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8 quotes from 1 episode on Private Equity Funcast, each with a timestamped link to the source.
William Tuck Hardie said private credit defaults remain low because fundraising lenders and equity sponsors roll troubled loans forward to avoid recognizing capital losses. Borrowers and creditors are pushing balance sheets originally due in 2028 out to 2030.
Market participants avoid defaults by quietly delaying troubled debt out of public view.
“And so if you find out about it, odds are I didn't do my job. So people kind of hold their nose, close their eyes, and kick the can down the road.”
Credit workouts are pushing balance sheets due in 2028 out to 2030.
“We're moving balance sheets now that are due in 2028 to 2030…”
William Tuck Hardie stated that equity and credit funds avoid formal bankruptcies while raising new capital. Businesses bought at high multiples carry debt they cannot support under current interest rates, so sponsors avoid sales that lock in losses.
“The reason for the relatively small percentage of capital E, capital D events of default and thus bankruptcies is really the dynamic that we've been talking about which is that the credit funds are fundraising, the equity funds are fundraising and nobody wants to find out how bad a deal they have on their books.”
“Most of the time, it's a business that was bought at too high a multiple with too much debt that the cost of that debt is too high as a result of the current interest rate environment. And people don't want to realize a permanent capital loss by putting the business up for sale and realizing that it's not going to sell for 100% of the debt and or any of the equity that was invested in it.”
Limited partners demand capital back, which disrupts lender unity. William Tuck Hardie noted that most creditors in a group of 10 may agree to an extension, but an individual lender can block the deal when investors demand cash.
“The limited partners, the investors in these vehicles are asking for capital back…”
“We could get nine out of the 10 of them to agree, but one of them just simply said, 'I can't do it. My investors will string me up by my thumbs if I agree to an extension on this credit.'”
William Tuck Hardie expects more corporate balance sheets to mature than in 23 and 24. Lenders will still roll forward a large portion of these obligations out of court.
“I think you're going to see more of those balance sheets come due than you did in 23 24. But certainly not all of them. A big chunk of them will continue to get kicked.”
William Tuck Hardie uses Claude to analyze borrower flexibility in credit agreements. The AI completes document reviews in minutes, replacing legal work that previously took associates up to 36 hours.
“Claude has replaced a lot of what we used to hire junior resources to do because I can now put credit docs into Claude and it'll tell me in five minutes what the borrower has in the way of flexibility, whereas it would take either one of my associates or some law firm's associates a day or day and a half to do it.”
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