Market for ‘orphan’ hedges leaves some borrowers stranded

Companies with private credit loans face punitive costs from banks for often imperfect hedges

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Many companies borrowing from non-bank lenders have struggled to find hedges for their interest rate exposure, as some banks remain wary of the risk and burden of hedging the private credit transactions.

Banks typically prefer to offer hedges to borrowers if they’re also involved in the loan. But experts say that while so-called orphan swap deals are often struck between companies and non-lending banks, they can be less timely, more expensive, and can provide worse hedges than if companies had