FTI Consulting August 2024 Newsletter

Given the explosive growth of leveraged credit markets over the last decade, the ascendance of private credit, the extreme lengths that PE sponsors will resort to in their efforts to protect teetering investments, and the reluctance of traditional lenders to foreclose on failing credits, the days of intense but short-lived default cycles might be over, barring a cataclysmic event. Not even COVID-19 was up to that task. Instead, we might have to get used to a “slower and steadier” version of default cycles, and that’s okay.

There are nascent signs the domestic economy is slowing, interest rates won’t be returning to the QE days, and it is still a target-rich environment of vulnerable companies out there — but it won’t happen as quickly or intensely as many of us would prefer.

Ultimately, that may be a good thing.

In the words of today, tag this with “Private Equity Portfolio Marks” and “Volatility Washing.”