Private Debt News Issue #18: Global Expansion, Regulatory Scrutiny, and Market Dynamics
Welcome back! This week’s edition is packed with global moves, regulatory rumblings, and market maneuverings that are reshaping the landscape of private debt. Let’s dive in!
1. Global Players Make Bold Moves
Key Takeaway: Major financial institutions are aggressively expanding their private credit operations globally, with a focus on Europe and Asia.
SMBC Launches €450 Million European Fund
Sumitomo Mitsui Banking Corp. is making waves with its new European Middle Market Credit Fund:
Raised €450 million ($489 million) from investors across Europe, Middle East, and Asia
Will provide senior-secured loans to mid-sized European companies backed by private equity
Partnered with Pantheon Ventures for a secondary transaction structure
The fund will invest alongside SMBC’s joint venture with UK-based Park Square Capital
Blackstone Eyes International Expansion
The world’s largest alternative asset manager is setting its sights on global domination:
Targeting substantial growth in Europe and Asia
Aiming for the private investment-grade credit market, estimated at $25-50 trillion
Already deployed about $1 billion annually to Asia since 2022
Credit and insurance business managed around $330 billion in assets by end of June
Global direct lending business totals about $120 billion, with ambitions for a $5 billion lending platform in Asia
AlbaCore Capital's €2 Billion Ambition
David Allen’s firm is gearing up to compete with the big boys:
Targeting over €2 billion ($2.2 billion) for a new senior direct-lending strategy
Aims to finance European leveraged buyouts with senior secured loans
Currently manages about $9.4 billion in assets
First Sentier Investors bought a majority stake in the firm last year
2. Regulatory Spotlight and Industry Transparency
Key Takeaway: The rapid growth of private credit is prompting calls for increased transparency and regulatory oversight from traditional banks and regulatory bodies.
Banks and Regulators Call for More Disclosure
The rapid growth of private credit is raising eyebrows in traditional finance:
Australian private credit market now comprises about $200 billion in capital
Global private credit has ballooned to $2 trillion in assets
NAB CEO Andrew Irvine sees private credit as a "good thing" but questions how funds will react in a recession
Westpac CEO Peter King highlights transparency as the greatest challenge
APRA Chairman John Lonsdale reveals discussions with global authorities to understand risks
The Transparency Debate
Industry insiders weigh in on the secrecy surrounding private credit:
Macquarie CEO Shemara Wikramanayake downplays the sector's size, calling it "chicken s--t" compared to total debt markets of over $300 trillion
Some funds accused of charging more in fees than investor distributions and delaying write-downs of underperforming loans
3. Market Dynamics and Deal Highlights
Key Takeaway: Private credit continues to play a significant role in major acquisitions and refinancing deals, with creative structures becoming more common.
Carlyle and CVC Credit Lead €600 Million Superstruct Deal
A prime example of private credit's growing role in acquisitions:
€600 million ($651 million) package for KKR's purchase of music festival organizer Superstruct Entertainment
Includes a €200 million delayed-draw term loan and €375 million unitranche loan
Unitranche pricing at 550 basis points over the benchmark rate
Foundation Consumer Healthcare Explores Options
The Plan B pill producer is testing the waters:
Seeking up to $1.5 billion from private credit lenders
Potential uses include refinancing debt and paying a dividend to PE owners
Comes after exploring a sale last year at a potential $4 billion valuation
Current annual EBITDA around $300 million
4. Sovereign Wealth Funds Warm Up to Private Credit
Key Takeaway: Sovereign Wealth Funds are increasingly allocating capital to private credit, attracted by diversification and potentially higher returns.
Invesco's Global Sovereign Asset Management Study reveals growing SWF interest:
56% of SWFs invest in private credit via funds, 30% invest directly
Two-thirds plan to increase allocations
Top sectors: infrastructure debt (51%), real estate debt (50%), corporate direct lending (29%)
US (64%) and Western Europe (41%) seen as most attractive regions
SWFs reallocating capital from fixed income (34%), public equities (26%), and private equity (24%)
5. Industry Consolidation on the Horizon?
Key Takeaway: The private credit industry may be entering a phase of consolidation, with several firms exploring strategic options or making acquisitions.
Crestline Explores Strategic Options
The $18 billion AUM firm is testing the waters:
Exploring options including a potential sale
Has deployed more than $12 billion in over 300 transactions via its credit strategies
Follows recent industry consolidation, including BlackRock's $12.5 billion GIP acquisition
Blue Owl's Acquisition Spree
The firm is on a buying binge:
Recently agreed to acquire Atalaya Capital Management for $450 million
Part of a series of three deals in recent months, boosting AUM by $40 billion since April
Total assets under management now at approximately $174 billion
Looking Ahead: The Future of Private Credit
As the industry evolves, key trends are emerging:
Global expansion, with major players pushing into new markets
Increased regulatory scrutiny and calls for transparency
Growing interest from sovereign wealth funds and other institutional investors
Potential for further industry consolidation
The private credit landscape is changing rapidly, with opportunities and challenges aplenty. Stay tuned for more developments in this dynamic sector!