Data gathering
‘Why is Private Lending So Popular?‘ by David Robinson and Melanie Wallskog, and ‘PIK Now and Pay Later‘, by Paul Rintamäki and Sascha Steffen start with information on publicly traded business development companies (BDCs). The authors use this to explore how private lending works, what drives its growth, whether it presents systemic risks, and what signals payment-in-kind (PIK) use convey.
While structurally different from traditional limited partner-funded private credit vehicles, the authors use BDCs, which invest in small and medium-sized companies, as a proxy for the asset class. They report publicly and so provide a source of data for the authors to study. They also hold around 10% of the US private lending market’s AUM.
“We’re fundamentally interested in how small businesses are funded and the associated changes since the GFC,” Robinson explains. “When we obtained this dataset, we realised that we needed to understand the private lending market’s growth before we could understand BDC lending’s growth.”
Is PIK an efficient liquidity management device or a method for postponing default?
Paul Rintamäki, Frankfurt School of Finance & Management
