Credit Market Perspectives
Credit Market Perspectives
Fundraising from Twin Brook Capital Partners, Cliffwater, BridgeInvest and Star Strong Capital
👋 Hey, Nick here. A special welcome to the new subscribers at Oaktree and Kirkland & Ellis. This is the 75th edition of my weekly newsletter. Each week I write about private credit insights and fundraising announcements. You can read my previous articles here and subscribe here.
📕Reads of the week
Guardian Life increases its equity stake in HPS and moves $30 billion of assets to HPS Link
Navigating the Sea Change with Howard Marks Link
Art-backed loans are thriving in a muted art market Link
Deutsche Sells Down Coal Mine Loan to Private Credit Funds Link
📆 Event of the week - Configure Partners Quarterly Update
I’ve covered The Configure Partners’ Quarterly several times (Most recently Here).
The team carries out quarterly surveys on private credit lenders as well as tracking data and market insights from debt advisory engagements.
Register for the August 21 Webinar here
📊Charts of the Week
JP Morgan produced a white paper on credit markets earlier in the year. Whilst its a bit outdated there are a few charts which might be useful in fundraising decks and for general awareness. Full link to the article here
High yield spreads have remained relatively stable despite volatility
Unlike past episodes, when recessions led to materially higher credit spreads and subsequent spikes in defaults, recent volatility has been muted. This resiliency supports the case for establishing a more permanent allocation to broad credit that extends beyond investment grade and into high yield.
High Yield recovery rates are below the long term average
The average recovery rate for high yield loans is ~40%. As of 2023, recovery rates dipped below this average, a trend that aligns with previous cycles. The data may also indicate that additional losses are still likely to materialize, as evidenced by past figures: 2000 - 20%, 2009 - 25%, Currently - 35%.
Lenders are accepting a growing percentage of debt service via PIK
Finally, the percentage of interest income being paid in kind (PIK) rather than in cash remains elevated compared with pre-pandemic levels.
💰Fundraising news
Twin Brook Capital Partners, a private equity firm backed by TPG Angelo Gordon, closed its $3.9 billion fifth direct lending fund. The fund provides capital to support sponsor-led buyouts and recapitalizations of lower mid market companies. It focuses on companies with between $3 million to $50 million of EBITDA, with an emphasis on companies with $25 million of EBITDA and below. Twin Brook target senior financing opportunities up to $400 million, with hold sizes ranging from $25 million up to $150 million. More here and here
Cliffwater, a Los Angeles-based alternative investment manager, raised $1.4 billion for its Corporate Lending Fund. The diversified interval fund invests in North American middle-market loans. It does this using a multi-lender model and invests in companies via its 16 investment partners. The fund had exposure to more than 3,700 companies, as of July 2024. These companies had an average EBITDA of $112 million and an average LTV of 41%. The fund had an annualized return of 9.54%, since its inception. More here and here
BridgeInvest, a Miami-based private real estate lender, has closed its $670 million Specialty Fund IV. The Fund will be focused solely on providing senior secured loans to U.S. commercial real estate. Fund IV plans to deploy credit into deals ranging from $20 million to $150 million and aims to close up to $1.2 billion in transactions over the next two years, said Horn. It will target the multifamily, industrial, hospitality and retail sectors, with special interest in sub-asset classes like student housing and self-storage — no office. More here
Star Strong Capital, a Connecticut asset manager, is reportedly raising $250 million for its flagship direct lending vehicle. The fund lends to startups with between $5 million and $50 million in revenue. It focuses on two main strategies. The first, consists of secured loans to EBITDA-positive startups. The second consists of asset-based financings tied to smaller companies. More here
Intesa Sanpaolo, an Italian Bank, raised ~$170 milllion for its private debt fund. The fund will lend to small and medium sized companies in Italy. More here
This newsletter is for education or entertainment purposes only. It should not be taken as investment advice.