Private Debt News Issue #17: Pushing Boundaries, Partnerships, and Performance
Welcome back, debt devotees! This week’s serving of private credit news comes with a side of controversy, a dash of innovation, and a heaping helping of market evolution. Grab your favorite beverage (maybe make it a double) and let’s dive in!
Private Credit: The New Banks on the Block? 🏦
Blair Jacobson, Ares Management Corp.’s co-head of European Credit, is boldly claiming that private credit funds are becoming "the new banks." Let’s break it down:
Private credit can now handle most assets banks want to offload, from mortgages to corporate loans.
Jacobson welcomes incoming regulation, seeing it as validation of the industry's growing importance.
Commercial banks are increasingly viewing partnerships with private credit as "the way forward."
As the lines between traditional banking and private credit blur, keep your eyes peeled for more regulatory attention and innovative partnerships.
The Retail Rush: A Double-Edged Sword? 🛍️💸
Private credit's push into retail is gaining momentum, but it's not all smooth sailing:
Blackstone's BCRED vehicle has amassed a whopping $55 billion from US retail investors.
The European version, ECRED, recently passed the €1 billion mark.
However, the need for liquidity and immediate deployment is putting pressure on margins.
Is the democratization of private credit a boon for investors or a potential time bomb? The jury's still out, but regulators are certainly taking notice.
Deal Spotlight: Oaktree's £1 Billion Tango with Lloyds 💃💼
In a prime example of the evolving private credit landscape, Oaktree Capital Management is partnering with Lloyds Banking Group to the tune of £1 billion. The highlights:
Oaktree will provide loans up to £175 million to Lloyds' private equity clients.
This move puts Lloyds in the company of Goldman Sachs, Citigroup, and Wells Fargo in the private credit arena.
It's a win-win: banks earn fees without tying up capital, while private credit funds gain access to new deal flow.
The "Anti-ESG" Opportunity: One Fund's Contrarian Play 🚫♻️
In a move that's sure to raise eyebrows (and maybe a few hackles), Balmain Corporation is launching a new fund targeting companies that fail ESG tests. Here's the scoop:
The aptly named "Eagle Series" (originally titled "Vulture Series" - points for honesty?) will finance companies supplying equipment to coal miners and other ESG-challenged industries.
Balmain's CEO, Andrew Griffin, sees this as an "enormous opportunity" as risk-averse banks exit these sectors.
The fund will offer higher yields but with longer terms of up to three years.
Is this financial genius or a PR nightmare waiting to happen? Only time (and returns) will tell!
The Rise of Borrow-Now, Pay-Later Deals 🕰️💰
As interest rates remain stubbornly high, private credit funds are getting creative:
Health Catalyst secured a $225 million credit facility from Silver Point Finance, including a $100 million delayed draw term loan.
"Synthetic PIK" arrangements are becoming more common, allowing companies to defer interest payments without officially calling the loan PIK.
But beware: these stop-gap measures may not solve deep-rooted performance issues.
Mergers, Acquisitions, and Partnerships, Oh My! 🤝🔄
The private credit world is playing musical chairs, with several notable moves:
Oak Hill Advisors and One Investment Management are joining forces, earmarking up to $5 billion for European private credit.
Blue Owl Capital is acquiring Atalaya Capital Management in a $450 million deal, adding $10 billion in AUM.
Seviora Holdings, owned by Temasek, plans to buy a minority stake in ADM Capital.
Crystal Ball Gazing: What's Next for Private Credit? 🔮
As we peer into the misty future of private credit, a few trends are emerging:
Increased regulatory scrutiny seems inevitable as the sector grows and pushes into retail.
The line between traditional banking and private credit will continue to blur.
Innovation in deal structures will likely accelerate as funds compete for returns.
ESG considerations will remain a hot-button issue, with funds taking divergent approaches.
Remember, in the world of private credit, today's contrarian play could be tomorrow's mainstream strategy. Stay nimble, stay informed, and as always, follow the money!
Until next time, keep those term sheets coming and those covenants tight. Same time, same place next week!