Private-Credit Risk Builds as Leverage Levels Scale New Highs
- Leverage of 7 times earnings or more surged 89% in 2021
- Higher debt loads becoming more prevalent across sectors
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Red-hot competition in the booming $1 trillion private-credit market saw leverage levels soar in 2021, another sign of riskier lending as the fight to win business intensifies.
The number of U.S. mid-sized firms that took on debt equal to an average of seven times earnings or higher last year reached an all-time high, jumping 89% from 2020, according to investment bank Lincoln International. Higher leverage has been more prevalent in the tech sector for some time, but it’s also creeping into others such as healthcare now, as lenders try to find an edge.