Illiquid Insights

Analyzing private equity, private credit & institutional capital. Join the weekly email list!

[Illiquid Insights @IlliquidInsight]

Data centers are being funded through SPV structures. Hyperscalers lease the facilities, and often guarantee the debt and provide equity.

This allows Big Tech to keep the debt off balance sheet.

[Illiquid Insights @IlliquidInsight]

https://t.co/TK5ZvgUKgz

[Illiquid Insights @IlliquidInsight]

Private credit is in a correction:

> PIK interest is up sharply since ‘23
> Defaults are at multi-year high
> Foreclosures on pace to double this year

The asset class has come back down to earth.

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[Illiquid Insights @IlliquidInsight]

@mundoivor Great points. Unfortunately hard to get granular data in PC, but interestingly foreclosures are way up this year, on track to double from last year

[Illiquid Insights @IlliquidInsight]

Private credit default rates (Fitch):

> $25M or less EBITDA: 12%
> $26M-$50M EBITDA: 5%

Smaller borrowers (the LMM) have a much higher risk profile. These companies are less diversified and more operationally fragile. Things can go wrong very quickly.

[Illiquid Insights @IlliquidInsight]

@mpolovneff Great recommendation

[Illiquid Insights @IlliquidInsight]

A lot of people feel lost after 2 years in IB + some time on the buyside.

After years of the set path (study finance, IB analyst program, jump to buyside), it's hard to figure out what's next.

You have to ask hard questions about what you want and what you’re good at.

There are no right or easy answers.

[Illiquid Insights @IlliquidInsight]

@Crucifier_0 Very true. Closing new deals gets all the hype, but running the asset / growth plan is very important.

[Illiquid Insights @IlliquidInsight]

The most overlooked part of private equity is PortCo work.

Many associates are shocked by how much time is spent on reporting, board decks, special projects, etc.

New deals are only one part of the job. You have to live with the companies you buy.

[Illiquid Insights @IlliquidInsight]

@hgr_la I also don't see a reversal anytime soon. Especially with sticky inflation, global uncertainty and rates potentially going higher, don't see how SMBs don't keep hurting.

[Illiquid Insights @IlliquidInsight]

Most private credit deals in these ranges have covenants.

The main driver is smaller borrowers are more sensitive to macro headwinds / disruptions. Easier for a $50M EBITDA business to handle a few rough years than a $5M EBITDA business (less liquidity, less diversified revenue, etc.)

[Illiquid Insights @IlliquidInsight]

@pedataguy There's always more PortCo work that needs to be done.

[Illiquid Insights @IlliquidInsight]

The best VPs and Directors try to shield the junior team from unnecessary work.

The worst ones spin up extra slides and analysis the MD didn’t ask for.

You don’t want to work with the latter.

[Illiquid Insights @IlliquidInsight]

@privatemrktdata Totally agree. Sourcing is the biggest value add, especially with the rise of AI. Many people get stuck because they don’t focus on it soon enough.

[Illiquid Insights @IlliquidInsight]

PE and private credit are execution jobs.

Sourcing, negotiation and diligence work matters just as much as modeling and research.

You’re expected to quarterback more of the deal process as you get more senior.

[Illiquid Insights @IlliquidInsight]

@leojohns77 I’d say junior people get paid to execute and paper the deals that seniors bring in.

[Illiquid Insights @IlliquidInsight]

@Richardbc2ee Great point. Imagine more rate hikes will make the problem worse.

[Illiquid Insights @IlliquidInsight]

"Bad PIK" in private credit is climbing.

The share of loans amended to PIK interest has roughly doubled, from ~3% in 2022 to ~6% in early 2026, per Lincoln International.

Many deals were underwritten assuming lower rates. Now borrowers are using PIK to preserve liquidity.

[Illiquid Insights @IlliquidInsight]

@ElkwaterCapital Will be interesting to see how rate hikes impact this

[Illiquid Insights @IlliquidInsight]

@AnishDAC For sure 👍

[Illiquid Insights @IlliquidInsight]

@ElkwaterCapital Good share. Lincoln data says the same thing. Has been a recent slight downtrend, but still up significantly since rate hikes