Insights

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The Merits of Direct Lending


Investment Manager, Private Equity

 

Middle Market Loans

Broadly Syndicated Loans

High Yield Loans

Upfront Fees/OID

200–350 bps

100 bps

Infrequent

Coupon

L + 450–750 bps

L + 350–450 bps

3–6%

Rate

Floating

Floating

Fixed

Term/Duration

~3 years

3–5 years

4 years

All-In Yield

7–9%

~5%

~5% index yield

Covenants

Typically, full maintenance-based package negotiated

Generally covenant-lite

Incurrence

Due Diligence

Direct and extensive (3–6 weeks)

Through intermediary/bank (< 1.5 weeks)

Through intermediary/bank (< 1 week)

Liquidity

Limited or None

Medium to High

High

Annual Default Rate

2.4%

2.9%

3.3%

Annual Loss Rate

0.8%

0.9%

2.0%

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