With interest rates stabilizing at “higher-for-longer” levels, companies with heavy debt loads are seeking out solutions that offer certainty and flexibility. For private credit managers experienced in distressed debt and business turnarounds, there are plenty of opportunities to deploy capital strategically. 

While corporate defaults remain low, hovering around 2%–3%, the sheer size of today’s debt markets has pushed distressed debt exchanges to record levels. “While we don’t expect a corporate bankruptcy wave in 2025, many companies are facing severe financial strain,” says Arif Bhalwani, CEO of Third Eye Capital in Toronto. As traditional lenders shy away from troubled businesses, private credit firms with the right experience and risk appetite are stepping in to provide the liquidity necessary for stability and rescue. 

Bhalwani believes that there is a vast amount of hidden value in companies that does not show up on balance sheets. “Intangible assets make up 80% of the total enterprise value of U.S. public companies, yet banks often ignore them,” he notes. “At Third Eye Capital, we finance businesses with strong fundamentals that don’t fit the conventional lending box. We work with businesses that other lenders pass on because we’re willing to roll up our sleeves, solve complex problems, and unlock real value in partnership with management teams.”

This hands-on, solutions-driven approach is precisely what many struggling businesses are looking for in a lending partner. Debt restructuring is a specific skill that can only be honed over years of working with businesses in different industries and states of economic turmoil. Specialized private credit firms provide tailored financing solutions aimed at maximizing valuable assets and optimizing internal talent. 

For investors in private credit, the ability to identify undervalued assets and restore their potential is understandably tantalizing. Bhalwani and his team prioritize not just financial metrics but also the integrity and competence of management. “Businesses can face challenges for reasons outside of their control. What matters is how leadership responds,” Bhalwani says. “We don’t just lend money, we engage, guide, and support companies in ways that traditional lenders won’t.” 

The role of a private credit investor, as Bhalwani sees it, goes beyond capital allocation – it is about problem-solving and value creation. “I was fortunate to have mentors in my career, and now I can do the same today for management teams navigating uncertainty,” he explains. As the economy shifts and debt burdens increase, private credit managers with expertise in complexity and distress will play an essential role in stabilizing and revitalizing businesses. For those willing to lean into uncertainty and solve challenges others avoid, the potential returns – both financial and strategic – are significant. “We believe that great businesses are not defined by their toughest challenges, but by how they overcome them,” says Bhalwani. “True value is found in places others ignore. That’s where we thrive.”