Bank financing of corp deals may steal pvt credit lunch

Geeta Chugh, managing director, sector lead, financial services ratings at S&P Global Ratings.

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Banks with lower cost of funds will have the advantage of lower pricing.

(ISTOCKPHOTO)

The proposed entry of banks, with their relatively larger balance sheets and readiness to lend amid muted corporate growth, could potentially result in lower yields, easier terms, and weaker collateral structures. In some cases, enforcing collateral or ensuring debt coverage may be weaker than with traditional bank loans, other experts said.

Still, in the short to medium term, the overall impact on private credit funds is expected to be small, given the limited ability and skill sets of banks to fund complex deals and the flexibility at private credit firms on with customizations and value-addition.

Private credit funds command superior returns because they offer customized funding structures—tailored for com-