April 2021: Private Debt and Digital Lending Digest
by Radek Jezbera
Welcome to the first monthly digest about Private Debt and investing in Digital Lending providers. We have hand-picked thought pieces and new information relevant to the topic from the past month.
This thought piece makes an amusing analogy between the role of different asset classes and players roles in a soccer team. Private debt investment is likened to attacking defender or wing-back helping the team to score without neglecting defending duties.
The lack of corporate defaults thanks to fiscal stimulus creates uncertainty about what the future brings when the stimulus checks dry up. Investors are increasingly deploying new debt capital to non-cyclical businesses.
Private debt does not experience the same level of volatility as listed bonds or equities. A careful choice between floating and fixed coupon investments is vital given the expected rise in inflation. The asset class is delivering attractive returns despite the low-interest-rate environment.
A legal thought piece on unitranche private debt transactions and the rights of the senior revolving debt facility investors
Private debt funds aim to achieve double-digit returns. Nevertheless, private debt costs the borrower about half of the cost expected from the Private Equity funds.
Digital lenders passed the pandemic tests, continue growing, and now they are buying banks
A good short overview of business models and regulatory regimes for digital lenders in India. The regulation is vital for promoting ethical and sustainable lending practices.
Digital lending in India has grown to $100 billion in 2019 with 43% average annual growth. The large digital lenders like IndiaLends, KreditBee and True Balance are ramping up funding for further expansion of the loan books.
More than 80% of UK SMEs are frustrated with their current lending experience. SMEs now turn to the challenger banks for their debt funding needs. This is bad news for smaller banks that lose market share both to top banks and the challengers.
An inside look into the kitchen of a digital lender and how technology is leveraged to deliver accurate risk underwriting and great customer experience at low unit costs.
A look into the US digital lending market, where the lenders have shown great business cycle resilience growing on average 47% year on year for the past five years.
2020 was the year of alternative lending and one specific type of lending will shine in 2021 - Buy Now Pay Later.