenty of false dawns, most recently when the covid pandemic offered only a brief rather than long-lasting opportunity. But with a “higher for longer” interest rate environment and a refinancing wall that may take a couple of years to manifest itself, this time might be different.

Macroeconomic trends such as covid-19 and the Ukraine crisis are fuelling a return to distressed debt investing. But just how will that play out? This special report looks to analyse the key trends facing the sector and what investors are really looking for.

Distressed debt remains one of private debt’s most popular strategies with investors, but it’s also one that demands perfect timing. Get it right and rich rewards beckon, but get it wrong and investor unrest won’t be far away. We explore all the key themes in a series of articles

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