BC Partners' Goldthorpe Sees Pockets of Value in 'Perilous' Credit Market

The video discusses the current state of the credit market amidst economic uncertainty, highlighting the differences between liquid and illiquid credit. It explores the challenges and opportunities in these markets, emphasizing the importance of fundamentals and underwriting. The discussion includes the behavior of credit originators, the impact of regulations, and the role of private equity in value-added lending. The video also examines the disconnect between equity and debt markets, particularly in tech businesses, and identifies strategies for creating value in illiquid credit.

What is a significant challenge currently facing the credit market?

• Economic uncertainty

• Decreasing interest rates

• High inflation rates

• Stable earnings growth

How has the market share of middle market lending changed from 2007 to today?

• Decreased from 87% to 4%

• Increased from 4% to 87%

• Remained constant at 50%

• Increased from 50% to 87%

What is a notable inefficiency observed in the liquid credit markets?

• Over-reliance on fundamentals

• Focus on ratings over fundamentals

• Excessive discipline among credit originators

• Lack of capital in the market

What is a key reason for the valuation challenges in the credit market?

• High interest rates

• Lack of enterprise value

• Difficulty in valuing non-cash flow assets

• Excessive liquidity

What strategy is used to find value in illiquid credit?

• Increasing interest rates

• Turning illiquid assets into liquid ones

• Reducing market share

• Focusing solely on liquid credit

What is a characteristic of value-added lending?

• Avoiding any form of institutional help

• Focusing only on short-term gains

• Acting like a private equity sponsor

• Providing loans without any additional support

How are private equity firms approaching leverage opportunities today?

• Leveraging more than in 2007

• Avoiding leverage altogether

• Being cautious and leveraging less

• Leveraging at 92% debt to enterprise value