The growing emergence of competitive tension in the liquidity market

In the current climate, borrowers are more likely to encounter liquidity issues rather than covenant breaches and are increasingly turning to private credit for time-sensitive cash injections, primarily due to the flexibility private credit providers offer. As these new creditors enter the debt stack, conflicts between them and existing creditors may well emerge. Sponsor-backed borrowers are increasingly deploying tactics popularised in the US to prime existing lenders who fail to follow their money. However, the need for new money to have super-seniority, to benefit from downside protection and obtain access to upside recoveries requires creative structuring.