Wall Street: Why private credit is booming

The latest in finance.
View in browser


Hi. I'm Aaron Weinman. Private credit is so hot, it was the talk of this week's SALT hedge fund conference.

Private credit is a pocket of the lending market that has grown to about $1.25 trillion in assets, according to Preqin data.

Private-credit funds lend — typically to leveraged companies — for myriad reasons, from financing acquisitions to servicing borrowers' working-capital requirements.

In their infancy, these funds stepped in for regulated banks. They provided small loans (say between $50 million to $200 million) to riskier companies that banks avoided, and often negotiated extras in their credit agreements like seats on their boards.

Private-credit funds plied their trade in the so-called middle market, and left banks to work on billion-dollar financings.

Now, equipped with trillions of dollars in dry powder, private-credit is taking market share from big banks more than ever before.

Let's take a look at the opportunities — dissected by Insider's Alyson Velati here — that private-credit giants like Owl Rock and Ares Management have found in this year's choppy credit markets.

If this was forwarded to you, sign up here. Download Insider's app here.

Wall Street street sign

1. Private credit has taken off amid a slowdown in dealmaking. There are opportunities for private-equity firms to tap private-credit lenders for loans rather than big banks.

Unlike bank loans, private-credit funds would usually underwrite the entire, albeit smaller, loan for a borrower, or team up with a few fellow lenders to provide the loans. Banks corral a syndicate of lenders to write sizable checks, which are then sold to third-party investors in the form of bonds or leveraged loans.

It was harmonious. Private credit stuck to small deals for small companies. Banks focused on big-ticket deals.

Now, equipped with trillions of dollars in dry powder, private-credit is taking market share from big banks more than ever before.

Blackstone and Oak Hill led a roughly $3 billion debt package for Carlyle's acquisition of US government contractor ManTech International, which closed today. In May, Goldman Sachs' asset-management arm provided $865 million in debt to help fund Brookfield's purchase of software company CDK Global.

Private-credit has a greater appetite for risk. They charge a greater interest rate, but can craft a deal faster (no roadshows, lender meetings), and they hold onto the loans usually until maturity.

Banks move debt off their balance sheets quickly. And by selling these loans to investors as bonds or loans, this debt is at the mercy of volatile secondary markets.

This year, banks have been left holding onto bad loans that they underwrote during the good times, and couldn't offload them when markets soured.

This dislocation has created opportunities for private-credit behemoths like Owl Rock or Ares.

For more on private credit, check out these stories:

In other news:

Joan Solotar of Blackstone in front of a window, wearing a sweater and a watch.

2. Blackstone has quadrupled its wealth business in four years. Joan Solotar, the firm's head of private wealth, outlined how the private-investment firm will win the war for retail clients.

3. Hedge funds are facing a shakeout as underperforming shops stutter. Here is what a $14 billion fund is doing to come out as a winner.

4. SoftBank is considering launching a third Vision fund, the Wall Street Journal reported. SoftBank, led by Masayoshi Son, absorbed massive losses in its previous Vision fund, which is now worth less than the investment that initially went into it.

5. Bankrupt crypto bank Celsius is plotting a comeback after the market crash, according to the New York Times. Alex Mashinsky, Celsius' chief executive, wants to rebuild the company by offering cryptocurrency storage and charging fees for certain transactions.

6. Citi expects to divest from its Mexican consumer-banking business by next year, the bank's chief financial officer said at a conference. The bank could sell its interest in Citibanamex via a straight sale or through an initial public offering.

7. Staying on Citi, regulators want the bank to move faster to fix problems with its risk-management systems. Citi is expected to submit a plan today, which executives hope will ease regulators' concerns, per this story from the Wall Street Journal.

8. Startup founders' salaries have been upended amid the market downturn. Venture capital-backed founders have higher salaries than their counterparts who have not raised outside funding, new data from Pilot revealed.

9. Investors and landlords are watching big expiring leases from the likes of Twitter and Morgan Stanley. The monitoring is so they can understand just how hard remote work will hit the office sector.

10. Inside the rise of the "bait-and-switch" job interview. Are you sure that a new employee is the same person you just interviewed?

People moves:

  • Francisco Partners has welcomed four new executives to the private-equity firm:
    • Erin Blake has joined as a managing director in legal and M&A. Blake will work with the investment team on legal matters relating to transactions. She was most recently a partner at law firm Kirkland & Ellis.
    • Jason Warner has joined as a MD and head of data science. He was most recently a principal in Blackstone's data science group.
    • Brian Elrod has joined as a director of tax. Previously, Elrod was a partner in Deloitte's M&A tax group.
    • Tulsi Byrne has joined as a director and head of ESG. She was previously the head of ESG for fixed income, private credit, and private equity at Nuveen.
  • Churchill Asset Management has appointed Carol Loundon its deputy chief risk officer. She was previously a MD in Churchill's senior lending underwriting and portfolio management group.

