The private credit market has undergone a structural transformation. What was once a niche corner of institutional portfolios has become an essential component of the lending ecosystem, and we believe the opportunity today is as compelling as it has ever been.
A Fundamental Shift in Lending
For decades, commercial banks dominated middle market lending. That model has changed. Regulatory pressures following the 2008 financial crisis, and more recently the regional banking stress of 2023, have accelerated banks' retreat from direct lending to smaller businesses. The result is a persistent supply-demand imbalance: creditworthy borrowers seeking capital, and fewer traditional lenders willing to provide it.
This gap has created opportunity for disciplined private credit managers. Where banks have pulled back, private lenders have stepped in not as lenders of last resort, but as preferred partners offering certainty of execution, flexible structures, and long-term relationships.
The Case for Current Vintage
We believe loans originated in today's environment carry distinct advantages:
Pricing reflects reality. Base rates have normalized from the near-zero era, meaning current loans generate meaningful current income. A senior secured loan yielding 11-13% today offers a fundamentally different return profile than similar credit risk five years ago.
Borrower quality is filtering upward. Higher financing costs naturally screen out marginal borrowers. The companies seeking capital today have conviction in their ability to service debt and the operating performance to support it.
Structures favor lenders. In a more selective market, disciplined lenders can negotiate meaningful covenant protections. We are seeing maintenance covenants, equity cushions, and call protection that were difficult to obtain in more competitive periods.
Our Approach
At Paxmont, we are not seeking to deploy capital quickly or build asset base for its own sake. Our focus is on careful selection: identifying borrowers with durable business models, experienced management teams, and clear paths to repayment.
We prioritize industries we understand, including essential services, healthcare services, business services, and light manufacturing, where we can develop informed views on credit risk. We structure loans with meaningful downside protection, because we believe the first job of a credit investor is to avoid permanent impairment of capital.
This approach means we say no far more often than we say yes. We are comfortable with that tradeoff.
Looking Forward
Private credit is not without risk. Economic cycles have not been repealed, and not every loan will perform as expected. But for investors seeking current income, downside protection, and exposure to a growing segment of the economy underserved by traditional finance, we believe private credit deserves serious consideration.
The opportunity is not theoretical. It exists today, in thousands of middle market companies seeking capital to grow, acquire, or recapitalize. These are companies that need partners who understand their businesses and can commit with certainty.
We built Paxmont to be that kind of partner.
Rodolfo J. Madrigal
Founder & Managing Partner