Private Debt News Weekly Issue #41: Wall Street’s Comeback, Mega-Tech Financing, and Growing Retail Access
Apollo Leads $35B Meta Deal, Banks Push Private Credit Out of LBOs, and Blackstone’s New Fund Signals a Retail Boom
The battle between banks and private credit is intensifying, as Wall Street firms aggressively reclaim market share in large corporate loans while private lenders shift to asset-based and middle-market deals. Meanwhile, Apollo eyes a $35 billion financing for Meta’s AI-driven data centers, Blackstone gains SEC approval for a retail private credit fund, and Prospect Capital’s internal dysfunction surfaces, shaking confidence in one of the industry’s early pioneers.
With private credit’s rapid expansion facing valuation challenges, shifting strategies, and heightened competition, here’s your breakdown of this week’s most critical trends, deals, and risks shaping the market.
Key Market Trends
Banks Regain Ground as Private Credit Loses Mega Loan Deals
Banks are taking back high-profile corporate financings, leveraging lower pricing and renewed demand for syndicated loans to push private credit firms out of major transactions.
Key Deals:
Morgan Stanley refinanced $3.9 billion in loans for Kaseya, replacing Golub Capital’s private debt.
Banks overtook private lenders in mega-loans, with direct lending to PE-backed businesses dropping to 24% of total loan volumes (down from 68% in Q4 2022).
Recent LBO financings have priced at 7%-7.5%, making it harder for private lenders targeting double-digit returns to compete.
Why It Matters:
Investment banks are aggressively reclaiming large-cap corporate financings, using cheaper rates to outprice private lenders.
Private credit firms are shifting focus toward asset-backed lending and middle-market deals to maintain growth.
SEC Approves Blackstone’s Retail Private Credit Fund
Blackstone won SEC approval to launch its newest private credit fund, the Blackstone Private Multi-Asset Credit and Income Fund (BMACX), targeting wealthy and retail investors.
Fund Highlights:
Invests 80%+ in private credit, spanning real estate, direct lending, and asset-backed loans.
Quarterly liquidity via interval fund structure.
Minimum investment of $15 per share.
Why This Matters:
Retail investors are rapidly entering private credit, with interval funds now managing $85 billion, up from $25 billion four years ago.
This marks a shift in private credit’s accessibility, setting the stage for further retail-focused credit products.
Prospect Capital’s Dysfunction Shakes Investor Confidence
Prospect Capital, one of private credit’s early pioneers, is now facing mounting scrutiny over its leadership, governance, and declining financial health.
What’s Happening?
CEO John Barry’s aggressive leadership style has alienated analysts and dealmakers, leading to the firm being frozen out of major transactions.
Prospect’s stock trades at a 45% discount to its book value, the widest gap among public private credit funds.
The firm’s reliance on PIK debt surged to 34% of its net investment income in 2024, well above industry norms, signaling increased borrower stress.
S&P and Moody’s downgraded Prospect’s debt to junk, citing “deterioration in asset quality.”
Why It Matters:
Valuation concerns are growing across private credit, as investors question whether debt marks are reliable or masking deeper problems.
More scrutiny on governance and underwriting standards in private credit firms could follow.
Recent Deals
Apollo and KKR in Talks for $35 Billion Meta Data Center Financing
Apollo is leading a $35 billion financing package for Meta’s AI-driven data center expansion, marking one of the largest private credit-backed infrastructure financings ever.
Why This is Huge:
Private credit is now a critical funding source for tech infrastructure, an area traditionally dominated by banks.
Meta’s AI ambitions require long-term financing, and private lenders are increasingly stepping into investment-grade transactions.
The deal would signal private credit’s growing dominance in large-scale corporate lending.
Ares Leads $2.2 Billion Private Credit Deal for ModMed
Ares arranged a $2.2 billion private debt package for Clearlake Capital’s buyout of electronic medical record firm Modernizing Medicine (ModMed).
Deal Breakdown:
$1.6 billion first-lien term loan.
$600 million in preferred equity.
Leverage: 8-10x EBITDA.
Why It Matters:
Large buyouts are still being funded by private credit, but at higher leverage levels than traditional bank deals.
Direct lenders remain crucial for PE-backed healthcare financings, a sector seeing increased M&A activity.
Walgreens Buyout Attracts Both Banks and Private Credit
Sycamore Partners is lining up $12 billion in financing for a potential leveraged buyout of Walgreens Boots Alliance, with both banks and private lenders competing for a share of the deal.
Funding Breakdown:
Banks: $7.25 billion in syndicated loans and bonds.
Private Credit: $4.5 billion in loans from Ares, HPS, and others.
Why This Matters:
Large buyout financings are increasingly using a mix of bank and private credit funding, creating a hybrid model.
This could become the new normal, blending the pricing advantages of syndicated loans with the flexibility of direct lending.
Forward Outlook
Banks vs. Private Credit: The Battle for Mega-Deals Will Intensify
Investment banks are pricing private lenders out of large-cap deals.
Private credit firms will focus more on structured finance, asset-backed lending, and middle-market opportunities.
Retail Investors Gain More Access to Private Credit
Blackstone’s SEC-approved fund opens new doors, with more asset managers expected to follow.
State Street and Apollo’s private credit ETF could set the stage for broader retail adoption.
Valuation Concerns Will Keep Growing
Prospect Capital’s struggles highlight the risks of discretionary loan pricing.
Regulators may demand more transparency on PIK debt and credit marks.
Private Credit Will Expand Further into Infrastructure and Tech
Apollo’s $35 billion Meta financing signals that private credit is here to stay in corporate infrastructure.
More large-cap firms will turn to direct lenders for long-term financing.
Hybrid Financing Structures Will Gain Traction
Walgreens’ LBO shows that banks and private lenders can coexist in financing large buyouts.
Future mega-deals may use a mix of bank and private credit capital, giving borrowers more flexibility.
Final Takeaway
The private credit landscape is rapidly evolving, with banks regaining market share, retail investors gaining access, and large-scale corporate financing shifting towards hybrid models. Meanwhile, valuation risks are becoming harder to ignore, as highlighted by Prospect Capital’s troubles and the growing scrutiny on PIK debt.
With competition heating up, transparency under the microscope, and new capital sources emerging, private credit is entering its next phase of transformation.
Stay ahead with Private Debt News Weekly—your go-to source for the latest deals, trends, and insights shaping private credit.