Private credit: A structural shift in corporate lending

Private credit refers to non-bank lending—usually provided directly by funds backed by institutional investors—structured outside of public markets. These transactions are typically bilateral or involve small lending clubs, allowing for tailored terms suited to the borrower’s specific needs. What sets private credit apart is its adaptability: it can support complex capital structures, offer longer maturities, and respond quickly to market dynamics, all of which are increasingly attractive to companies navigating a more volatile financing environment.

Historically, Swedish corporates have relied primarily on bank lending. However, for borrowers seeking execution certainty, longer tenors, or deal-specific structuring, private credit now offers a credible and competitive alternative. While mid-market, sponsor-led transactions remain the core of the private credit market, the product is expanding to support a wider range of situations—from large acquisition financings to growth capital, refinancings, and recapitalisations.

As of 2024, the global private credit market’s assets under management (AUM) are estimated at approximately USD 1.6 trillion. However, detailed AUM figures specific to Sweden’s private credit market are not publicly available. One of the most notable Nordic private credit transactions is the €4.5 billion unitranche loan provided by a private credit syndicate to finance the leveraged buyout of Adevinta ASA. Another recent example of a significant transaction involving private credit was EQT’s recent successful public takeover offer for Fortnox AB (acting through Omega II AB) valued at USD 5.5 bn where RE:FI STHLM acted for a syndicate of leading international lenders, including private credit funds.

In terms of number of deals, some of the most active private credit providers in the Nordic region during 2024 have been Ture Invest, Ares, KKR Credit, Sixth Street, Cordet Capital, Arcmont, Capital 4 and CVC Credit. 

Why Private Credit Is Growing

Several structural trends support the continued growth of private credit. On the demand side, institutional investors—such as pension funds and insurance companies—are seeking higher returns in a low-yield environment, and private credit offers attractive, floating-rate exposure. On the supply side, companies want alternatives to bank loans that can provide speed, certainty, and flexibility—particularly in acquisition finance, special situations, or cross-border deals.

In Sweden, the local market is maturing rapidly, with both domestic and international credit funds actively pursuing opportunities. Borrowers that once relied exclusively on local bank relationships are now accessing a deeper and more diverse capital pool.

A Different Legal and Commercial Dynamic

From a legal and commercial standpoint, private credit differs from bank financing in several key respects—differences that have direct implications for how deals are structured, negotiated, and managed.

Documentation is one of the most visible distinctions. While private credit documentation may draw on LMA templates as a starting point, these are typically adapted significantly to reflect deal-specific risks, borrower profiles, and the lender’s credit approach. The result is typically more bespoke documentation with custom covenants, tailored events of default, and borrower obligations that go beyond standardised bank terms.

Flexibility is one of private credit’s key strengths. These lenders can offer subordinated or structurally subordinated tranches, deferred interest, and other bespoke features not typically available in standard bank facilities. Execution timelines are often shorter, and private credit lenders are generally able to underwrite transactions with greater certainty. However, this flexibility is balanced by a higher degree of lender oversight—more robust covenant packages, broader information rights, and more active monitoring in the event of underperformance are common.

Pricing is another key differentiator. Private credit is typically more expensive than traditional bank debt. Interest margins tend to be higher, reflecting the lender’s greater risk tolerance and the illiquidity premium demanded by investors whose capital is locked up for longer periods. Borrowers should also expect higher upfront costs, including fees for origination, structuring, and due diligence. Prepayment penalties, exit fees, and non-cash elements such as warrants or PIK (payment-in-kind) interest are not uncommon. Legal and advisory costs can also be materially higher, given the customised nature of documentation and the need for detailed intercreditor and security arrangements.

Tenor is generally more flexible in private credit structures. While banks typically offer loans with maturities of up to five years—often amortising—private credit lenders are more comfortable with five-to-seven-year bullet or lightly amortising terms. This better aligns with the cash flow profile of many borrowers and supports longer investment horizons, particularly in acquisition or growth scenarios.

Structural Coordination and Intercreditor Complexity

Private credit transactions are frequently structured alongside traditional bank facilities or capital markets instruments. This creates hybrid structures that combine the flexibility of private credit with the working capital support or liquidity features of bank financing.

Common structural combinations include:

• A unitranche facility provided by private credit funds—often comprising term loans and delayed draw tranches—paired with a super senior revolving credit facility from a bank;
• A holding company level loan extended by private lenders, sitting structurally above senior bank debt or high-yield bonds at the operating company level; and
• Subordinated private credit, positioned beneath senior secured financing in the form of syndicated bank loans or capital markets instruments.

These combinations offer significant flexibility for borrowers but also introduce legal and structural complexity. Intercreditor arrangements must address enforcement mechanics, waterfall provisions, covenant harmonisation, and standstill rights. These terms require careful negotiation to ensure alignment across creditor groups, particularly when lenders have differing priorities or investment horizons.

Security arrangements are also central. Private credit lenders typically require first-ranking security over material assets, as well as share pledges or cross-border guarantees. Where banks or bondholders are also involved, intercreditor agreements must clearly define how collateral enforcement proceeds are shared and how creditor rights interact in distressed scenarios.

The Role of Banks in a Changing Ecosystem

While the rise of private credit has introduced new options for borrowers, it has also created opportunities for banks. In many transactions, banks retain a key role—whether by providing liquidity lines, participating in intercreditor arrangements, or financing private credit funds through separate arrangements.

Some banks have developed structured partnerships with private lenders, enabling them to offer more comprehensive financing packages. Others act as arrangers or syndication agents for deals that blend bank and non-bank capital. These collaborative models allow banks to continue serving their core clients while expanding their reach into alternative lending structures.

This evolving dynamic reflects a more fluid and integrated financing environment, where banks and private credit funds complement rather than replace each other.

Legal Considerations: What Borrowers Should Know

While private credit offers flexibility, it also places greater demands on borrowers and their legal advisors. Key legal areas to consider include::

• Covenant package design, including definitions, thresholds, and cure rights;
• Security arrangements, particularly in cross-border or multi-lender structures;
• Intercreditor provisions, including enforcement mechanics and payment waterfalls;
• Transferability and lender rights;
• Regulatory and tax matters, such as licensing requirements, withholding, deductibility, and fund domicile;
• Governing law of the facility agreement and the intercreditor agreement – international private credit companies typically prefer English law whereas local financiers typically demand Swedish law to govern.

Given the bespoke nature of private credit, each transaction demands tailored legal solutions. Borrowers and advisors should engage early and negotiate robust, long-term terms tailored to the specific capital being raised.

Conclusion

Private credit has become a permanent and expanding part of the Swedish corporate finance landscape. For borrowers, it offers access to tailored capital with greater structural flexibility and deal-specific execution. At the same time, banks remain central to the financing ecosystem—often working alongside private lenders to deliver complementary funding solutions that address different parts of a company’s capital needs.