Jorge Cerna Moran, CFA’s Post

Banks are trying to stay involved in private credit in multiple ways - including debt advisory. Ellen Rose Schneider and Kat Hidalgo have a fascinating story today about efforts by banks including Citigroup and Goldman Sachs to play matchmaker between private credit lenders and companies. Most large private equity firms have their own capital markets teams that do this - no bank needed. But as Ellen and Kat write: "Banks may have relationships with other privately held companies, such as family owned businesses, that are less well known to direct lenders." https://lnkd.in/e29h96MN #privatecredit #leveragedfinance #banking

#Leveraged loan issuance supporting dividend recapitalizations is running at a record pace. The persistent lack of net supply against surging investor demand has pushed borrowing spreads to multiyear lows across the credit quality spectrum. With those syndicated loan market stars aligned, #private equity sponsors are rushing to extract dividends from #portfolio companies, especially as the traditional #exit environment remains challenging. https://lnkd.in/gtiA8ifC

Interesting dynamics in the US. After a period where traditional lenders have had debt stuck on their balance sheets, allowing direct lending players to participate in buyout deals: - traditional lenders are now in some cases pitching to provide junior financing in some cases on leveraged buyout financing deals. Some larger banks are also pitching for “pre capitalisations” where lenders refinance a firm’s debt and add a portability clause, allowing a buyer to keep the existing debt package in place. This makes it easier for companies to be sold at a later date becuase the new owner doesn’t have to find financing. -borrowers are expected to mix and match between the direct lending and traditional lending markets depending on their liquidity needs. This would create a legal contractual playground in the event of material defaults.

Deal news: Goldman Sachs and Sixth Street private credit arms in talk to provide $655m acquisition financing for buyout sponsor H.I.G. Capital Led by Goldman Sachs Asset Management and Sixth Street, the financing package consists of $435m term loan, $160m capex facility and $60m RCF for H.I.G’s potential acquisition of USA DeBusk, a Taxas based mechanical and industrial cleaning company, reports Bloomberg. The deal is priced at 525bps over SOFR, c.1% less than the seller’s existing debt. In the ever growing private credit market it’s increasingly common to see deals fully led by private lenders with no bank loans involved. This type of deal could potentially go through faster due to risk appetite and availability of capital. Follow for the latest deal news in private credit and alternative investment. #privatecredit #privateequity #investmentbanking #goldmansachs #investing

#HoldingTheBag: This will end well. Blackstone snaps up ‘circular’ private equity credit risk - FT https://lnkd.in/grUbd35n The world’s largest buyout group, which manages more than $1tn in assets, has in the past year emerged as a big investor in risk transfer products that are underpinned by short-term loans used by private equity fund managers to close deals as they wait to receive cash from their backers. Such transactions magnify the private equity behemoth’s exposure if an investor were unable or unwilling to fund their commitment. “The unusual thing about Blackstone is that it is a bit circular,” said one large SRT investor. “They are providing protection on themselves.” The dealmaking underscores how intricate and interconnected the private capital industry has become and how new pockets of risk can build up within less regulated corners of the financial system. Banks in Europe and the US have been finding investors willing to assume some of the default risk on their loan portfolio in so-called significant risk transfer transactions (SRTs). Such risk-transfer deals allow lenders to reduce the amount of capital they are required by regulators to hold and thereby boost returns.

After a hot start to the year, the leveraged loan market sparked a heat wave just in time for summer with volumes climbing to near-record levels. Pricing contraction across the market fueled a frenzy of Q2 refinancing activity, and as demand heavily outweighs supply, lenders are being forced to concede on pricing and other key terms to win new deals. With spreads at multi-year lows and overall sentiment continuing to improve, investors anticipate even more borrower-friendly conditions in the back half of the year. Learn more about Q2 performance and trends shaping the leveraged finance market: https://lnkd.in/gP3wYtP8

I would like to thank both Kat Hidalgo and Abhinav Ramnarayan for the excellent coverage of my views on the new areas for consumer lending markets (asset based finance) topic in Bloomberg. Assessing whether or not the bet will pay off private credit funds in an environment of rising unemployment and economic uncertainty. It was indeed a very insightful discussion. #PrivateCredit #Bloomberg #bnnbloomberg #ConsumerLending #CorporateLoans #FinancingRisks #FinancialMarkets #NonTraditionalFinancing #BankingIndustry #privatecreditfunds #AssetBasedFinance #privatedebt #portfoliodiversification #investmentopportunity #acquisitions #householdsbudget #privatedebt #europe #us #creditbooming #unemployment #economicuncertainty #traditionalfinancingvsprivatelending

KeyBanc Capital Markets Doug Ingram weighed in on the return of private equity in 2024 with Axios Kimberly Chin. Read more to learn about why it matters and the big picture #privateequity #dealflow

Morgan Stanley and Goldman Sachs's attempt to elbow their way into a multi-billion financing for The Ardonagh Group shows banks are back in the world of leveraged finance. It also shows private credit is here to stay. Our take on the biggest direct lending deal that *almost* was. w/ Silas Brown 📰 Subscribe to our Private Credit Weekly for more news on deals, fundraising and job moves across the $1.7 trillion private credit market. Run NSUB DIRLENWRAP <GO> on Bloomberg #privatecredit #privatedebt #privatemarkets #investmentbanking #leveragedfinance #leveragedloans #directlending

Following Chairman Powell’s remarks in Jackson Hole, all eyes are focused on potential rate cuts in a few weeks time. UBS’ MD and Head of Structured Credit recently joined Reorg Radio to touch on the future outlook of structured credit, including that of collateralized loan obligations. Here are a few of my takeaways from this listen: Fundamentals of CLOs Recent Timeline Around CLOs Demand and Liquidity around Structured Credit A Short post 1> Fundamentals of CLOs Collateralized Loan Obligations are a collection of business loans that are pooled together, securitized, and then passed on to different owners in separate tranches of debt. These tranches are graded on a variety of factors centering around the risk profile of these securities. During macro environments like the current state, fundamentals of these CLOs remain strong, especially for the higher grade tranches. However, high rates are weighing down on the lower tranches which include low investment grade companies that hold large amounts of leverage on their balance sheets. 2> Recent Timeline Around CLOs Market selloff started in August with poor labor reports and was exaggerated following the yen carry trade unwind amongst other forex events. CLO face values went from being in the 99 range to mid to high 98s. Higher quality was less impacted and this was much more to do with the technical change in this environment. While volatility likely is here to stay with the upcoming slew of political events and data reports, there remains opportunity in structured credit. Even though this volatility disallows some resets and refinancings to take place, it allows for the equity investor to create a new CLO to ramp their own loan portfolio below par and accelerate the overall state of issuances as such. 3> Demand and Liquidity around Structured Credit Given the rates forecast and potential volatility on the horizon, there has been a lot of outflows with given volatility and the market continues to have some concern about a continued drawdown. There is also a lot of speculation around ETFs within the space and the ability for lower rated ETFs to withstand such pressures. This is because a lot of the lower-rate bonds and loans have caused a drawdown in subsequent ETFs causing many to trade well below historical averages. CLO call volume has been elevated as per previous years to contrast activity in ‘22 and ‘23 where loan prices were much more depressed. As long as the market remind strong, Verdi believes that there will be a continuance of buying opportunities and investor confidence. Old deals will also have the ability to get called, reset/refi and have investment periods pushed back. // PS, if you like this, you’ll love my newsletter - Pari Passu - that will teach you an advanced investing concept / story every week. Link in bio Pari Passu Newsletter