Private Credit’s $143 Billion Leveraged Loans Pose Risk, DB Says

Business development companies are sitting on a massive pile of leveraged loans, which could be sold to meet redemption requests and push spreads wider, according to Deutsche Bank AG analysts.
BDCs — private debt funds that bundle direct loans — own nearly $143 billion of leveraged loans, the bank said in a note published on Tuesday, more than the $120 billion currently held by leveraged loan funds. The BDC market is already down about 11% so far this year, the analysts wrote, with recent earnings announcements indicating loan value markdowns and dividend cuts.