Borrowers have started to use a hybrid financing model that combines three sources of cash: institutional, bank and private credit. It’s an arrangement that works out well for private equity firms and their companies, allowing them to stretch leverage, push more aggressive terms and drive pricing down.
“Now borrowers are looking at blended debt deals, which is positive as it diversifies where the financing is coming from, and I think that probably continues to grow,” said Tal Reback, global investment strategist at KKR & Co.’s credit and markets business. “There are a lot more hybrid structures coming.”
