It’s been a nasty few years for private credit borrowers, who have operated in a recessionary environment under the spectre of high-leverage loans with ballooning interest rates on floating-rate private debt packages. This week’s 0.5 percentage point rate raise by the Bank of England to 5% will make things worse. 

Two months ago, 9fin highlighted some of the problems of distress in private credit portfolios — not least that most direct lending deals are floating rate, and their loans are invariably unhedged, meaning that the sharp rise in interest rates will bite their borrowers.