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News Analysis
Brookfield taps CLO talent pool for syndication push
by Lisa Fu
A little over a year ago, Brookfield Asset Management made a signature hire to beef up its private credit efforts. Its choice for the role was not a direct lending specialist, but a high-profile executive at Morgan Stanley with years of experience in CLOs.
Brookfield’s recruitment of CLO expert Rachel Russell reflects a growing market for syndicated private credit, in which large-scale loan transactions and risk exposures are spread across multiple lenders.
A CLO background is useful as Brookfield scales up its business of structuring and syndicating complex private credit deals, an area where Apollo Capital Solutions is also making strides.
“Our timing ended up being really perfect in maybe an unintentional way,” said Craig Laurie, co-head of Brookfield Capital Solutions. “Clients are wanting securitised product or structured product, and then issuers are getting much more comfortable with it as well.”
Through this capital solutions team, Brookfield aims to deliver big, bespoke debt deals just as the rise of artificial intelligence ramps up companies’ capex budgets and financing needs.
Increase in IG tranches
Demand for direct exposure to investment-grade (IG) private credit is growing. Large deals backed by private assets are increasingly structured with an IG tranche to meet investor needs with cost-efficient financing.
Laurie, who has held multiple senior finance positions across Brookfield, launched the capital solutions platform in 2022. Russell, then Morgan Stanley’s global head of new CLO issue, came on board as co-head to help syndicate deals, bringing her know-how in distributed credit risk.
“To understand how to structure and tailor the risk to meet these different pockets of capital and their return objectives, that’s what we did in CLOs all day long,” Russell said. “So it seemed like a natural fit for me.”
Now, Oaktree managing director Matt Pendo has joined the team to form a trio of co-heads. Brookfield is taking full ownership of its partner Oaktree, one of the pioneers in private credit.
Under their leadership, Brookfield is looking to serve sophisticated institutional investors seeking exposure to private credit with variable risk-return options. For example, a bespoke finance structure can include an IG tranche as well as portions with higher risk ratings.
We understand how to structure risk
Rachel Russell
Co-head
Brookfield Capital Solutions
The potential benefit for borrowers is a single point of contact, generating solutions that could not easily be achieved through public markets. Customised hybrid deals can mix bank debt and private credit, or cashflow-lending and asset-backed finance, Russell said.
Brookfield Capital Solutions says it has participated in 89 transactions totalling a deal volume above USD 100bn.
Syndication has traditionally been the preserve of investment banks’ leveraged finance teams, while private credit managers typically hold assets for investors and strike deals as smaller lending clubs. But as deal sizes grow, syndicated loans are becoming attractive for major private credit players.
So far, Apollo looks to be one of the few managers alongside Brookfield to have built a large-scale syndication strategy, market sources say. Apollo Capital Solutions syndicated more than USD 35bn in private assets so far this year, according to a source familiar with the business.
Brookfield can use its balance sheet to fund a deal, then syndicate portions to institutions, much as banks do in leveraged finance. When it commits its own capital, the firm charges the corporate borrower a one-time fee for taking on the risk.
Just a handful of investors would typically be involved — much fewer than the hundred or so parties in a syndicated bank deal. And the whole deal may not be syndicated, as capital is still sourced from separately managed accounts, commingled private funds or other vehicles managed by the firm. It can also tap the insurance arm Brookfield Wealth Solutions or bring in co-investors.
Deals tend to be bilaterally negotiated by Brookfield and the issuer on bespoke terms, Russell said. Sometimes, the firm uses its existing banking relationships to create a private credit deal to complement a public debt solution, as many blue chips are active debt issuers. The borrowers place emphasis on direct negotiations with Brookfield, rather than knowing the source of the funds.
Timing of syndication
Syndication tends to happen after a deal is struck, whereas a limited partner may be more involved throughout in a co-investment relationship. Where there is more complexity, it makes sense for Brookfield to handle the groundwork and bring in investors later, Russell said. But in some cases, co-investors will be invited on board early and part of the deal will be syndicated later.
The aim is to serve investors flexibly, from separately managed accounts through to large syndications, said Laurie.
