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Private Lenders Are Offering Cheaper Debt Than Wall Street Banks

  • Shadow lenders dish out low-cost debt to grow market share
  • By contrast leveraged loans, junk bonds have sold off sharply
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A dirty little secret in a $1.2 trillion world of credit is getting exposed as the Wall Street rout deepens: Private debt is now the cheaper financing option for big-ticket leveraged borrowers than the ailing public market -- upending industry norms.

As banks get pummeled by risk aversion and sinking asset values, direct lenders are lavishing risky companies and private-equity firms with capital at rates below what’s available in the volatility-lashed high yield and syndicated loan market.