A number of P2Ps have taken place with more on the September horizon — but the bad news is that they aren’t plumping for private credit in the way they did before.

As reported in 9fin’s pipeline piece, Wake me up when September lends, EQT’s take-private of German software firm SUSE is unlikely to be using any private credit. The sponsor will instead bring a max €500m TLB to the market, partly supporting a divi recap for shareholders. EQT, which owns around 79% of SUSE, will offer minority shareholders €16 per share, valuing the company at €2.7bn.

Another take-private looming is Spain’s testing firm Applus, which Apollo is buying, while in Germany, KKR and the founding family of satellite firm OHB are taking the company private — but it’s unclear if private credit is involved or if it’s the banks. 

9fin sources nonetheless have cited three private credit-backed take privates coming up in the UK. One is a UK healthcare take private in which Blackstone is said to be offering up the debt, another is a construction P2P with 85m debt, coming late September, and lastly a further P2P in which a new private credit entrant will provide the debt.

Blackstone declined to comment. 

We’re also looking at the resurrection of 2023 deals that simply went away whether due to valuation issues, or summer, or a mixture of all. 

These include BC Partners’ sale of VetPartners, in which incumbent lender Ares was said to be providing a senior secured soft staple with JP Morgan in the junior. With punchy leverage (the total sale value is meant to be in the region of £3bn, which, at an EBITDA of £150-200m would require fairly toppy leverage on the debt unless there was a big equity cheque), BC Partners was willing to wait for better market conditions in which to achieve the sale.

Ambassador Theatre Group is another mammoth that’s gone quiet. The Providence Equity Partners-owned group was meant to be refinancing to the tune of £1.2bn, but it appears that it instead waited. Instead, it has been playing the 2023 game of getting acquisitive while it waits for market conditions to better support a primary deal. 

Specialty pharma business Pharmanovia is also ever-teetering on the brink of sale from sponsor Triton. At a €2bn valuation, this would mean a decent slug of private debt if it’s financed that way, but will it be resurrected in September?

Other smaller deals that may or may not return to market include education provider Media School, the carve out of consumer insights business WGSN from Ascential and Ipackchem.

Debt going into no-frills cremation service Pure Cremation, and progress with Swiss oil and gas testing business Rosen Group will also be up the list. On the subject of oil and gas, read on…

Private credit stole from Old King Coal?

Private credit fund managers have been scratching their heads for a long time about what to do with all of their dry powder in a low-LBO environment, so there’s a pleasing imagery in tipping this combustible powder down a coal mine. 

That Macquarie’s private credit arm is leading a group of direct lenders seeking to underwrite financing of $2-3bn for Australian coal mines, according to a 9fin source familiar with the matter, is yet another reminder of the ongoing mission creep of the asset class. This is by no means any longer confined to sponsored transactions, nor to loans secured against EBITDA. 

Bloomberg reported earlier this week that private credit funds were considering loans to help finance the bids of two potential buyers for the assets: Australian coal producer Stanmore Resources and Indonesian mining contractor Bukit Makmur Mandiri Utama (BUMA). Australian miner BHP is the seller. 

However, the choice of asset is unusual, given the obsolescence risk of coal assets, as well as the ESG constraints of such a fossil fuel investment.

According to the Global Infrastructure Hub and cited by GIC, global infrastructure investment needs are expected to total $94tr between 2017 to 2040. This implies an average of $3.9tr each year. 

Private credit’s involvement in infrastructure is driven by the same factors that originally drew it into corporate lending: the retrenchment of the banks. In fact, the long-term, price-certain off-take contracts that made project finance attractive for banks have the same lure for private credit. 

Fund houses known for private credit but lending also to infrastructure include Barings, Apollo, Ares, KKR are all pretty big here.

In general, private credit claims to invest in infrastructure debt with low-obsolescence risk from technological advancement, energy transition or demographic changes. 

Surely that doesn’t apply to coal?

According to seller BHP, the coal assets do enable the energy transition. In a press interview, CEO Mike Henry said high-quality coals such as those produced by the two mines for sale will be vital to helping steel-makers decarbonise by improving the efficiency of their blast furnaces. 

“Those assets we see as having upside through the energy transition,” Henry is quoted as saying.

So that’s all right then. 

Macquarie declined to comment on its involvement in the process.

Elsewhere in the market…

The lack of exits has created an odd situation where it’s difficult to get a true valuation of an underlying corporate, and discrepancies are beginning to bite. According to a 9fin piece, discrepancies in valuations of the underlying credit vary by as much as 25% even within different funds held in the same fund manager, making it difficult to carry out refinancings or other portfolio work on the same credit.

Volpi Capital and its portfolio company, Xalient, have signed a new debt facility with Bank of Ireland and Investec to support buying Integral Partners LLC.

Bain Capital has acquired Greek financial leasing company Sunshine Leases Sunshine Leases, which has a portfolio with a gross book value of approximately €500m. 

Carlyle has led a $230m unitranche loan to finance Advent’s acquisition of Aussie fashion brand Zimmerman. The debt was priced at SOFR/Euribor+ 650bps, according to a source close to the matter, and issued at a 97 OID. 

Carlyle declined to comment.