COVID-19 credit strategies must be flexible – AVCJ Forum
COVID-19 has emphasized the need for patience and mandate flexibility in private credit, industry participants told the AVCJ Forum.
Speakers representing a range of credit strategies concurred that while lending has produced strong returns during the pandemic, default rates have not been as high as expected due to government stimulus packages.
This has created a surprisingly subdued environment for distress, even in hard-hit areas such as hospitality. The environment has proven too unpredictable to underwrite forward financial figures in these businesses, making virus-based distress plays more like bets than investments.
Ted Goldthorpe, head of credit at BC Partners, advised patience in this context while predicting a boom in the years to come. The initial distress opportunity will focus on areas most directly impacted by COVID-19, but by 2021, it may move into more regulated industries such as healthcare.
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