U.S. middle market optimism outshines the world
This week’s chart examines the case for U.S. middle market firms, which expect a notably brighter future than their international peers.
![Column chart showing the percentage of middle market firms by country that expect to generate higher profit growth over the next 12 months. U.S. middle market firms lead the way, with 70% of companies expecting higher profits compared a global average of 59%. Just 45% of firms in the European Union expect higher profits over the next 12 months compared to 56% of Asian Pacific firms, 58% of firms in the EMEA region and 63% of Latin American firms.](https://fsinvestments.com/wp-content/uploads/2024/07/COTW_2024-07-12_thumbnail-247px.jpg?w=250&h=150&crop=1)
Private credit loss rates don’t support draconian headlines
Direct lending loss rates compare favorably to much of the leveraged finance market, as this week’s chart shows.
![Column chart that shows direct lending’s historical loss rate since 2005 compares favorably to many other parts of the leveraged finance markets. The direct lending loss rate of -1.03% is roughly in line with leveraged loans (0.92%), but below that of high yield bonds (-1.49%) and commercial and industrial bank loans (-2.30%).](https://fsinvestments.com/wp-content/uploads/2024/05/COTW_2024-05-22_thumbnail-247px.jpg?w=250&h=150&crop=1)
Private credit valuations proven conservative over time
Private credit investors’ realized losses have been about half that of unrealized markdowns during the past three periods of market stress.
![Close up thumbnail of a column chart](https://fsinvestments.com/wp-content/uploads/2024/05/COTW_2024-05-17_thumbnail-247px.jpg?w=250&h=150&crop=1)
As private credit grows, underwriting standards remain healthy
Lenders requiring more equity and less leverage, suggesting healthy private credit lending standards.
![Column chart depicting 2022, 2023 and 2024 lending requirements, showing lenders required more equity in deals and less earnings leverage over the past three years. The percentage of deals requiring greater than 45% equity in deals went from 25% in 2022, 49% in 2023 and 55% in Q1 2024. Earnings leverage requirements of 6x or lower increased from 18% in 2022, 54% in 2023 to to 55% in 2024.](https://fsinvestments.com/wp-content/uploads/2024/05/COTW_2024-05-10_thumbnail-247px.jpg?w=250&h=150&crop=1)
Private credit attractive to sponsors and investors
Private credit has become PE sponsors’ primary source of financing for LBOs and M&A activity as the asset class becomes increasingly mainstream.
![Column chart showing private credit represents well over 50% of LBO and M&A financing since 2019, but only a small percentage of refinancing activity.](https://fsinvestments.com/wp-content/uploads/2024/04/COTW_2024-04-19_thumbnail-247px.jpg?w=250&h=150&crop=1)
Private credit maintains its healthy yield premium
Amid private debt’s massive growth, this week’s chart looks at the healthy yield premium of private credit transactions compared to public markets.
![](https://fsinvestments.com/wp-content/uploads/2024/03/COTW_2024-03-22_thumbnail-247px.jpg?w=250&h=150&crop=1)