Private Debt News Weekly Issue #28: Secondaries Surge as Banks Flex Their Muscles
Traditional Lenders Push Back While Portfolio Sales Hit Record Territory
The private credit landscape is evolving on multiple fronts this week, with significant movement in both secondary markets and direct lending. The Florida State Board of Administration’s planned sale of up to $4 billion in private credit holdings highlights growing institutional comfort with secondary markets as a portfolio management tool. Meanwhile, traditional banks are demonstrating their continued relevance, particularly in Asia-Pacific where they recently secured the entire A$5.5 billion AirTrunk financing despite fierce competition from private lenders.
These developments come as the $1.7 trillion private credit market continues to mature and major players like Blackstone and Apollo expand their investment-grade lending capabilities. From secondary market transactions to competitive dynamics between banks and private lenders, this week’s activities offer insights into how the market is adapting to meet evolving institutional needs.
As always, let me know if you have any feedback or have areas you’d like explored in more detail.
Secondary Market Momentum
The Florida State Board of Administration is preparing one of the largest secondary market transactions to date, seeking to offload between $3 billion and $4 billion of private credit holdings. The move reflects a broader trend of institutional investors using the secondary market to reposition portfolios and generate liquidity in the $1.7 trillion private credit market.
Key developments:
Florida SBA is offloading $3-4 billion in private credit holdings while doubling down on direct lending, with current positions across Blackstone, Oaktree, and Värde Partners potentially being sold in series of transactions.
Secondary market momentum accelerating with Ares completing a landmark $491 million deal for 17 funds and 1,500 loans, while Brookfield markets a $1.5 billion portfolio from American National with opportunistic credit fetching around 90 cents on the dollar.
Major buyers including Coller Capital, Ares Management, and Pantheon Ventures are driving projected industry sales of $15 billion this year, with Coller launching a new retail-focused credit-secondaries fund amid growing market acceptance.
Banks Push Back
Traditional banks are showing renewed competitiveness in certain markets, particularly in Asia-Pacific:
Banks led by Citigroup, DBS, and Deutsche Bank secured the entire A$5.5 billion AirTrunk financing package with better pricing than private credit alternatives, while also rolling over A$7 billion in existing loans for the A$24 billion deal.
Asia-Pacific private credit market has doubled since 2019 to $99 billion, though banks maintain regional dominance as demonstrated by last week's $35 billion in leveraged loan launches amid pre-election market rush.
Traditional lenders showing renewed strength globally, with banks undercutting private credit on Cotiviti's $5 billion financing and winning share of Ardonagh's $5 billion refinancing.
Investment Grade Expansion
Major alternative asset managers are increasingly focusing on investment-grade private credit:
Blackstone's credit arm has become its largest division at $354.7 billion, with investment-grade private credit assets exceeding $90 billion after 40% year-over-year growth and $38 billion in A-rated financings originated year-to-date through their four key insurance partnerships.
Apollo manages $275 billion of investment-grade credit, with its high-grade solutions business originating $100 billion in four years across major deals with Intel, Vonovia, Air France-KLM, and BP, typically earning a two percentage point premium over public markets.
Total addressable market for investment-grade private credit estimated at $30 trillion, with firms earning average excess spreads of 185 basis points while meeting growing insurance company demand for these assets, driving Blackstone's insurance assets up 24% to $221 billion.
Deal Highlights
Notable transactions this week include:
Gateway Casinos is pursuing a C$1.8 billion private debt package through Morgan Stanley for refinancing and dividends, marking one of Canada's largest such deals this year, while Bausch + Lomb draws competing $5 billion financing proposals from banks and private credit for a potential $10 billion buyout by Blackstone and TPG.
Sports Illustrated Tickets is seeking $30-50 million for its Anytickets.com acquisition, while Pure Fishing secured $750 million in private credit and Great Canadian Gaming launched a $665 million term loan, highlighting continued activity across deal sizes.
Market Challenges and Considerations
Industry participants are monitoring several key risks:
Competitive pressures intensifying as the market approaches $2 trillion, with spreads compressing from 350 to 100-150 basis points amid aggressive bank competition, particularly in the investment-grade space where traditional lenders are adapting strategies.
Regulatory scrutiny increasing across valuation practices and liquidity mismatches in retail products, with particular focus on private credit ETFs and disclosure requirements following recent appeals court decisions affecting SEC oversight.
The secondary market's growing prominence suggests the private credit industry is maturing, while traditional banks' ability to win major deals indicates the competitive landscape remains dynamic. As the market evolves, the push into investment-grade lending by major alternative asset managers could reshape the industry's risk profile and competitive dynamics.