Market Wrap
The Unicrunch — Summer lovin’ for the big private credit firms
- Shubham Saharan
•4 min read
The Unicrunch is our US private credit newsletter, in which we break down everything from unitranches to ABL lending. Find out more about 9fin for private credit here.
Greasing the fundraising wheels
May flowers certainly followed April showers this year. For, while the opening quarter showed fundraising was in the doldrums for private credit, Goldman Sachs, HPS, and this week Ares have reported huge fundraises that show the private credit has sprung back into action. Many of us now are feeling that private credit heatwave.
Global private credit fundraising, this year, has been tepid at best. Per Preqin, direct lending funds worldwide raised $33.1bn from the beginning of January to the end of May — less than a third of the sum raised in the first half of 2023.
Of that, direct lenders raised $210bn in all of 2023, down from $215bn in 2022, and $242bn in 2021 (the record amount raised for the market).
However, earlier this week, Ares announced that it had raised a whopping $34bn for its latest direct lending fund. About $15.3bn of that was raised in equity commitments for Senior Direct Lending III, while the remaining amount is made up of equity commitments in related vehicles and anticipated leverage. The fund has already deployed about $9bn of capital to over 165 companies.
Of course it is hard to divide up fundraises into neat quarters and make comparisons to highly investor sentiment. The likes of Ares, Goldman, and HPS have been on the road for some time courting institutional investors and the numbers are just now filtering into the data.
It is, however, appearing to be that case that most of those difficulties in fundraising seem to be for smaller players. Scale is the name of the game when it comes to private credit, and fundraising is central to that. If you don’t carry the name of Ares of HPS, it may be hard. There is a reason people joke that no-one gets fired for hiring Goldman — that is the case in private credit as well.
BDCs earnings kickoff
Another quarter, another round of BDC earnings. Big names like Ares, Sixth Street, and Oaktree kicked off this season, and we here at 9fin are here with all the details.
Among the many topics discussed on the investment vehicles’ earnings calls was the status of fallen angel Pluralsight, a big investment for a number of BDCs.
As we discussed a couple months ago, the company underwent a liability management exercise to deal with its debt burden. Ares and Oaktree are investors in Pluralsight and have updated their marks on the their loans to the company to reflect the difficult situation.
Kipp DeVeer ARCC CEO was sanguine: “Unfortunately for Vista Equity Partners, who is the sponsor, it's not going to be a situation that works out very well for them.”
The saga has also put Ares in a tough spot. The mark down on their investment significantly contributed to the $291m unrealized losses, the firm reported in this quarter.
Meanwhile, at Oaktree’s OCSL, CIO and CEO Armen Panossian said that there is dialogue between the sponsor and lender , which has led to the latter taking the keys. “Lenders are engaged in an active dialogue with the sponsor and the co the company regarding the most logical path forward.”
Of course, if you want this media outlet’s take on what happened behind the scenes, you can always refer to our postmortem on the situation on the 9fin platform.
As for what we’ll get from the firms that were involved in the situation, it seems like they’re licking their wounds and moving forward.
“Like the other ones, we'll go in and fix it and move on,” DeVeer said.
This week in 9fin
Pluralsight postmortem — more than meets the eye?
ViaPath finalizes $1.4bn debt refi with direct lenders
Ares raises record $34bn for its latest direct lending fund
Ally Financial markets debt for AIP’s carve-out of Veolia acid business
RXBenefits refinancing stalls as lender interest cools
Galway slashes pricing on $4bn debt by 75bps
HPS leads $365m loan to fund carveout of Parker Hannifin’s fuel containment unit
MRI Software seeks repricing of $2.5bn debt and a $250m add-on
Private credit M&A bolt-on tracker — July 2024
Golden State Foods auction enters into late stage
Ares Capital Corporation — Q2 24 BDC earnings review
Oaktree Specialty Lending — Q2 24 BDC earnings review
Sixth Street Specialty Lending — Q2 24 BDC earnings review
What’s in market (access on 9fin)
MRI Software — the company is in the market for a repricing of its existing $2.5bn debt and is seeking a $250m incremental loan for additional M&A
Golden State Foods — the company is in advanced stages of a sale process
Porter Airlines — the company is looking to raise CA$250m in preferred equity to bolster its liquidity and pursue growth objectives
Wastequip — the company is looking to refinance its existing syndicated debt facilities in the private credit market
Priority Power — the energy management services company is on the auction block, marketed on $85m LTM EBITDA. Warburg Pincus has expressed interest
From around the web
Private Credit Sells Funds for Small Investors as Big Ones Balk (BBG)
Private Credit Has a New Target: Asia. It’s a Steep Growth Curve. (Barron’s)
Hedge fund investor appetite hit by high fees and private credit, says Goldman Sachs (Reuters)
PS — We spoke to Dan Matthews, head of EMEA leveraged finance at SMBC Group, about SMBC Group's inaugural private credit fund in our 9Questions interview here.
