Borrowers face funding trade-off as PIMCO flags debt market cracks
A merchant works in New York on October 1, 2025 on the opening bell of the New York Stock Exchange (NYSE).
Timothy A. Clary | AFP | Getty Images
PIMCO President Christian Stracke is optimistic in the asset -based financial segment of the private credit market, but warns “cracks” in direct loans that make up most of the sector.
Singapore on Wednesday at the Annual Milken Asian Summit in Singapore CNBC’nin Talking with the Chery Kang, Stracke, stressed the expansion gap between the two lending sphere.
“There are problems [in corporate private credit] The borrowers go to the lenders and said, ‘Now I cannot pay you in cash, but can I borrow interest from you and pay it later?’ This is called payment exactly [PIK]And it’s quite common right now, “Stracke said.
Balance sheet deviation
He referred to a “much healthier” credit environment for asset -based financing.
“Asset-based financing-consequence mortgages, consumer loans, student loans and automobile loans-economy-economy, households are strong, the consumer is strong and we don’t see it really like this.”
The expanding gap stems after the 2008 global financial crisis, which sees that consumer debtors have withdrawn their borrowings and saved household balance sheets, which help to increase asset -based financing activities. On the contrary, corporate borrowers formed their leverage and have “less clean” balance sheets.
In October last year, Pimco collected more than 2 billion dollars for a asset -based expertise strategy as part of its ongoing forces for private loans.
According to Stracke, corporate debtors face a change in the private debt markets against the public.
It means that it may be easier for borrowers to re -negotiate the credit conditions in case of loan pressure, even at higher costs, the lesser lenders in private markets.
Opportunities
On the other hand, more liquid bank debt comes at a much lower cost, but the financing process can be more complex.
“A wide syndication bank loan or bond is more difficult with Stracke.” He said. “We see some real problems in the loan markets. There have been high-profile defaults in the credit markets-public markets, where the company is very difficult for the company to negotiate with lenders to protect value in the company.”
When we look at it, Stracke said that as the Federal Reserve’s interest rate continued on the path of interest rate deductions and in general, all the borrowing costs have fallen in particular mortgage rates, and there would be more opportunities for PIMCO to take advantage of this loan request.
Meanwhile, Australian Pension Fund Hostplus CEO David Elia, Corporate investors looking for a search for a portfolio diversification of the private market area with more withdrawal, but the arrangement should focus on the retail area, he said.
Elia, CNBC at the Milken Asian Summit, a more challenging arrangement of private markets, any rather than developed corporate investors, rather than the diversifying benefits of the asset class, “mother-Dad” investors should be gathered around.
“There are probably about 19,000 companies listed in global markets. There are 140,000 private companies exceeding $ 100 million in US revenue.” He said.
“As long -term corporate investors, in the markets listed, if you are real in diversification, you will not see the level of concentration. Therefore, you will direct you to the sector that is not left around private capital style investment types.”
It also foresees more public offering in the coming months.
