Breaking a loan covenant kills a normal business. Lenders seize assets. The lights go out. But for private equity? It is just a ne...

Breaking a loan covenant kills a normal business. Lenders seize assets. The lights go out.

But for private equity? It is just a negotiation.

A Federal Reserve study proves the double standard. When PE-backed firms violate covenants, their credit limits are cut by just 4.53%.

That is a 60% smaller penalty than what standalone companies face.

The reason is "Relationship Rent." Lenders do not evict a tenant who owns the whole block. They want the next deal, so they waive the fee.

At Caprae, we study this to know where leverage ends and reality begins. The "Sponsor’s Shield" buys time. It does not buy revenue.

#PrivateEquity #PrivateCredit #DistressedDebt #CapraeDNA #RiskManagement