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Explanation:
Private credit differs from high-yield bonds in that it typically involves direct lending with customizable loan structures and terms negotiated between the lender and borrower. This flexibility allows private credit lenders to tailor covenants, repayment schedules, and collateral requirements to meet specific borrower needs
A is incorrect: Private credit is illiquid and not publicly traded, unlike high-yield bonds, which are actively traded in public markets.
B is incorrect: While private credit is directly negotiated, it is often riskier than high-yield bonds due to its focus on lending to middle-market or financially constrained borrowers. The direct lending structure does not inherently reduce risk.
D is incorrect: Private credit typically offers higher yields than high-yield bonds, reflecting its illiquidity premium and higher borrower risk profile.
Q.6393 An institutional investor compares private credit to high-yield bonds. Which of the following is a key difference between these two asset classes?
A
Private credit offers greater liquidity than high-yield bonds.
B
Private credit is less risky due to its direct lending structure.
C
Private credit offers greater flexibility in negotiating loan terms.
D
Private credit typically has lower yields.
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