Trends in Special Situations & Private Credit 2024

Welcome to this second edition of Akin's Trends in Special Situations & Private Credit, in which we reflect on another active year for the global private credit market in the face of turbulent public markets and geopolitical challenges.

With 2023 characterized by record inflation, constraints in the syndicated lending environment and rising interest rates, credit funds were able to step in to provide flexible, tailored and relationship-based financing to address widespread liquidity challenges. With predictions of extensive distress failing to materialize, the asset class proved particularly attractive to investors able to benefit from a floating-rate product offering outsized returns.

As we progress into 2024, we expect credit funds to continue to grow market share as a viable alternative to the broadly syndicated loan market, financing ever-larger transactions and expanding into more esoteric and non-sponsored lending channels, especially asset-based and asset-backed finance. While the U.S. remains by far the dominant private credit market, we are now witnessing rapid adoption and scaling of the asset class across Europe and Asia Pacific, and increased interest from Middle East investors.

Meanwhile, as a new period of sustained high interest rates makes refinancings challenging, borrowers facing upcoming maturity walls are increasingly engaging in liability management exercises (LMEs) to preserve and increase equity value and extend runway. The so-called lender-on-lender violence that had characterized these transactions in the past cooled somewhat in 2023, with an evolution of structures aimed at broader lender engagement. We explore these themes in more depth below, looking at LME developments in the U.S., Europe and Asia, as well as the outlook for their continued advancement in 2024.