On May 9th and 10th, the Loan Syndications and Trading Associations held its third annual private credit industry conference in Ft. Lauderdale, Florida. The major theme of the conference—the speakers of which included industry professionals from direct lending funds, investment banks, LPs, rating agencies and law firms—was that, while competition between private credit/direct lenders and traditional syndicated lending will only increase, the industry is still in its "golden age" and appetite for private credit products remains high. The following are our key thematic takeaways from the conference.

• Innovation. While private credit has found its groove in the middle market space (and even expanded to larger transactions), the expectation is that innovation will continue in order to take advantage of additional opportunities. New players (such as insurance companies) and strategic partnerships will continue to emerge, and existing players will look to expand into new product offerings (such as asset-backed lending) and geographies. Middle market CLOs are likely to make a heavy push into the market, and rated debt feeder funds are also expected to become more prevalent. Be on the look-out for evolutions in financing structures, and while classic acquisition financing facilities will remain popular, we expect to see more net-asset value (NAV) facilities, junior capital and preferred equity and paid-in-kind (PIK) flexibility. 
• Allocation and Growth. Despite an overall positive outlook on the private credit market, attending investors suggested they would only "modestly increase" their investments in private credit in the near term. Given the breadth of competition (there are over 1400 private credit managers in the US, though 99% of those managers have less than $100 billion in assets under management), one underlying desire was liquidity—investors want the ability to move in and out of their investments with ease. This will likely drive more developments in the establishment of secondary trading platforms focused on private credit.
• Portfolio performance. With interest rates significantly higher than recent lows and currently expected to remain at elevated levels for the near term, debt service coverage ratios for private credit borrowers have spiked. However, for now, default levels remain low and PIK interest has been deployed sparingly. Research also shows that portfolio companies with an EBITDA in excess of $100 million grew more quickly and defaulted under their credit facilities less often than their sub-$100 million counterparts. Of course, each credit is to be viewed independently but trends suggest, on a macro level, that larger companies have recently performed better than smaller companies.

• What About the Banks? While the number of private credit firms has grown exponentially over the last several years, they still face stiff competition from investment banks for larger deals given that the syndicated loan market has roared back to life in 2024. Traditional banks will admit they've lost some ground to private credit in the upper middle market, but they still have a range of capabilities (e.g. strong origination network with access to non-sponsored credits, treasury and cash management, back office infrastructure, dedicated workout support) that many private credit firms do not. 

  Nonetheless, the private credit train waits for no one, and many banks have moved to form their own private credit solutions in recent years. There are different ways to go about it—some have elected to build internally, either using the bank's balance sheet or forming BDCs or other managed funds. Others have acquired whole teams from their competitors. And still others have partnered with separate entities to create strategic alliances. No matter how you slice it, everyone is looking to get a piece of the private credit cake. 

• Back to the Future. So what's next for private credit? Will 2024 be a call-back to the rampant 2021 market? Are emerging markets the next frontier? Will the technology sector remain bullish, with healthcare still depressed? With its rising popularity and growth, will private credit garner more attention from the regulators?

  The only certainty is that private credit (and references to the "golden age") is here to stay.