Moody's Report: Alt Lenders Outpace Banks in ABL Space

July 14, 2024
July 12, 2024
2 Minutes Read
Newsblog main image

Moody's Ratings has released a report highlighting the rapid expansion of private credit beyond its traditional middle-market focus. The report underscores the growing prominence of alternative lenders in the broader financial landscape.

Key points:

  1. Market Expansion
  2. Private credit lenders are diversifying into new territories, including asset-based financing and investment-grade lending, driven by investor demand and competitive pressures.
  3. Bank Competition
  4. Traditional banks are pushing back, refinancing $14 billion of private credit debt and doubling their leveraged loan issuance for M&A deals compared to last year.
  5. AUM Growth
  6. Major alternative asset managers have seen their credit AUM surge to $1.3 trillion in Q1 2024, up from $481 billion in Q4 2019.
  7. Regulatory Concerns
  8. The IMF and other regulatory bodies have expressed caution about the sector's rapid growth and potential systemic risks.
  9. Transparency Issues
  10. A recent U.S. appeals court decision vacated an SEC rule aimed at increasing private fund transparency, potentially delaying enhanced oversight.
  11. New Opportunities
  12. Private credit firms are tapping into asset-based financing markets, which offer significant growth potential beyond traditional middle-market lending.

The report emphasizes the transformative impact of private credit on the lending landscape while noting the challenges of market opacity and regulatory scrutiny. As the sector continues its explosive growth, it's reshaping the dynamics of corporate financing and challenging traditional banking paradigms.

Our Opinion:

With AUM hitting $1.3T, Alternative Lenders are not just competing with banks - they are redefining the game. Their pivot to asset-based financing and investment-grade lending shows we're more nimble and innovative. Sure, regulatory concerns exist, but their ability to provide capital where traditional banks can't is undeniable. The challenge now? Balancing explosive growth with smart risk management as they continue to disrupt the lending landscape. This isn't a bubble; it's the new normal in corporate financing.

Headlines You Don’t Want to Miss

Bank Profits Squeezed: Deposit Exodus and NIM Compression Offset Loan Growth

Banks face a double whammy as Q2 net interest income drops despite loan growth, due to shrinking deposits and falling net interest margins. The sector's earnings are further squeezed by increased reliance on costly funding sources and higher loan loss provisions.

DFPI Strips Synapse of Lending License, Slaps $2.5M Fine for Regulatory Breaches

California's DFPI has revoked Synapse's lending license due to multiple violations of state laws, including breaches of lending regulations and failure to comply with regulatory authorities. The fintech company also faces a hefty $2.575 million fine for its infractions, which included inadequate financial reporting.

KBRA Rates $500M DriveTime Subprime Auto ABS, BLAST 2024-3

KBRA has assigned preliminary credit ratings to BLAST 2024-3, a $500 million auto loan securitization originated by DriveTime, the largest subprime-focused used car retailer in the US. The ratings were determined through a comprehensive analysis of factors including borrower financials, debt service coverage ratios, and transaction structures.

Stay ahead with top alternative finance news—straight to your inbox.

Access Real-Time Secretary of State Data and Automate your underwriting process. We help Alternative Funders work smarter through AI Technology. Get our FREE AI Tools here

youtube iconlinkedin iconfacebook iconlinkedin iconlinkedin icon

We send Alternative Finance and
AI Automation News Updates

Subscribe to our Newsletter!

Subscribe to our newsletter

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
SUBSCRIBE