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Private Credit 

Sayed Kadiri

Jemima Denham

Welcome to Taking the Credit, 9fin’s weekly observations on the issues affecting the European private credit market. To get these updates in your inbox each week, sign up here.

The familiar refrain “there are too many funds chasing too few deals” has been levelled against the private credit market in the past. But how can that possibly be when, according to BlackRock, the private credit fund universe totals $1.7tn and is barely making a dent in the $35tn total addressable market? Too few deals — you’re obviously not looking hard enough!

$220bn of those private credit assets are set to sit under the BlackRock banner after the asset manager struck a deal to acquire HPS Investment Partners for $12bn.

So, what does integration actually look like? For starters, the investor base is relatively differentiated with an LP overlap in private credit of 6%.

But perhaps it’s on the asset side where HPS really moves the needle. Specifically, its footprint into the upper middle-market, non-sponsored deals (which make up a whopping 60% of HPS’s origination) and junior capital (where BlackRock lacks a presence).

HPS has regularly rubbed shoulders with some of the other heavyweight private credit lenders in the business, joining forces with the likes of Apollo, Blackstone and Goldman Sachs on large unitranche facilities — see here for a breakdown of HPS’s deals.

HPS also has a seat at the table when it comes to junior debt facilities — notably HPS is among lenders participating in a €1bn+ HoldCo PIK for Stada.

But the pair of BlackRock and HPS have not been part of the same lending club, according to 9fin’s private credit database, given BlackRock’s propensity to act as sole lender in most cases.

Other pull factors for BlackRock include HPS’s prowess in capturing retail demand and its appeal among insurers, with BlackRock expecting these institutions to gravitate towards investment grade private credit (either in the form of real estate debt or IG private placements). This happens to be a growth area that Apollo and Blackstone have made moves in.

Raising capital has not been an issue for HPS. In fact, chief executive officer Scott Kapnick stated on the investor call (3 December) that HPS has 120 insurer clients and that 40% of insurers with more than $100bn in assets allocate to HPS.

The firm has raised several mega funds, picking up $21bn for Specialty Direct Lending VI (June 2024), $17bn for Strategic Investment Partners V (a mezzanine strategy closed in April 2023) and $10bn for Core Lending II (June 2023).

HPS also has over $20bn in assets from retail investors, boosted by its BDC complex, which is set to add another offering, as reported by 9fin.

By BlackRock’s reckoning the combination with HPS will make it a top five manager by private credit AUM.

Working out the specifics of how the two asset managers will integrate will be foremost on the agenda leading up to the transaction close in the second quarter of 2025. As reported by 9fin earlier today, the unified alternatives business will be led by HPS officials and (to the surprise of some, based on the chatter at Opal’s CLO conference in LA this week) is set to include CLOs.

The private credit franchise on the other hand was always likely to fall under the domain of HPS. “In the private credit area, it was only really one organisation we sought out,” said BlackRock chief executive officer Larry Fink on the 3 December investor call, outlining how selective BlackRock had been in its quest to grow in private credit.

All told, the BlackRock-HPS combination hammers home a point that has been clear for many months — the biggest fund managers are grabbing market share. But with another $33.3tn of assets to play for over the years, there’s space aplenty for new entrants. Fink big!

Investec builds in private credit from multiple angles

Early signs are that Investec will be among those competing for a share of that $35tn market. It hired Michael Miller in May to lead a new private credit management team and then last month it paired with Ares over a fund finance venture geared towards lending to private funds.

And this week, Investec Alternative Investment Management announced a €200m first close of Private Debt Fund II. The strategy will lend to business located in the UK, Ireland, Benelux and DACH regions with EBITDA of €3m-€50m.

We reported on the progress of 16 transactions in Europe this week, but in and amongst that there were a couple of sale processes that have faded away.

Sponsor Livingbridge appointed Deloitte as sell side adviser for the sale of Jensten Group, but lenders say they have been met with radio silence since attending lender education.

PSG Equity, meanwhile, has changed tack by prioritising a divi recap of Mapal Group having earlier this year attempted a sale.

But private credit scored a win over syndicated markets with sponsors Hg and KKR looking to refinance the debt of Citation Group and keep the issuer’s debt in the private credit space. The company is being marketed on over €100m EBITDA and could feasibly have gone to the syndicated markets.

And there’s more signs of private credit being in rude health in our analysis of the, well, healthcare sector. Gesundheit indeed.

As we head towards the year-end, we want to hear the views of you dear reader (yes, you!) over what awaits next year in private credit. More consolidation? Maybe more private credit restructurings? Or simply, more deals (there’s a fair way to go to get to the £35tn industry target)? Please spare five minutes to take part in our survey on an anonymised basis — the results of which will be shared in our year end-report.

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