As capital floods into a market, discipline usually erodes.
The headline default rate stays below 2%, but once liability management exercises are
included, the true rate approaches 5%. PIK, once limited to junior debt, now appears in senior
secured loans.
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The IMF found that 40% of borrowers carry negative free cash flow, up from 25% in 2021.
Can anybody explain me how businesses amortise their debt if they have a negative free cash
flow?

Something is wrong here. The stress is no longer isolated.

LPs still have capital to deploy. If private credit no longer delivers the return it once did,
where does the allocation go?
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The answer isn't obvious, but the question is being asked more seriously than before, and that
creates space.
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For allocators looking beyond traditional credit, royalty investing offers a different profile.
Yield-generating, but not a loan. Uncapped upside, but not equity. Returns are tied to business
performance, not exit timing, refinancing conditions or interest rate cycles. Payments are
naturally aligned with the cash flow of the business.
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In software and technology, where recurring revenues amount to far beyond EUR 1 trillion,
are predictable, and growing, that profile becomes particularly interesting.
The private markets dynamic is shifting, and royalties prove to be the alternative.

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