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Alternative Market Briefing

Alt-credit managers cautiously optimistic about 2019

Thursday, December 06, 2018

Bailey McCann, Opalesque New York:

Alternative credit managers are still finding new opportunities heading into 2019, according to the delegates at the recent Opalesque New York Roundtable. While 2019 is likely to show signs of a slowing market, there is still room to be cautiously optimistic managers say.

"Given where we are in the credit cycle, it is prudent to invest more slowly and not ramp up assets over the next 12-18 months," said Hank D'Alessandro, Managing Director, Head of Morgan Stanley Credit Partners. He adds that managers that focus on niche markets that are less likely to be commoditized are more likely to be able to ride out the late cycle.

"There are two areas where we still see value today. Lower middle market senior loans, so small companies, less than $15 million of EBITDA, you can generally get very good covenants, solid amortization and excess cash flow sweeps, reasonable leverage and good pricing," D'Alessandro says. "And in the broader private debt market non sponsored companies, there seems to be much less competition, and so ability to get well structured, well-priced deals even today still exists. However, sourcing non - sponsored deals costs more and takes more work versus sponsored deals where the process is a efficient, albeit in an auction environment."

Jonathan Berger, CEO & CIO, at Birch Grove Capital noted that now may also be a good time to look at ways of investing that participate in op......................

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