points by lokar 2 days ago | 0 comments
I think a lot is fixed, but for a fairly short term. So you have roll the debt over (at the new market rates) every 5 to 10 years.
[–] peezd 2 days ago
[–] chollida1 2 days ago
> Yeah, it's rarely not fixed, and a lot was tied to the historic expectation of the investment being at most ~5-7 years.
You've got it reversed, the debt BDC's and PC firms write is usually floating rate based off SOFR. That' s why they do so well in rising rate environments.
Now they often borrow at fixed rates by issuing bonds or preferred shares that pay a fixed rate so falling rates has to opposite effect on them.
[–] lesuorac 2 days ago
I mean if your borrowers go bankrupt then its bad for you.
[–] hedgehog 2 days ago
My understanding is that almost all deals are built on floating rate debt, with some hedging. I don't work in PE though, maybe someone here knows the market in more detail.
Closely related, you can read about the PE Zombie funds that cover a lot of this debt.