Private Debt News Weekly Issue #21: Mega Deals, New Frontiers
Private Debt News Weekly Issue #21: Mega Deals, New Frontiers
Trillion-Dollar Market Reshapes as Banks and Alt Lenders Blur the Lines
Introduction
Welcome to this week's Private Debt News Weekly. As the market surpasses $2 trillion in assets under management, we bring you the most significant developments, fundraising efforts, and strategic moves shaping the private credit landscape.
Market Dynamics and Fundraising
The private credit market continues to exhibit robust growth, attracting significant capital across various strategies and regions.
Bradesco Asset Management, Brazil's third-largest fund manager, reported net inflows of 45 billion reais ($8.2 billion) this year through July, with credit products accounting for about 90% of the total. This figure is already triple the amount for all of last year, highlighting the growing appetite for credit products in emerging markets.
Key fundraising developments:
SeaTown Holdings International, a unit of Singapore's Temasek Holdings, raised $1.3 billion for its second private credit fund. The fund targets mid-teens net returns and a double-digit distribution yield, underscoring the attractive returns still available in the Asian private credit market.
HSBC Holdings Plc's asset management group launched two new private credit strategies:
An infrastructure debt strategy attracting over $240 million in commitments
An extension of its UK direct lending strategy into continental Europe, raising $2.4 billion as of June 30
CCS Partners, a new credit manager, launched with $4 billion in commitments. The firm, founded by industry veterans Randy Takian and Rob Kinderman, will focus on structured and private asset-based deals, including risk transfer trades.
Coller Capital closed a $1.6 billion credit continuation vehicle with Abry Capital, reported as the "largest ever" such deal.
These fundraising efforts demonstrate the continued strong investor interest in private credit, especially in specialized strategies and emerging markets.
Blurring Lines Between Private Credit and Traditional Banking
A significant trend emerging in the market is the increasing overlap between private credit providers and traditional banks in terms of deal sizes and target markets.
Private credit deals are growing larger, with recent examples including:
A $2.6 billion loan to fund Thoma Bravo's acquisition of Coupa Software
A $7.5 billion financing for AI-focused cloud service provider CoreWeave, led by Blackstone
Simultaneously, major banks are making inroads into the middle market:
JPMorgan Chase earmarked $10 billion of its balance sheet for direct loans to midsize businesses
Bank of America has doubled its middle-market investment banking team to 200 in just two years
This convergence is reshaping the competitive landscape, potentially offering borrowers more options and better terms.
Strategic Partnerships and New Ventures
The private credit market is seeing a wave of new partnerships and ventures as firms seek to expand their capabilities and reach:
Stifel Financial Corp. is forming a new direct-lending joint venture with Benefit Street Partners (owned by Franklin Resources) and Diameter Capital Partners. The venture will focus on unitranche loans, blending senior and subordinated debt.
Amundi and First Eagle Investment Management are launching a private credit fund for wealthy investors in Europe, registered as a UCI Part II fund in Luxembourg.
Carlyle Group and KKR acquired a $10.1 billion portfolio of private student loans from Discover Financial Services, capitalizing on banks' need to shed assets due to regulatory pressures.
These partnerships and acquisitions demonstrate the industry's efforts to innovate and cater to a broader range of investors, including high-net-worth individuals.
Market Trends and Investor Behavior
Several key trends are shaping investor behavior and market dynamics:
Asset-backed lending and specialized credit strategies are gaining traction. The Carlyle/KKR student loan portfolio acquisition is a prime example of this trend.
Family offices and institutional investors show continued interest in private credit. However, Preqin data suggests a potential shift in sentiment, with North American private credit fund searches comprising 11% of the total this year, down from 18% last year.
The secondary market for private credit is developing, with firms like Golub Capital expanding their trading desks. This could provide increased liquidity options for investors.
Energy transition and infrastructure are emerging as focus areas. HSBC's new infrastructure debt strategy, which targets assets facilitating energy transition, exemplifies this trend.
Institutional investors are expanding their direct investment capabilities. For instance, the $40 billion Texas Municipal Retirement System is hiring three investment staff to expand its direct investment capabilities in private markets.
Conclusion
The private credit market continues to evolve rapidly, presenting significant opportunities for institutional investors. Key takeaways include:
The market is attracting substantial capital, with several multi-billion dollar funds launched or in the pipeline.
Lines between private credit and traditional banking are blurring, potentially reshaping the competitive landscape.
Strategic partnerships and new fund structures are expanding access to private credit for a broader range of investors.
Specialized strategies, including asset-backed lending and energy transition-focused funds, are gaining prominence.
The development of secondary markets may provide increased liquidity options for investors.
As the market matures, successful navigation will require a nuanced understanding of these trends, careful due diligence, and a strategic approach to portfolio construction. Institutional investors should stay attuned to these developments as they seek to capitalize on the opportunities in this growing asset class.