Market Wrap
Taking the Credit — Losing our Barings
- Josie Shillito
•4 min read
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One drizzly night in autumn 2023 in a pub near Soho, a small huddle of City suits talked seriously at a table to the side of the bar. These were not regulars. The next week it would be another pub, another borough carefully selected to put distance between themselves and their place of work next to the Old Bailey in St Pauls.
The gang communicated nothing to each other in writing, relying instead on face-to-face conversations and the trust built up over decades of working together. Meanwhile, in the months to March 2024, their circle grew in number. They had been reassured to understand that similar conversations were taking place across the Atlantic.
On the afternoon of Friday 8 March 2024, private credit team member after team member at Barings’ London office in St Pauls resigned in turn, and the asset manager knew it had a crisis on its hands.
By Monday 11 March, everyone in the company knew, and by the Tuesday, it had leaked out to the press.
These men and women were the participants in what has been the biggest flight from private credit ever. They have joined Nomura-backed fund Corinthia Global Management, unleashing all manner of consequences, from the triggering of key-person provisions on Barings’ private credit funds to lawsuits by Barings against individual defectors such as former co-head of Barings’ global private finance group Ian Fowler.
However, the entire drama shares a common theme: relationships matter in private credit, and, in the case of Corinthia and its chairman Paul Weightman, some are willing to pay good money for them.
“It’s phenomenally aggressive [of Corinthia],” one 9fin source said at the time. “But also a huge bet on private credit.”
Indeed. The numbers involved are significant. Nomura is seeding Corinthia Global Management. To what size, it is unknown, but private credit funds with ambition and track record have been raising as much as €10bn at a time recently.
Across the battlefield, Barings’ owner, the insurance giant MassMutual, is keeping some Barings funds on life support with capital injections.
Meanwhile, Corinthia offered to buy Barings’ loan portfolio, raked through by our 9fin journalists, here. They are not alone. Every other asset manager under the sun, according to 9fin conversations, appears to be looking through the portfolio for value.
Then there’s the salaries. According to a 9fin analysis on private credit salaries published in February 2024, group heads at private credit shops likely earn north of $2m annually. Investment VPs a few rungs down start at $430k and can go as high as $650k. According to recent 9fin sources, total base and bonus for a director in private credit in the UK would come up to £400-500k. Plus a golden handshake for joining.
Private credit and relationships
Fundraising for private credit has long relied on an investment track record and an established company name. By pinching the Barings team, Corinthia is getting both.
As US recruitment firm RCQ flagged in 9fin’s analysis on private credit salaries, the most highly prized candidates in private credit are VP and principal-level candidates who can identify and originate their own investments, or those with deep knowledge of developing and building loan asset management processes.
Somewhat ironically, RCQ also noted that “demand for professionals with strong private credit investment and asset management skills is expected to increase in 2024.”
According to one of the sources close to the heart of the matter, at least two LPs are already committing money to Corinthia, which, if followed through, would bear out the idea that this track record matters.
Meanwhile, Barings is still fundraising its fifth global private debt vehicle, the Barings Global Private Loan Fund V, which has been targeting a $3bn raise and a close in March 2025. Where LP money goes will be of interest. Corinthia clearly has some firm bets.
9fin coverage of the Barings saga
Barings private debt leadership resigns across the UK and US (9fin)
Barings overhauls private credit leadership (9fin)
Barings faces suspension of private credit funds after senior leadership exodus (9fin)
Barings launches lawsuit against Corinthia, Fowler amid team upheaval (9fin)
Fresno County investor reviewing Barings key person provision clause (9fin)
Barings in market with fifth global fund despite staffing turmoil (9fin)
A look under the hood of Barings' BDC portfolio (9fin)
MassMutual provides capital injection to Barings funds amid LP disquiet (9fin)
Private credit pipeline
Elsewhere in the market, UK software business IRIS Software has finally closed its refinancing and plumped for debt funds over BSL — a victory for private credit at a time when those with a BSL track record, like IRIS, will be tempted by the lower prices of the BSL market.
However, as the IRIS deal shows, there are benefits to private credit that can justify the relatively higher pricing. If the deal has a sterling component, as IRIS’s has, then the BSL market simply does not have the depth at the scale IRIS was looking for (£1.45bn).
Private credit is relatively more expensive, but by waiting until spring 2024 rather than putting in the package in December 2023, IRIS sponsors Hg, TA Associates, ICG and Leonard Green have benefitted from a 75bps shave in pricing on the sterling thanks to the competition from the BSL market.
Meanwhile, for private credit lenders, they are still getting exposure to a debt-friendly credit with strong cashflow visibility at 10.25% all-in, thanks to the Bank of England base rate of 5.25%. Plus, of course, a 99 OID.
For the European private credit pipeline, please click here or email subscriptions@9fin.com
