(Charlotte, NC – October 1, 2019)
Source: Preqin Data, Bloomberg Businessweek
How Private Credit Soared to Fuel Private Equity Boom
(Bloomberg Businessweek) Following the 2008 financial crisis, banks stopped lending to smaller or riskier borrowers, leaving demand for loans unfulfilled. The private credit world has exploded since then, filling the void left by traditional lenders. From $237.9 billion of assets under management (AUM) at the end of 2008, private debt is now estimated to top $1 trillion of AUM next year. These loans have supplied the leverage that helped buyout firms expand their collective portfolio to its current $4 trillion. Loans in this market are typically much more lucrative for lenders, with all-in yields of 7%-9%, but they do not come without commensurate risk. An influx of new lenders and fresh cash has led to increased risk-taking through looser covenants. Regulators are concerned that intertwining private equity firms with the lenders who finance their acquisitions, could be setting the lenders up for trouble down the road. JPMorgan CEO Jamie Dimon has also expressed concern, saying that non-bank lenders holding lower-quality loans could be left “stranded” in an economic slump.
Investors Flock to a Rare Private Equity Listing
(Wall Street Journal) Swedish private-equity firm EQT AB had an initial public offering (IPO) this week, which drew massive amounts of interest from investors. Shares were up more than 25% on their first day of trading and the IPO was more than 10 times oversubscribed – indicative of rising public demand for buyout firms that historically were not publicly traded. EQT joins U.S. peers Blackstone Group, KKR, Apollo Global Management, and Carlyle Group as buyout firms that have sold shares to the public in recent years.
A Covenant-Lite Loan Refresher
(Paul Weiss, Private Equity Digest Issue 27) The popularity of covenant-lite loans has skyrocketed in the past couple of years, making up 85% of all leveraged loans in the U.S. (the highest percentage on record). Here’s a refresher on their features and considerations.
Pac-12 Football Conference Rejects Private Equity Money
(Pitchbook) The Pac-12 has spent months seeking outside capital from a third-party investor, and private-equity players with deep pockets answered the call. However, in an interview published this week, Pac-12 commissioner Larry Scott revealed the struggling conference had chosen to seek money elsewhere.