Private Credit Lenders Giving Up Protections to Win Bigger Deals

Private credit firms seeking to capture market share from traditional bank lenders are giving up investor protections as they snag larger financings, according to Moody’s Investors Service.

Direct lenders have been siphoning business from the broadly-syndicated leveraged loan market in recent years, in part by staking a claim to increasingly larger deals. But an analysis by the credit-rating firm shows that legal safeguards that protect investors tend to weaken as the size of the transactions increase.

“Private credit is dropping maintenance covenants in larger deals,” analysts including Derek Gluckman wrote in a Thursday report, referring to a type of investor ...