The Credit Edge by Bloomberg Intelligence PGIM Sees 'Chilling Effect' on Private Credit From BDC Storm
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Apr 2, 2026 Matt Harvey, global head of middle‑market direct lending at PGIM Private Capital, discusses how private credit is structured and why firms choose it over public markets. He explains underwriting, first‑lien senior loans, risk controls, and the sources of illiquidity premium. He also talks about BDC turmoil causing more conservative pricing and where Europe and Australia offer relative value.
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Direct Lending Mirrors Bank Loans For Event Financing
- Direct lending replicates traditional bank lending but in private, negotiated form for event-driven financing.
- Matt Harvey says middle-market loans fund acquisitions, recapitalizations and longer-term needs for firms that can't or won't access public markets.
Private Credit Provides Banklike Solutions Banks Won't
- Private credit fills gaps banks avoid by offering larger, longer-term, and more certain financing for midmarket companies.
- Harvey notes private credit finances family-owned firms and PE deals that need execution certainty or cross-border financing banks won't provide.
Where Direct Lending's Extra Return Actually Comes From
- Excess return in direct lending comes from an illiquidity premium plus manager techniques like selection and covenant protections.
- Harvey estimates the liquidity premium is roughly ~100bp versus comparable liquid loans and also cites covenant reprice ability and loss avoidance.