Private debt stands as a distinct option for financing enterprises, deviating from conventional and unconventional asset classes.

Here's a simplified look at its key aspects:

 

Characteristics of Private Debt Financing:

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1. Non-Bank Funding: Private debt evolved in response to the gap in small and medium-sized enterprise (SME) financing, primarily due to increasingly stringent capital requirements imposed on banks.
    

2. Tailored Bilateral Agreements: Private debt offers the flexibility to customize financing terms for specific projects, considering the interests of both the issuer and creditor. Importantly, the process for obtaining financing is typically more expedient compared to traditional bank lending.
    

3. Enhanced Profitability: Investments in private debt markets often yield higher returns due to the premium attributed to lower liquidity, coupled with the agility and swiftness in securing funding.
    

4. Robust Creditor Protection: A flexible approach to collateral and financial/non-financial covenants provides investors with a strong defense against credit risk.
    

5. Active Repayment Oversight: Comprehensive control and ongoing communication with the financed entity facilitate swift responses to potential repayment issues.

 

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For investors:

Private debt is a rapidly expanding asset class within the alternative investments sphere, offering opportunities to diversify portfolios and access credit risk exposure. The associated premium for taking on this risk can result in attractive returns for investors.

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