PEI Private Credit Expert Q&A with Prospect Capital President and COO, Grier Eliasek

Prospect Capital argues that private credit is splitting between crowded, weakening large-cap lending and less-saturated mid-market lending, where stronger protections and better risk-adjusted returns remain available.

• Negative headlines overstate stress: borrowers still face operating-cost and interest-cost inflation, but Prospect says its borrowers average more than 200% interest coverage, while software exposure is 3% of its portfolio versus 25–50% for many peers.
• The firm underwrites a near-term recession as the base case, tests peak-to-trough revenue declines against the point where fixed-charge coverage falls below 100%, and requires conservative leverage, limited EBITDA add-backs, SOFR floors and quarterly maintenance covenants.
• Prospect says it reviews more than 3,000 direct-lending opportunities annually and usually selects fewer than 0.5%; deals pass through a subcommittee and then a full investment committee, while deal champions remain responsible through repayment.
• More than $2 trillion has been raised during the current credit cycle, but capital is concentrated in large-cap lending; only about 10,000 of the 230,000 US mid-market companies have EBITDA above $50 million, leaving roughly 220,000 smaller businesses less contested.
• Competition has tightened spreads, increased leverage and weakened documentation in large-cap lending, while the broadly syndicated loan market captured the largest share of LBO financing volume in the first half of 2026; Prospect targets borrowers below $50 million of EBITDA, smaller sponsors and independent sponsors.

Takeaway: The interview supports selective exposure to lower and core US mid-market direct lending rather than an outright retreat from private credit, while warning investors to assess refinancing risk, software disruption from AI and the quality of covenants and underwriting.