Financial Regulation International
Unveiling the new titans of corporate finance
The rise of private credit in leveraged buyout transactions
by Zakariya Sedik
The emergence of private credit in leveraged buyout (LBO) transactions has significantly reshaped the lending landscape and
challenged traditional lending practices by introducing new actors and financing structures. Historically, bank loans and
what has been referred to as the "broadly syndicated market" have been the primary source of funding for sponsors.
1 Nonetheless, private credit has emerged over the past two decades as a dominant force, now playing a starring role in leveraged
finance. After the 2007-08 global financial crisis (GFC), tightened banking regulations calling for enhanced supervision of
banking activities, most notably the Dodd-Frank Wall Street Reform and Consumer Protection Act in the US and Basel III in
the European Union (EU), saw increased demand for alternative financing opportunities. These milestones in the global regulatory
environment aimed to restrict banks' operational scope by prescribing capital adequacy rules and limitations on risk-taking
for traditional lenders. A new lending market formed for non-bank institutions emerged.