Key Takeaways
- • Lord Abbett's Michael Cibelli, CFA, Product Specialist, Alternatives, frames the private corporate lending market as roughly $1.7 trillion in assets, according to the firm's educational video on private credit.
- • Senior direct lending is the largest segment of that market and refers to first-lien, senior secured loans made by non-bank lenders, which rank first for repayment if a borrower goes bankrupt.
- • The middle market is split into three tiers by annual EBITDA: lower middle market ($10M to $25M), core middle market ($25M to $100M), and upper middle market ($100M to $300M).
- • The U.S. middle market includes more than 200,000 businesses that the video describes as prime candidates for private loans, as banks' lending to smaller firms has declined.
Summary
Lord Abbett's educational video on private credit, presented by Michael Cibelli, CFA, Product Specialist, Alternatives, outlines the structure of the $1.7 trillion private corporate lending market. Senior direct lending is identified as the largest component of that market and is also the primary focus of many business development companies (BDCs). The video defines these loans as private, first-lien, senior secured obligations originated by non-bank lenders, positioning them as less risky than subordinated debt. Typical uses include financing company acquisitions, funding growth initiatives, and refinancing existing debt.
The video places particular emphasis on the middle market, where borrowers are generally grouped by EBITDA. Companies with less than $100 million in annual earnings have historically relied on banks for capital, but according to the presentation, their access to bank loans has decreased because of changes in banking dynamics. The video argues this gap creates an opening for private lenders, citing more than 200,000 U.S. middle market businesses as potential borrowers.
The presentation divides the middle market into three tiers: the lower middle market at $10 million to $25 million in annual earnings, the core middle market at $25 million to $100 million, and the upper middle market at $100 million to $300 million. The video also notes that borrowers larger than the upper middle market have begun turning to private financing, weighing its benefits against public debt markets. The piece is educational in nature and does not provide fund-level performance data; the presenter flags yield and performance as the subject of a forthcoming installment.
The video places particular emphasis on the middle market, where borrowers are generally grouped by EBITDA. Companies with less than $100 million in annual earnings have historically relied on banks for capital, but according to the presentation, their access to bank loans has decreased because of changes in banking dynamics. The video argues this gap creates an opening for private lenders, citing more than 200,000 U.S. middle market businesses as potential borrowers.
The presentation divides the middle market into three tiers: the lower middle market at $10 million to $25 million in annual earnings, the core middle market at $25 million to $100 million, and the upper middle market at $100 million to $300 million. The video also notes that borrowers larger than the upper middle market have begun turning to private financing, weighing its benefits against public debt markets. The piece is educational in nature and does not provide fund-level performance data; the presenter flags yield and performance as the subject of a forthcoming installment.
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