Private Credit market news

Navigating the Evolving Private Debt Market

At the Super Return International conference held in Berlin over the summer, industry experts gathered to discuss the evolving landscape of the private debt market and debate which segment offers the most attractive risk-return profile. The discussions highlighted a shift in focus from traditional middle-market deals to larger, more complex transactions, reflecting broader changes in the private credit sector.

Stuart Mathieson from Barings emphasized that targeting businesses with $10 to $50 million in EBITDA and strong market positions can be more advantageous than competing in the larger, more competitive deal space. He pointed out that as the syndicated market recovers, there is an increase in competition and pricing pressure, particularly in the US. In contrast, European middle-market deals are seen as offering greater stability and more favorable terms, providing a less volatile environment for investors.

Recently, Troutman Pepper observed a significant evolution in the private credit market. Initially focused on middle-market companies with deal sizes rarely exceeding $500 million, private credit now frequently funds transactions over $1 billion and plays a major role in 85% of leveraged buyouts. This shift has seen private credit expand into larger, higher-capitalization companies, overlapping with the syndicated loan market. In response, some private credit funds have consolidated capital into larger funds, while others have adopted club-style deals involving multiple lenders to manage the increasing deal sizes.

Here is the view of recent CLO trends from PitchBook / LCD.

From Proskauer and Bloomberg:

Recent News and Developments

• Janus Henderson is extending its reach into private credit via the purchase of Victory Park Capital.? The deal follows the recent acquisition of National Bank of Kuwait's alternative investments business by Janus Henderson, which manages an asset portfolio worth $353 billion. That deal is expected to strengthen its position in emerging markets and help it access clientele in the Middle East.

• Private Credit Panel at the 2024 Milken Instutute.? The panel included Dianna Carr-Coletta, MD of Direct Lending at PGIM Private Capital; David Greenberg, Co-Head of the North American Investmen team, Strategic Value Partners; Ted Koenig, Chairman and CEO of Monroe Capital; Danielle Poli, MD, Global Credit at Oaktree Capital Management; James Reynolds, Direct Lending at Goldman Sachs, and moderated by Liz Hoffman.??

• AVANA Companies and funds managed by Oaktree Capital Management announced the formation of a new $250 million AVANA-Oaktree Private Credit Partnership its direct private commercial real estate lending strategy. Through the Joint Venture (JV), AVANA will use the capital to provide private debt financing in the United States over the next three years.
• iHeartMedia Inc. is negotiating refinancing with select creditors, while others remain uncertain. This reflects a trend of intense competition among lenders for the best terms, exploiting weak legal protections, which often leaves some creditors with minimal recovery and worsens outcomes for struggling companies.
• Distressed Chinese developer, Logan Group Co., secured a $1 billion refinancing loan arranged by JPMorgan Chase & Co., improving its restructuring prospects. The loan, involving several financial firms, will help address its $8 billion offshore debt.

• Market turmoil is making private credit funds reconsider lower loan margins. Firms like Ares Management and Blackstone may widen spreads due to recession fears, while private credit remains stable compared to volatile syndicated loan markets.

• San Francisco City & County Employees’ Retirement System committed $130 million to several funds, including $75 million to Fortress Credit Opportunity Fund VI. Its private equity and credit allocations were 27.6% and 8.6%, respectively, compared to targets of 20% and 10%.

• Goldman Sachs is allowing insurance clients to co-invest in asset-backed loans, aiming to double its private credit assets to $300 billion in five years and boost recurring revenue.

• Arrowhead Pharmaceuticals obtained a $500 million credit facility from Sixth Street, including $400 million immediately and $100 million optionally. The seven-year, non-dilutive deal features a 15% interest rate and flexible repayment terms.

• Bright Mountain Media has extended its credit agreement with Centre Lane Partners to December 31, 2024, deferring some payments and adjusting repayment terms to support its growth strategy.

If you’re interested in chatting about any private credit opportunities or deal situations, please get in touch with me at [email protected].?

For more information about AXIS Group Ventures, visit our website here.

All the best? - Tim