Barclays: Private credit expands borrowing to blue chips, and the eventual market size is expected to reach $22 trillion.

A research report released by Barclays on Thursday shows that private banks, which have become fierce competitors to traditional banks by providing credit to distressed companies, are now aggressively entering the blue-chip lending market. The $1.6 trillion private credit industry has established its position in highly leveraged companies by offering faster and more flexible loan terms than Wall Street banks. The report states that they are now increasingly providing loans to the highest rated companies, which was unheard of a few years ago. The authors of the report, analysts Corry Short and Peter Troisi, wrote, "The term 'private credit' has begun to encompass a broader range of financing. Over the next 10 years, even if it only accounts for 1-2% of net growth, it could potentially bring deployment opportunities worth billions of dollars to private capital." They wrote that private lending institutions are also quietly entering other areas of the credit market, such as asset-based financing, mortgage loans, or automotive asset securitization. Barclays estimates that based on the balance sheets of public credit and commercial banks, private credit could ultimately pursue a market size of around $22 trillion. They did not classify the increasing impact of private credit on the credit market as good or bad, but pointed out that investors providing funding to banks or private lending institutions will have to carefully consider the pricing they may receive in both options. Investment-grade borrowers have been using the private credit channel for some time, but have not yet reached the level of leveraged financing borrowers. Barclays highlighted recent deals, including Dow Chemical's sale of shares in an infrastructure company for $2.4 billion and Rogers Communications' sale of a subsidiary in April for 7 billion Canadian dollars (5 billion US dollars), as examples of private capital further moving toward the investment-grade sector. Nevertheless, Barclays stated that the investment-grade bond market is effective. Analysts pointed out that, unlike the junk bond market, the largest deals in the investment-grade market can be initiated and priced in a single trading day. This is because regulatory guidelines have slowed down the pace of banks, which are cautious about engaging in high-risk debt or being penalized for excessive activity in this business. One area where private credit companies may continue to make progress is in providing funding for high-rated loans for long-term assets such as data centers. Christina Minnis, Global Head of Credit and Asset Finance at Goldman Sachs, highlighted this trend during a roundtable discussion held at the Milken Institute Global Conference in Beverly Hills this week. She said, "Currently, private investment grade may be the fastest growing segment we see. Alternative asset management companies have raised a significant amount of funds."