Monday Market Minute | Apr 29, 2019

Mid-market private credit demand accelerates as traditional lenders pull back

What Moved

Industry surveys from multiple Canadian alternative asset managers confirmed that mid-market private credit demand continued to build. Borrowers in the $5-50 million range — too large for MICs, too small for institutional syndicated loans — found the traditional bank channel increasingly restrictive. Ninepoint Partners, among others, reported strong pipeline activity in direct lending, with deal quality improving as the opportunity set expanded.

Why It Matters

The mid-market lending gap represented a structural opportunity in Canadian private credit. Unlike cyclical dislocations that disappear when conditions normalize, this gap was driven by regulatory capital requirements that were permanent features of the post-2008 banking landscape. Investors accessing this segment earned yields of 8-12% with senior secured positioning, favourable covenant protections, and relatively short durations.

Signal to Watch

The Bank of Canada's Financial System Review, due in May, would assess risks in the non-bank lending sector. While prior reviews had flagged growth in alternative lending as a potential concern, the quality metrics — delinquency rates, LTV ratios, covenant compliance — had remained strong through the cycle.

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