TL;DR: Investment banks are looking to win back leveraged finance deals from the private credit space. Banks such as Goldman Sachs, Citi, and Barclays are in talks with buyout firms to refinance loans issued during volatile periods. With loan markets stabilizing and interest rates dropping, investment banks hope to reclaim some of the business. Private credit unitranche loans allow companies to refinance without major charges, and a drop in borrowing costs could make syndicated debt a cheaper option. However, borrowers may still prefer private credit solutions.
Investment banks, including Goldman Sachs, Citi, and Barclays, are reportedly looking to win back leveraged finance deals from the private credit space. These banks are in talks with buyout firms to refinance loans issued during more volatile periods. Loan markets have calmed down and interest rates are expected to drop, creating an opportunity for investment banks to reclaim business in this sector.
Some specific deals being targeted for refinancing include the $924 million loan that backed KKR’s buyout of French insurance broker April Group, and the $544 million loan that backed EQT AB’s purchase of calibration services firm Trescal Ltd.
Private credit unitranche loans typically allow companies to refinance around 12-18 months after a deal is first priced without incurring major charges. As the syndicated market normalizes, investment banks may be able to offer cheaper deals with fewer covenants than direct lenders, thanks to a drop in borrowing costs in the leveraged finance market.
However, it’s important to note that borrowers may not automatically opt for syndicated loans simply because they are available again. Some sponsors and borrowers may still prefer a private credit solution. The article also mentions that Goldman Sachs is looking to double its private credit operation.
Private credit, also known as private debt, has become a popular option for businesses, especially smaller Main Street businesses, to access capital. Traditional lending channels, such as banks, have become more stringent in their underwriting and lending activities. The Federal Reserve has reported a decline in small business lending, making private credit an attractive alternative for borrowers. This trend presents an opportunity for investment banks to tap into a market worth trillions of dollars.
