Bass, Berry & Sims PLC served as a sponsor of the 5th Annual U.S. Private Credit Industry Conference on Direct Lending hosted by the Loan Syndications and Trading Association (LSTA) and DealCatalyst, held April 16-17 in Nashville. In attendance, representing the firm, were Katie Day, David Harper Jr., Katie Smalley, and Christina Godard.
Here are a few of the most significant takeaways from the exciting two-day event for direct lenders, borrowers, and other market participants.
Is Private Credit Still Strong in 2026?
With over 1,700 registrants – from direct lenders to credit rating agencies, investors, fund managers, and bankers – the message from the panelists was loud and clear: private credit remains strong.
Notwithstanding the headlines coming out of First Brands’ bankruptcy, the recent rise in investor redemptions in certain private credit funds, and the Federal Reserve’s interest in the exposure that major U.S. banks have to private credit, leaders from several of the largest private credit players in the space remain adamant that the headlines do not paint an accurate portrayal of the current private credit ecosystem. Echoed throughout the conference was the consensus that the real issue is the need to better educate investors, specifically retail investors, and to level-set expectations among all stakeholders.
While the First Brands’ bankruptcy has drawn outsized attention, panelists generally framed it as a documentation and diligence lesson rather than a systemic warning, underscoring the importance of robust information rights, lender protections, and disciplined underwriting in an increasingly competitive market. Speakers acknowledged that performance, underwriting discipline, and portfolio construction increasingly vary from manager to manager, and top-quartile platforms with deeper sourcing, workout capabilities, and sponsor relationships are expected to continue to separate from the tail of the market.
Why Are Private Credit Lenders Focused on the Middle Market?
Perhaps unsurprisingly, many private credit lenders therefore remain focused on the core and lower middle market where so-called “covenant lite” deals – credit facilities that contain less restrictive terms and conditions on the borrower than a traditional credit facility and therefore less opportunities for the borrower to trigger a default – remain the minority and credit risk is expected to trail off during the remainder of 2026. Notwithstanding that there has been a slight increase in private credit defaults since last year, current default rates remain within historical averages (with sponsor-backed companies tending to perform better).
So, it seems the middle market, with its robust guardrails and demonstrable portfolio performance, will continue to draw in investor dollars, particularly as the percentage of those dollars increasingly comes from retirement savings plans, insurance, and private wealth. Given that private credit currently only represents a fraction of the overall credit marketplace, it will be quite interesting to see if we are still discussing credit risk at next year’s conference.
If you have any questions about the topics covered at this year’s conference, please contact the author or one of the attending attorneys.