With Arcmont and Ares having raised similar sized funds earlier this year, the big guys of the market are not exactly struggling to raise capital.

However, such raises are far from the norm if you look across the full fundraising market, as 9fin explored this week. While LPs are rushing to put their money in these giga funds, smaller and newer funds have not been blessed with the same fundraising fortune.

As Arcmont's CEO Anthony Fobel put it at a recent roundtable event: “I don't think there really is any room in this market now for small independent players.”

Ouch!

Although there is undoubtedly truth behind Fobel's views, some smaller and newer funds are finding their way in this harsh environment, either focusing on specific niches or hiring private credit veterans with strong track record.

“It's important to have a clear and defined strategy, and to make sure you have a proposition that is clearly identified and somewhat unique,” a direct lender said.

“You also need to put high calibre individuals in the team,” they added. “If it's the first time fundraising you don't have a track record, so you rely on having the right people. You need to hire veterans in the space, you can't just have some leveraged finance person or a debt advisor — you need people with a strong heritage in private credit.”

The American dream… about Europe

Leading huge club deals in Europe such as the £1.4bn debt package to refinance Iris Software and SumUp's €1.5bn refinancing, Goldman is a perfect example of how US funds are thriving in Europe.

“We are seeing the American funds being quite active in Europe now and they are driving the pricing down,” a debt advisor said. “Funds like Blackstone, Blue Owl, Golub… they are all quite active.”

In its recent Why Europe? report, Hayfin says that, despite North America being the largest, most liquid and longest-established private credit market, it is Europe that offers the most compelling opportunity.

So what is so special about Europe? To start: the competitive dynamics and historically higher recovery rates than in the US, the report states.

In addition, Europe's more bank-centric market with “less sophisticated capital markets” makes for more room for disruption by private credit, and the regulatory environment and banking supervisory standards provides an opportunity for private credit to gain market share, Hayfin says.

Since 2008, more regulation has led banks to scale back their lending activities. However, Hayfin believes they still have more to retrench. The total assets held by European banks are more than double than their US counterparties, despite US GDP being 1.8x Europe’s.

Hayfin is by no means the only one taking advantage of what the European market has to offer.

We have already seen how Goldman is churning out deals in Europe, and Blackstone is also ramping up its activities. Over the last six months, it has provided the £550m financing for Apax's acquisition of Zellis, the £480m financing for Hg's acquisition of Focus Group and the €950m financing to Permira's acquisition of GGW.

Since hiring head of European origination Tara Moore in 2020, Golub has been following the same trend. Alongside Blackstone and others, it was a lender for Permira's acquisition of GGW. This year it was also the sole lender in the take-private of Matrix42, the sole lender to Marlin Equity Partners' refinancing of Treasury Intelligence Group and lead arranger for the refinancing of RLDatix, owned by Five Arrows, TA Associates and Nordic Capital — just to name a few.

Last year, Antares jumped on the European bandwagon by hiring managing director Sheila Brown, based in London. In February, Antares was part of the club providing financing to UK firm Ardonagh.

If we're to go by Hayfin's report, there's more market share to be won by private credit in the years to come, with plenty of opportunities for US funds to continue their conquest.

European private credit pipeline

This week's additions to our European private credit pipeline includes financing opportunities mainly in the UK. Most notable though, was Ontario Teachers’ Pension Plan using a £300m+ private debt package to finance a dividend recap of Busy Bees.

We have not seen as many dividend recaps as one might have expected in the sluggish M&A market. The high interest rates are making it a less appealing solution for sponsors, 9fin sources said, but some think we might see more and lenders are ready to step up for the right assets.

“The lack of dividend recaps is definitely because of the sponsors,” one direct lender said. “For the right asset we would not mind at all financing a dividend recap.”

With that, the private credit market is entering a weekend off before meeting up in Berlin for the annual SuperReturn International. 9fin journalists are of course also attending and keen to meet and discuss everything private credit.

For the full run down on all the in-market deals in our pipeline, email subscriptions@9fin.com.

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