IEQ Capital’s Bhavika Booragadda, Director of Research, recently had the pleasure of sitting down with David Golub, President of Golub Capital, for an IEQ Fireside Chat to commemorate Golub Capital’s 30th anniversary.
Founded in 1994, Golub Capital is a private credit manager that is known for building long-term partnerships with investors and private equity sponsors. In the late 1990s, Golub Capital streamlined a capital structure known as the “one-stop” or unitranche loan, which remains in the lending industry today. At the time, transactions often involved a combination of senior bank debt and higher-cost mezzanine debt, leading to complex capital structures. Golub Capital developed a non-bank finance company that provided single-tranche loans, simplifying the process and aligning the interests of private equity sponsors and investors1.
During the conversation, Ms. Booragadda and Mr. Golub discussed current market trends, including credit market dynamics and particularly the recent trends in credit spreads. Mr. Golub noted the narrowing of credit spreads observed in early 2024 suggest a reflection of improved borrower credit quality, which he believes may result in more manageable interest payments.
Their discussion also addressed how the current, higher for longer interest rate environment is a significant consideration for lenders and borrowers. While higher base rates generally benefit lenders, they can make it more challenging for borrowers to pay back their loans, creating a potential for heightened credit stress. Golub Capital is expecting interest rates to lower in the coming period, which they believe could provide some relief to borrowers.
According to Golub Capital, it has concentrated on the core middle market, targeting companies with cash flow between $20 million and $100 million since its founding. These businesses are typically underserved by public markets or high yield bonds.
Golub Capital stated that it will continue its experience in middle market direct lending, while adapting to evolving market conditions. The firm's strategy includes maintaining relationships with private equity sponsors, utilizing its industry insight, and exploring growth opportunities within its core sector.
IEQ Capital applauds Golub Capital for 30 years in the direct lending industry
1. Turning the Middle Market Upside Down: Unitranche Financing in U.S. Middle-Market Leveraged Buyouts. McCarthy M. Shelton Appalachian State University.
The opinions expressed hereinsolely represent the views of the individual interviewed. Nothing expressed should be viewed as investment advice or a recommendation to buy or sell any investment, norcreates an advisory relationship with IEQ Capital. Information presented is as of the date indicated and is subject to change. No representation is made with respect to the accuracy, completeness or timeliness of information and IEQ assumes no obligation to update or revise such information.