Private Credit Enters the Equity Business as Borrowers Struggle

Private credit firms are in the business of lending, not owning. But as more borrowers start to struggle with their liabilities, lenders are swapping their debt positions for equity stakes to try and stem losses.

There’s been a string of debt-for-equity swaps in recent weeks, including for British auction houseBonhams, telecommunications supplier Netceed, Italian sportswear maker Dainese and French radiology-center specialist Oradianse.

While these swaps can produce upside, the original investment was designed to be a loan that provided stable income over time, rather than an equity play. The latter requires a different set of skills ...