Cheyne's Fiertz Warns Private Credit Faces Slow-Motion Stress Test After Rate Shift
Updated
Updated · Institutional Investor · Jun 5
Cheyne's Fiertz Warns Private Credit Faces Slow-Motion Stress Test After Rate Shift
1 articles · Updated · Institutional Investor · Jun 5
Summary
Stuart Fiertz said private credit’s strains are surfacing gradually rather than in a sudden break, with redemption requests rising in retail-oriented funds and institutions turning more cautious on new commitments.
Higher rates are driving that stress test: Fiertz said the industry still has not absorbed the fallout from the interest-rate regime change, especially after a loose underwriting cycle and growing use of payment-in-kind loans.
Managers are already tightening standards, charging higher lending rates and offering fewer borrower concessions, but loose covenants, refinancing, continuation vehicles and evergreen capital are still delaying a broader reckoning.
Valuations remain a second fault line, he said, arguing many unsold private companies may need meaningful haircuts before exits can resume because private equity firms have little incentive to mark them down.
Transparency may be the biggest long-term risk, Fiertz said, warning inconsistent portfolio reporting could invite heavier regulation as scrutiny of private-credit valuations increases.