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VIDEO: ‘A downturn will test how the documents perform,’ says Ares’ Arougheti

Controversial aspects of deal structures such as EBITDA addbacks and restricted payment baskets will come under scrutiny as and when conditions get tougher, says Ares' Michael Arougheti.

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The widespread use of covenant-lite loans will delay distress but, when a downturn hits, “structural nuances” such as EBITDA addbacks and restricted payment baskets will be put to the test, says Michael Arougheti, director, co-founder, chief executive officer and president of New York-based fund manager Ares Management.

In an eight-minute video with PDI, he reflects on the growth of the market beyond mid-market corporates to real estate, structured credit and asset-backed credit; how growth in investor allocations will be sustained regardless of the rate environment; and why retirees can’t get the 6-8 percent return they need without private credit solutions.