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(Bloomberg) -- Private credit lenders are preparing for the next phase of the credit cycle: distress.

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TCW Group Inc. is deploying record amounts of capital to rescue finance, in response to the fact that private markets are starting to see signs of stress, according to Chief Executive Officer Katie Koch.

There are signs of “excess,” Koch said during a panel at the Bloomberg Invest conference on Tuesday, or clues that distress is inching into the market. While defaults in private credit haven’t markedly risen, signals of stress, such as lenders offering extensions to maturing loans, are appearing, and are new territory for private credit firms, Koch added.

“We have an asset class that 95% haven’t invested through a cycle or when rates weren’t zero,” Koch said.

Direct lenders have a lack of experience in a real credit cycle, panelists said. Given private credit’s meteoric rise into a $1.6 trillion market mostly happened while rates sat close to zero, many of its largest players haven’t weathered a true recession.

“More people have seen Big Foot in the last decade and a half than a business cycle, and that means a lot of us are to some degree asleep,” said Jonathan Lewinsohn, the co-founder and managing partner of Diameter Capital Partners.

Restructurings have inched up in the market over the last few months. Private lenders completed a deal this week to take control of Alacrity Solutions and restructure its debt, while another borrower Zips Car Wash has filed for bankruptcy with a plan to hand over the business to lenders.

Still, the group asserted private credit had workout tools at its disposal and was focused on relationships. Private credit loans are often provided by a smaller group of lenders, making it easier should the debt get rocky, given the parties all know each other.

“We make a loan, we keep a loan,” Blue Owl Capital Inc. Co-Chief Executive Officer Marc Lipschultz said in an interview with Bloomberg TV before the panel. “You signed up with us, we are with you for the duration.”

--With assistance from Rene Ismail.

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