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Private Credit 

Nicolle Liu

Sean Griffin was named executive director of the Loan Syndications and Trading Association (LSTA) on 1 April 2024. His appointment came at a pivotal time for the corporate loan market, as private credit has asserted itself as a viable alternative to broadly syndicated loans.

Griffin, who used to lead JP Morgan’s global primary CLO business, spoke with 9fin about his vision for the future of the LSTA and how the organization is adapting to better support the private credit market while tackling new regulatory challenges.

1. You spent nearly your entire career at JP Morgan, focusing on CLO structuring and origination. What motivated you to transition to a new role at the LSTA?

I am thankful for my time and experience at JP Morgan – I am grateful for having had the opportunity to work for a first-class organization and with wonderful people during my nearly 23 years there.  As I embark on the next stage in my career, I am truly fortunate to once again be at a top-notch organization with incredibly talented and motivated individuals. I have always had the utmost respect for the LSTA and what it does for the corporate lending and CLOs markets, having worked incredibly closely with the team on a number of CLO related matters over the course of 15 years, including credit risk retention, the Volcker rule and LIBOR transition. It was impressive to see how dedicated the staff, the board and broad membership are to furthering the mission of the LSTA. The opportunity to lead the LSTA is a once in a lifetime opportunity, putting you in a position to make a real difference in the corporate lending market. I believe that my experiences, skillset, institutional knowledge, relationships and passion for the corporate lending market provide a solid foundation from which I can lead the LSTA into the future.

2. What are the LSTA’s key policy priorities that the leveraged loan market should be focusing on right now?

As I reflected upon where the market and the LSTA is today, I contemplated both where we have been successful in the past as well as where we would like to be over the next one, three and five years and beyond. A tremendous amount of time and effort has been spent over the past decade dealing reactively to existential concerns brought on following the GFC, and rightfully so. Now that many of these items have been brought to rest, it is time to pivot and focus on being proactive. In stepping in to the executive director role, my three top external priorities are private credit, technology and loan market operations. Each of these topics covers fundamental aspects of the corporate lending market where the LSTA, working with its board and its membership, can drive change and improvement. By focusing on these priorities, we will also be addressing some of the regulatory questions the market faces.

3. How will the growth of the private credit market impact competition in leveraged finance, and the LSTA’s policy initiatives?

The growth of the private credit market is a positive one for corporate America, allowing companies another route to accessing much needed capital. While much has been said about corporate private credit driving increased competition with traditional syndicated finance and the banks, long-term I see private credit and syndicated finance existing in a symbiotic relationship with there being a natural ebb and flow of financing between the two markets depending upon prevailing market conditions. It is driving an evolution on how market participants think about corporate lending and the various ways they can be involved. Likewise, it is important to the LSTA and how we think about our policy initiatives. We serve our members and the board, and as our membership’s views and objectives evolve, so do ours.

4. We've observed quite a few new technologies being introduced in the loan market to improve the speed of syndication and trading, as well as data analysis. Which aspects of the loan market do you think are most in need of technological improvement?

Technology, particularly as it relates to the corporate loan market, has improved dramatically over the past couple of years. It was very refreshing to see this first-hand at our recent Operations conference, and it gave me confidence that the market is eager to understand and ultimately embrace changes that lead to market improvements. One critical point that market participants kept circling back to was data. Having reliable and consistent data available to the market will allow participants to more efficiently manage loans. This the first step, amongst many, to improving loan operations. While certainly not the only place where technology will be impactful, I believe it starts with data.

5. What do you see as the primary obstacle to maximizing the benefits of improved technology in your industry?

I see two focal points: (1) technology adoption needs to reach a critical mass – if you do not have sufficient active users of the technology, it is challenging for it to take flight and become market standard, and (2) anytime you introduce new technology to an established process, there must be recognition that appropriate resourcing needs to be dedicated to the implementation of said technology. Resourcing may come in the form of time, money and human capital.

6. Recently, the LSTA has played a significant role in the Libor transition and in addressing the issue of whether loans are securities. In your previous role you were also personally involved in CLO risk retention cases. What do you foresee as the next major challenge for the leveraged finance market?

As highlighted earlier, many of the regulatory concerns that felt more existential have been addressed or come to rest over the past couple of years. However, we at the LSTA remain vigilant and diligent in our efforts with regards to the regulatory environment and anything that may disrupt the markets and the flow of capital to corporate America. There are a handful of items we continue to watch closely – the outcome of the Private Funds Advisers litigation, the Outsourcing Rule and the Safekeeping / Custody Rule to name a few. That being said, my broader concerns lie with the market overall – the considerations raised by the current global geopolitical environment as well as the ongoing rates discussion, can have meaningful impacts on the economy, the corporate lending market, borrowers and lenders.

7. The speed and scale of the growth of private credit markets has raised concerns about systemic risk. Can the market cope if interest rates stay higher for even longer?

The private credit market has existed for as long (or longer) than the syndicated corporate lending market. There is increased focus now due to the convergence of these two markets, especially at the larger end of the private credit spectrum.  Ultimately this is a positive for corporate America, providing borrowers with more ways to access the capital which they need.

Regarding the rates question, the short answer is “yes.”  Fortunately, the economy was in a strong position heading into the increasing rates environment and has some cushion built up. There could be some increased stress on companies’ bottom lines, of course, but I do not currently see that as a universal problem for the entire market. Where I begin to become more concerned is with a weakening of the economy combined with higher for longer rates. I will add that one of the benefits of private credit is the more concentrated lender group for a particular borrower. In periods of stress this makes it easier for the borrower to work with its lender group on solutions, as there are fewer parties involved.

8. Ahead of the upcoming US elections, what are the key potential regulatory or policy issues that LSTA members should be aware of?

There are a couple of active items we have been keeping a watchful eye on – the outcome of the Private Funds Advisers litigation, the Outsourcing Rule and the Safekeeping / Custody Rule. Elections can always deliver surprises and create policy uncertainties. In addition to the presidential election, we watch the House and Senate contests very closely, as they will determine which party controls key congressional committees with legislative jurisdiction over various aspects of the loan industry. Regardless of the outcome of those elections, the LSTA prides itself on being able to work constructively with both sides of the aisle and will continue to do so, as we have done in in the past.

9. We know you're a big fan of heavy metal (and even performed at a CLO conference). Could you share with us your most memorable concert experience?

I am a huge music buff and enjoy many genres, but I specialize in heavy metal. One point of clarification – while I have performed live once, I did not play heavy metal. At a conference last year a group of us from the CLO market, along with some professional band members, performed a cover of “Feelin’ Alright” (the Joe Cocker rendition).  Perhaps I will get another opportunity to perform again in the future, but I have a lot of practicing to do.

As far as memorable concert experiences go, I have two for you. The first was seeing the “Big Four” of thrash metal perform live at Yankee Stadium. Seeing the likes of Anthrax, Megadeth, Slayer and Metallica take the stage in front of tens of thousands was awesome. The members of Anthrax were thrilled to be playing in front of a home crowd (they are New Yorkers), Dave Mustaine of Megadeth was an incredible technical guitarist, Slayer hit us with a wall of sound and Metallica played an incredible setlist that really topped off the evening. 

My second was seeing and having the opportunity to meet Iron Maiden (my favorite band) in Cleveland back in 1999, when the modern-day renaissance man Bruce Dickinson and guitarist Adrian Smith rejoined Maiden for a greatest hits tour.  The old-school setlist was amazing and getting to shake hands and chat with my favorite band is something I will never forget. Fortunately, they are still going strong today, and I am taking my son to see Iron Maiden later this year as his first concert ever.

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