USA Trends and Developments Contributed by: Stelios G Saffos, Dan Seale, Peter Sluka and Alfred Xue, Latham & Watkins LLP
1 January 2025, new guidelines from the National Association of Insurance Commissioners reclassified certain sections of insurers’ financial statements, pro - viding better insight into their private credit activities. From a portfolio perspective, insurers are diversify - ing their investments beyond traditional direct lending into areas such as asset-backed finance, including financing for equipment, data centres and specialised receivables. Private capital is appealing because it fills funding gaps with structured, amortising risk that can be customised. This approach aligns with insurers’ financial goals and capital efficiency requirements, while partnerships with managers allow insurers to access origination without developing all capabilities internally. For borrowers and sponsors, the message is clear: insurance capital, often through integrated credit and insurance platforms, can provide long-term scale, competitive pricing and flexible structuring across various credit ratings, from investment-grade corpo - rate solutions to complex asset-backed securities. For legal advisers, the focus is shifting towards creating customised covenant packages, preparing for private letter ratings, engaging with regulatory bodies, and developing terms that align issuers’ goals with insur - ers’ financial constraints. From Dry Powder to Power Moves: How Retail/ Semi‑Liquid Vehicles Are Impacting Private Credit Recent data shows that about USD465 billion is avail - able in private credit funds, with about half of this amount deployed through direct lending. This abun - dant capital is increasing competition in terms of pric - ing, deal structures and speed of execution. Investors are poised to deploy funds quickly as market condi - tions improve, creating a favourable environment for new investments and co-investments. In the corporate world, investment-grade private credit is becoming more common, as seen in recent large transactions that focus on managing market impact and maintaining financial flexibility. This trend is expanding the use of private credit beyond highly leveraged, ratings-sensitive situations.
Significant innovation has occurred in retail and semi- liquid credit products – through new reliable structures that are attractive to private credit. By mid-2025, semi- liquid credit funds had reached about USD230 billion, driven by investors seeking floating-rate income and diversified private investments. For legal advisers, the shift towards retail credit prod - ucts raises important considerations under investment regulations, marketing rules and international distribu - tion limits. Such vehicles also require careful attention to how they are structured, valued and disclosed. Competition from broader public syndicated markets is squeezing margins on certain loans and encourag - ing refinancing between public and private markets. This competition increases the need for well-struc - tured agreements and flexibility in loan terms. That said, refinancing of private transactions with broadly syndicated loans does permit funds to show improve - ments in distributions to paid-in (DPI), which is always a good thing for private funds. And as described above, insurance companies con - tinue to play a key role in investment-grade private credit, supported by new regulatory definitions and private rating systems. Smart Money: Private Credit’s Role in the AI Infrastructure Boom The surge in AI-related investments has become a major theme in private credit markets. At the same time, the market is bifurcating and starting to clearly focus on which industries are AI-exposed and which companies are clear AI winners. For digital infrastructure, viewed as an early AI-advan - taged industry, as companies shift their financing needs from their own balance sheets to large, pro - ject-based investments, private credit is playing an increasingly crucial role. Private credit providers are funding the upfront costs of financing the purchase of graphics processing units, building data centres and upgrading power grids. Many asset managers anticipate that AI investments through to 2030 will require significant upfront spending on computing, data centre and energy infrastructure. This demand has spurred increased borrowing and more activity
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