Private credit lenders are easing loan terms on existing deals in hopes of staving off costly restructurings, at the risk of an extend-and-pretend dynamic that masks deeper economic strains.
Their effort comes as companies rush to address private credit loans maturing between 2025 and 2027, ahead of a potential tightening in credit markets, and in response to rising defaults and bankruptcy risks driven by tariffs, higher operating costs, and declining revenues.
“Of the debt coming due soon or in the near to medium term, there’s a lot of reluctance in the marketplace from lenders to enter a real messy restructuring unless they absolutely have to,” said Seth J. Kleinman, vice chair of restructuring and bankruptcy practice at Benesch Friedlander Coplan & Aronoff.
Extend-and-pretend refers to creditors extending a loan’s maturity—despite doubts about the likelihood of repayment—to avoid restructuring and give borrowers time for conditions to improve. Economic uncertainty can fuel the practice as companies and lenders hope tariffs will ease or that they can adapt, fending off bankruptcies that could erase lenders’ recoveries.
The private credit market has surged since the 2008 financial crisis to about $2 trillion in 2024, according to data firm Preqin. While the extend-and-pretend practice has existed in the banking sector for a long time, it’s unusual in private credit, said Daniel Alpert, founding managing partner of Westwood Capital and a senior fellow in financial macroeconomics at Cornell Law School.
This article was originally published by Bloomberg Law.
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Angélica Serrano Román 