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Law360 (May 13, 2020, 1:58 PM EDT ) Private credit market lenders have become more optimistic over the last month about making loans for a variety of asset classes amid the continuing COVID-19 pandemic, according to a forthcoming report from Proskauer that Law360 has exclusively obtained.
A vast majority of respondents to the survey showed optimism in the health care, software and business services sectors, although investor optimism in real estate continues to remain low.
The forthcoming report from Proskauer Rose LLP follows a similar survey the law firm did earlier this year.
"The private credit firms are in the market. They're lending. And I know that folks have been speculating as to whether or not the private credit firms are actually in the market. We're seeing them," Stephen Boyko, a partner at Proskauer and the main author of the survey, told Law360 in an interview Wednesday.
"We work with more than 75 clients in the space and we've got a number of active deals. Certainly deal volume is down substantially. But a number of folks have done one, two, three, four loans since the beginning of the crisis," he added.
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According to the survey, 96% of respondents are seeking new lending opportunities, up from 86% on March 30.
Ninety-six percent of respondents said they are interested in health care deals, while 97% noted interest in business services transactions and 97% also said they have interest in software or technology transactions.
And the majority of investors continue to be interested in transportation and logistics loans, as companies like Amazon.com Inc. have seen a surge in orders with brick-and-mortar shopping nearly coming to a halt amid the pandemic. Interest in that sector rose to 55% in the latest survey.
Interest in construction, engineering and infrastructure deals, however, fell to 24%, and optimism about energy and utility deals slipped to 11%.
Real estate deal interest remained low, at 13%, while interest in retail deals also continued to slide — to 27% in the latest survey. Retail has been one of the hardest-hit sectors during the pandemic.
Boyko told Law360 that in addition to an overall increase in optimism, default rates continue to hover in the 5% to 6% range.
"There are a number of folks who are willing to make very large loans. We have a handful of clients that are more than willing to write checks for $100 million, $500 million, or even more," Boyko said. "We have a portfolio of about 600 active deals at Proskauer. From that, we can tell that the number of deals in default, presently that's at 5.9%."
As to the expected shape of the economic recovery, a slight majority, 51%, expect a U shape, while 20% expect a W shape, 28% an L shape and 1% a V shape, according to the survey.
Proskauer surveyed 73 investment professionals between April 27 and May 6 for the latest survey. Most respondents are managing directors or partners at their companies, and the firms that participated manage a combined more than $1 trillion in assets.
--Editing by Daniel King.
For a reprint of this article, please contact reprints@law360.com.