Curated by Aaron Weinman in New York. Tips? Email aweinman@insider.com or tweet @aaronw11. Edited by Hallam Bullock (tweet @hallam_bullock) in London.

Download on the app store   Get it on google play

Key phrases

Older messages

Wall Street: BlackRock’s crypto crew

Thursday, September 15, 2022

The latest in finance. View in browser INSIDER INSIDER Subscribe 10 THINGS ON WALL STREET Hi. I'm Aaron Weinman. BlackRock has been slowly easing itself into the choppy seas of digital assets.

Inflation cooled slightly in August as sliding gas prices offset rising costs elsewhere in the economy

Thursday, September 15, 2022

The Consumer Price Index climbed 8.3% in the year through August, the government said, slowing from the prior reading but landing above forecasts. View in browser Business Insider Business Insider

The Twitter whistleblower testifies before the US Senate on Tuesday. Here's what to expect.

Tuesday, September 13, 2022

Peiter Zatko is set to make his first public appearance since his whistleblower complaint detailed allegedly serious security flaws at Twitter. View in browser Business Insider Business Insider

Wall Street: Bankers brace for layoffs

Tuesday, September 13, 2022

The latest in finance. View in browser INSIDER INSIDER Subscribe 10 THINGS ON WALL STREET Hi. I'm Aaron Weinman. Some — perhaps uncaffeinated? — Goldman Sachs bankers were taken aback by the New

I'm an executive headhunter. Here are the 2 key elements I look for on your social-media profiles — and the things to avoid at all costs.

Monday, September 12, 2022

Jörg Kasten, a managing partner at the executive-search firm Boyden, broke down the keys to attracting headhunters on sites like LinkedIn. View in browser Business Insider Business Insider Business

‘Collision course’

Wednesday, October 5, 2022

Bloomberg Evening Briefing View in browser Bloomberg One giant options transaction may have sparked the S&P 500's huge midday bounce Wednesday. The trade, which involved buying and selling call

🤐 What Twitter isn't telling you about Credit Suisse

Wednesday, October 5, 2022

The WTO predicted a trade slow-down | Tesco's profit showed off its best limbo attempt | TOGETHER WITH Hi Reader, here's what you need to know for October 6th in 3:11 minutes. 🙋‍♀️ Even old-

Issue #163: Christmas shopping with a PSL in hand

Wednesday, October 5, 2022

plus a Missouri sign war + bear snack ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌ ͏‌

Amazon reportedly freezes hiring for the corporate wing of its global retail business

Wednesday, October 5, 2022

Numerous major companies have begun initiating hiring freezes and layoffs to reduce their workforce. View in browser Business Insider Business Insider Business Insider Subscribe Hello! We're saying

Insider's new daily newsletter is coming your way

Wednesday, October 5, 2022

Only fascinating stories — right in your inbox. INSIDER INSIDER Hi there! Insider is about to launch a new daily newsletter and we wanted you to be the first to hear about it. We know you're

Wall Street: Dalio exits Bridgewater

Wednesday, October 5, 2022

The latest in finance. View in browser INSIDER INSIDER Subscribe 10 THINGS ON WALL STREET Good morning! This is Kaja Whitehouse reporting to you from New York City. The focus of today's newsletter

The Daily StockTips Newsletter 10.05.2022

Wednesday, October 5, 2022

(Published 7:30 AM ET MON-FRI) ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

[New post] Bonus episode: understanding pay and labour market tightness

Wednesday, October 5, 2022

BankUnderground posted: " Josh Martin Everyone likes a bonus – be it a bonus in pay, or a bonus episode for your favourite TV show. Everyone, that is, except statisticians. Bonuses are hard to

🥖 Butter on both sides of Greggs’ bread

Tuesday, October 4, 2022

South Korea's Naver bought Poshmark for $1.2 billion | Bakery chain Greggs saw 15% sales growth | TOGETHER WITH Hi Reader, here's what you need to know for October 5th in 3:13 minutes. 🗻 More

Elon wants Twitter—again

Tuesday, October 4, 2022

Bloomberg Evening Briefing View in browser Bloomberg After months of trying to back out and just days before a trial over his reversal, Elon Musk now says he's willing to buy Twitter after all, and