The expansion in global credit markets provides levered companies with several financing options. Depending on a company’s financial health, these options can include publicly issued high yield bonds, broadly syndicated loans, or private loans from banks or direct lenders. The following case study highlights three potential areas of interest for private-credit investors: the developing interplay between these financing avenues; PGIM’s approach to underwriting large-cap private credit transactions; and how investors may benefit from the evolving financing dynamics and our approach to private credit analysis.
Drivers of Refinancing
Recently, a private equity sponsor approached PGIM to evaluate a refinancing proposal regarding an existing portfolio company in the leisure industry.
The company’s decision to refinance was driven by several converging factors. First, it aimed to continue expanding its footprint, invest in capital upgrades, and enhance customer experiences, all of which required access to flexible and cost-effective financing. Second, acquisitions, property upgrades, and prior strategic actions left it with a layered debt profile, including publicly-issued debt.
Our deep relationships with both the company and sponsor via our origination and analyst teams facilitated a conversation around potential capital market solutions, which could have taken a variety of financing paths, including public and private debt options. After discussions with the company and the sponsor, PGIM formed part of a club syndicate to offer a private loan facility to facilitate its refinancing (see the Case-Study Context for additional market perspective).
Credit Merits
From a credit perspective, the company benefited from strong industry tailwinds, notable barriers to entry, and a favorable, recurring revenue profile. The company posted consecutive annual improvements to its EBITDA margins amid improved operating leverage, and its owned assets were valued at more than $1 billion.
Furthermore, the company’s steps to address its capital structure consisted of some credit-positive developments. It used the proceeds from non-core asset sales to pay down a portion of an existing first-lien term loan, thereby reducing leverage and interest expense, before turning its attention to the publicly-issued debt.
PGIM’s prior knowledge of the company and strong understanding of the industry enabled a quick assessment of its improving credit trajectory. Sector-specific research analysts subsequently collaborated on the underwriting process given their comprehensive view of the industry, competitors, and the company’s competitive position.
Refinancing Strategy and Solution
PGIM’s refinancing plan was designed to address the company’s short-term liquidity needs and long-term strategic goals by consolidating its existing debt into a more streamlined capital structure, thereby reducing its administrative burden and freeing up cash flow. By refinancing to longer-term debt, the company could also decrease its near-term refinancing risk and increase financial stability while also funding ongoing expansion and strategic initiatives.
The first-lien loan was issued at a discount to par and priced at SOFR+5.00% with an expected yield to maturity of 9.65%. It also benefited from call protection through the first two years of its life, thereby reducing prepayment risk.
Pro forma for the transaction, net leverage was 3.6 times. At the same time, the refinancing brought stronger credit documentation and a significant tightening of liability management exercise (LME) protections.
Case Study Summary
As the private credit market has grown in size and breadth of participants, more sizeable transactions have opened the door for larger companies (EBITDA>$75M) with larger scale, stronger revenue growth, more resilient margins, and experienced management teams.
While just one of the many privately placed loans funded through PGIM’s Large Cap Private Credit strategy, the above case study highlights several of the attributes PGIM seeks out when sourcing private credit investments. These include attractive economics, tighter security documentation, and more favorable fundamentals, with the larger scale of large cap private credit historically leading to lower defaults and higher recovery rates.
Case Study Context
Cross-Market Dynamics
Our case study demonstrates how increased competition between private and public syndicated markets has fueled a surge in cross-market refinancings. While 2022-2023 saw a notable increase in the volume of broadly syndicated loans (BSLs) being refinanced by direct loans, 2024 and 2025 brought near equilibrium to that trend.
In 2025, the volume of broadly syndicated loans refinanced in the private credit market totaled $39 billion, only slightly greater than the $34 billion in direct loans that were refinanced with BSLs (Exhibit 1). This give-and-take speaks to the growing convergence of public and private credit over time, the fungibility of capital, and the shifting relative value between the two markets based on prevailing market dynamics.
Exhibit 1
Refinancing volumes across private and public markets has reached near parity.
Evolution into Large Cap
Although much of the expansion in private credit has focused on direct lending to small and middle market companies, the subsequent growth phase in direct lending finance now includes direct lending to large companies with EBITDA from $75 million to $1 billion. The size difference historically indicates stronger credit profiles consisting of stronger revenue growth, greater cash-flow stability, often higher profit margins, greater resilience with more stable/defensible market positions, and more sophisticated and experienced management teams. The credit costs of large-cap borrowers are slightly lower than the middle market cohort, but once adjusted for a lower expected credit loss experience, the illiquidity premium of large cap private credit is more attractive in our estimation.
We’ve come to this conclusion based on the beneficial attributes of large cap private credit, including: (i) typically stronger security and covenants compared to the broadly syndicated loans market; (ii) larger scale, which has historically led to lower defaults than the private credit mid-market; and (iii) stronger fundamentals (e.g., stronger revenue growth, EBITDA growth, and margins than smaller caps (Exhibit 2)). The strong security protections of all private lending helps to protect private loans from aggressive LME defaults.
Exhibit 2
Credit comparison across small, medium, and large cap private credit
Strong First Lien Security Protection
The share of broadly syndicated loans issued with weak security documentation is at an all-time high (Exhibit 3). Carve outs, unrestricted assets and collateral, and overall fewer lender protections have enabled many public leveraged finance borrowers to undertake LMEs. These are distressed exchanges where the company inflicts principal loss to the lenders—often to the benefit of either shareholders or other creditor groups—and have become a mainstay in the broadly syndicated loan space. By contrast, private credit transactions generally benefit from stronger security over the borrower’s assets (which was an objective in our case study above), leading to higher recoveries in the event of default. Over time, sponsors may look to explore creative ways to raise additional debt on weaker terms. Therefore, restrictions on collateral transfers and asset-drop rules are critically important aspects of each private credit transaction that PGIM underwrites.
Exhibit 3
Private credit transactions can offer stronger covenant protection and restrictions on liability-management exercises.
Source(s) of data (unless otherwise noted): PGIM Fixed Income, as of January 2026.
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