Private Debt: Yield, Safety and the Emergence of Alternative Lending (Wiley Finance)

322 Pages·2023·5.345 MB·English

by  Stephen L. Nesbitt

Private Debt
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Private Debt
Yield, Safety and the Emergence
of Alternative Lending
Second Edition
STEPHEN L. NESBITT
Copyright © 2023 by Cliffwater LLC.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-i n- Publication Data:
Names: Nesbitt, Stephen L., 1953- author.
Title: Private debt : yield, safety, and the emergence of alternative
lending / Stephen L. Nesbitt.
Description: Second Edition. | Hoboken,  New Jersey. : Wiley, [2023] |
Series: Wiley finance | Revised edition of the author’s Private debt, [2019]
Identifiers: LCCN 2022051297 (print) | LCCN 2022051298 (ebook) | ISBN
9781119944393 (cloth) | ISBN 9781119944416 (adobe pdf) | ISBN
9781119944409 (epub)
Subjects: LCSH: Investments. | Small business— Finance. | Bank loans.
Classification: LCC HG4521 .N427 2023  (print) | LCC HG4521  (ebook) | DDC
658.15/2—dc23/eng/20221024
LC record available at https://lccn.loc.gov/2022051297
LC ebook record available at https://lccn.loc.gov/2022051298
Cover Design: Wiley
Cover Image: © s_maria/Shutterstock
Contents
Introduction ix
List of Exhibits xv
Acknowledgments xxi
CHAPTER 1
Overview of US Middle Market Corporate Direct Lending 1
CHAPTER 2
The Historical Performance of US Middle Market Direct Loans 9
CHAPTER 3
Performance Comparisons to Other Asset Classes 23
CHAPTER 4
Current Yield or Yield to Maturity? 37
CHAPTER 5
Comparative Credit Loss Rates 43
CHAPTER 6
How Liquid Are Direct Loans? 49
CHAPTER 7
Middle Market Loans as a Hedge Against Rising Interest Rates 53
CHAPTER 8
Credit as a Separate Asset Class 57
CHAPTER 9
Senior and Unitranche Direct Lending 65
v
vi Contents
CHAPTER 10
Loans and the Theory of Credit 69
CHAPTER 11
Risk Premiums in US Middle Market Lending 87
CHAPTER 12
Covenants and the Loan Agreement 95
CHAPTER 13
Should Direct Loan Portfolios Be Leveraged? 99
CHAPTER 14
The Democratization of Alternatives 107
CHAPTER 15
Business Development Companies (BDCs) 111
CHAPTER 16
Interval and Tender Funds 127
CHAPTER 17
Selecting Direct Lending Managers 131
CHAPTER 18
Loan Valuation 153
CHAPTER 19
Investment Fees 161
CHAPTER 20
Portfolio Construction 167
CHAPTER 21
Expected Returns and Risks from Direct Lending 181
CHAPTER 22
Asset Allocation 191
CHAPTER 23
Direct Lending Performance Under a Volcker- like Fed Policy Regime 195
Contents vii
CHAPTER 24
Enter SOFR 201
CHAPTER 25
European Middle Market Direct Lending 207
CHAPTER 26
The Borrower’s Perspective 215
CHAPTER 27
Enhanced Lending 223
Conclusion 271
Glossary 275
About the Author 283
Index Citations 285
Index 287