Private Debt News Weekly Issue #38: Banks Strike Back, Ares' Power Play, and Regulatory Heat Intensifies
Investment Banks Undercut Private Credit, Mega-Funds Consolidate Capital, and Regulators Target PIK Debt and Valuation Transparency
Private Debt News Weekly: February 10, 2025
The battle for private credit dominance is intensifying. Investment banks are aggressively reclaiming buyout financings, using lower-cost syndicated loans to lure borrowers away from direct lenders. Meanwhile, Ares raises a record-breaking $133 billion, reinforcing the consolidation of capital at the top as smaller funds struggle to keep pace. At the same time, regulators are circling, with growing concerns over valuation transparency, PIK debt, and private credit’s increasing reliance on securitization to attract insurance capital.
With pricing pressure, deal competition, and oversight mounting, private lenders are being forced to adapt, specialize, or consolidate in this rapidly evolving market. Here’s your essential breakdown of the trends, deals, and risks shaping the private debt industry this week.
Key Market Trends
Banks Strike Back: Private Credit Loses Ground on Pricing
Investment banks are aggressively pricing sponsored financing deals lower, taking back key buyout transactions that private credit lenders previously dominated.
Key Wins for Investment Banks:
Ardonagh Group: Morgan Stanley, Bank of America, and JPMorgan led a $1.2 billion refinancing, shifting the UK-based insurance broker’s private credit debt into a syndicated loan structure at significantly lower pricing.
Wagamama Holdings: The UK-based restaurant group replaced £330 million ($410 million) in private credit with a high-yield bond, cutting financing costs.
Circor International: Opted for a $650 million syndicated loan, saving 2.25% in borrowing costs compared to private credit alternatives.
Why It Matters:
Banks are aggressively reclaiming market share, leveraging lower pricing, CLO demand, and renewed appetite from institutional investors.
Private credit must now differentiate on flexibility and speed, as its pricing advantage erodes in a more competitive market.
Fundraising Concentrates Among Private Credit Mega-Funds
Private credit fundraising totaled $167 billion in 2024, marking its third consecutive annual decline. However, mega-funds continue to dominate.
Ares’ Record War Chest:
Ares raised $92.7 billion in new capital in 2024, boosting its total dry powder to $133 billion—the largest in the firm’s history.
This includes €30 billion ($31.1 billion) dedicated to European direct lending, the largest-ever private credit fund in the region.
Other Fundraising Highlights:
Crescent Capital: Positioned for an M&A resurgence, targeting 15%+ returns on senior debt with a 40% loan-to-value approach.
Thoma Bravo: Closed a $3.6 billion private credit fund, further fueling competition in direct lending.
Challenges for Mid-Sized Funds:
Investors are shifting more capital to private equity, with buyout funds outperforming private credit for the first time in two years.
Only the largest players are consistently raising capital, forcing smaller private credit firms to either consolidate or specialize.
Regulatory Pressure Mounts on Private Credit
Regulators and policymakers are closely examining private credit’s rapid growth, focusing on valuation transparency, leverage, and insurance capital inflows.
Key Areas of Concern:
PIK Debt Under Scrutiny:
The IMF has launched a deep dive into payment-in-kind (PIK) loans, which have become more prevalent in credit fund portfolios.
Regulators worry that PIK debt artificially prolongs struggling companies, delaying inevitable defaults and masking systemic risk.
Insurers’ Private Credit Exposure Investigated:
Germany’s BaFin is probing insurance firms’ private credit holdings, questioning whether they fully understand the risks of their direct lending allocations.
Private Credit’s New CLOs Raise Concerns:
Private credit lenders are increasingly securitizing loans into rated feeder funds to attract insurance capital.
Regulators worry that these securitized private credit structures lack transparency, potentially introducing hidden risks into the financial system.
What’s Next?
More stringent disclosure requirements for private lenders could be introduced.
Greater oversight of PIK debt usage may lead to structural changes in how private credit funds operate.
Capital requirements for insurers investing in private credit may tighten, potentially reducing a critical funding source for direct lenders.
Recent Deals
Ares Raises a Record-Breaking $133 Billion in Capital
Ares secured $92.7 billion in new capital in 2024, pushing its total dry powder to $133 billion, the largest in its history.
Breakdown of New Capital Raised:
$30 billion+ for European direct lending.
Highest returns in Asia-Pacific credit (27.2% in 2024).
Strong momentum in 2025, as deal flow increases.
Why It Matters:
Ares’ fundraising dominance cements its position as a top-tier lender in both the US and Europe.
The fundraising gap is widening—smaller and mid-sized funds are struggling while mega-funds consolidate power.
Oaktree Leads $2.9 Billion Refinancing for Blackstone’s Encore
Oaktree arranged a $2.9 billion refinancing for Blackstone’s audio-visual services company, Encore Group.
Deal Structure:
$2.4 billion term loan, priced at SOFR +500bps.
$250 million revolving credit facility.
Oaktree contributed $452 million.
Key Takeaway:
Private lenders continue to dominate large refinancing deals, even as banks reclaim new buyout financings.
Private Credit’s Role in Pre-IPO Financing Grows
With IPOs still sluggish, private lenders are stepping in to provide liquidity for high-growth firms delaying public listings.
Recent Transactions:
Databricks secured $2.75 billion in direct lending, providing pre-IPO liquidity for employees and investors.
Blackstone led a $4 billion loan for Clario, a clinical trial software firm preparing for an IPO.
Why It’s Significant:
Direct lenders are becoming a primary capital source for late-stage growth companies, offering structured annual recurring revenue (ARR)-based loans that banks typically avoid.
Forward Outlook
Banks vs. Private Credit: The Battle Intensifies
Investment banks will continue undercutting private credit lenders on pricing, forcing private debt funds to differentiate with flexibility and speed.
Fundraising Will Remain Highly Concentrated
Only mega-funds like Ares and Apollo are consistently raising capital.
Mid-sized lenders will need to find specialized niches or consolidate to stay competitive.
Regulatory Scrutiny Will Increase
Expect new rules on PIK debt transparency and insurer capital allocation.
Tighter valuation disclosure requirements may reshape private credit reporting standards.
Pre-IPO Lending Will Continue Expanding
Private credit will remain the go-to capital source for delayed IPO firms, funding late-stage growth without equity dilution.
CLO Market Pushback on Private Credit Refinancing Terms
CLO investors are pushing back on aggressive private credit refinancing structures, making it harder for highly leveraged borrowers to transition into the syndicated loan market.
Final Takeaway
The private credit market is evolving rapidly—investment banks are stealing deals, mega-funds are consolidating power, and regulators are tightening oversight. Only the strongest, most specialized, and well-capitalized private lenders will thrive in this next phase.
Stay ahead with Private Debt News Weekly—your definitive source for insights, deals, and trends shaping private credit.