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Global credit funds & CLO's
October 2024 Issue 269
Published in London & New York 10 Queen Street Place, London 1345 Avenue of the Americas, New York
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News

News in brief

European direct lending firms raise record funds in third quarter
European direct lending fundraising jumped up a notch last month, as year-to-date figures almost doubled in a few final closes. By the end of June, 12 funds had raised a total of EUR 21.8bn over the year, according to ­Creditflux data. By the end of September, a number of large fundraises had pushed total fundraising in 2024 to EUR 41.6bn.
Park Square Capital European Loan Partners II was the first to close in September. At EUR 3.4bn it briefly became the second-largest fundraise of the year. BNP Paribas then beat the EUR 600m target for its third SME debt fund. It closed at EUR 741m.
A week later, ICG announced the final close of the largest European direct lending fund ever, ICG Senior Debt Partners V. The fund raised USD 17bn (EUR 15.2bn), surpassing not only Arcmont’s fund from earlier in the year, but also the previous record holder, Ares Capital Europe V, which raised EUR 11bn in 2021.
In January, Arcmont Direct Lending Fund IV had reached EUR 10bn for its final close in what was, at the time, the second-largest European direct lending fund ever.
The pace continued across a host of smaller funds. Notable fundraises included: Swedish credit specialist P Capital Partners’ PCP Corporate Credit Fund V, which raised EUR 1.7bn; Enterprising Finance’s Netherlands Unitranche Fund, which raised EUR 84m (the fund will provide loans to finance growth, acquisitions and buyouts for Dutch SMEs); and Kartesia Senior Opportunities II, which hit EUR 1.8bn and invests in first lien secured loans.
Don’t panic — but Pluralsight could point the way to LMEs in private credit
Over the summer, the private credit market has been full of talk about the arrival of liability management exercises (LMEs). KBRA’s latest research piece points out that the deal in question doesn’t fully qualify as the dreaded lender-on-lender violence, but agrees that a new trend could be on the way.
Although LMEs have become a fact of life for broadly syndicated lenders, the private market seemed safe — at least until Pluralsight showed up. The firm made headlines when Vista threatened a liability management exercise that would have impacted the direct lenders that funded the buyout of the technology learning platform.
Vista injected preferred equity into the company through a drop-down transaction that moved the company’s intellectual property to a restricted subsidiary, a move that seemed to follow the infamous IP transfer executed by retailer J.Crew eight years ago.
While not mentioning any names, the KBRA research, written by Judah Gross and John Sage, concludes: “Notably, the recent LME was relatively small compared to the overall size of the capital structure, and the proceeds from the preferred issuance were reportedly funnelled up to secured lenders.”
But in a less positive finding Gross and Sage also took a random sample of 20 private credit agreements, and found that in every case the documents “allowed for the issuance of preferred equity, which meet the criteria of qualified stock, at any subsidiary”.
The same documents allow transfers of some assets to restricted subsidiaries.
Top stories on creditflux.com: policy scrambles in the US and stalling debuts in Europe
18 September
PineBridge CLO manager Steve Hasnain passes away
We reported on the sad death of Steve Hasnain, a portfolio manager with PineBridge Investments’ leveraged finance team, and the co-director of leveraged finance research. Hasnain had long been a fixture at the asset manager.
Hasnain: joined PineBridge in 2002, when it was part of insurance giant AIG. He was based in Los Angeles, and was responsible for managing the firm’s US CLO portfolio. He also served as a member of the CLO tranche and leveraged loan credit committee.
9 September
CLO managers scramble to update policies
The announcement from the SEC that it had fined Sound Point USD 1.8m sent shockwaves through the US CLO market.
9 September
Chatham hires Thomas Flannery to lead new CLO management business
Chatham Asset Management has launched a CLO management business dubbed CTM Asset Management.
12 September
Lim departs from Arini and retires from CLOs
Arini’s head CLO portfolio manager Evangeline Lim has left the firm and returned to Singapore to spend more time with her family. The firm’s deputy CLO PM Ben Rothberg has replaced her.
16 September
Polen targets USD 200m for CLO equity fund
Polen Capital took another step on the road to becoming a CLO manager with the launch of a captive equity fund.
18 September
Polus raises capital from Abu Dhabi Investment Authority
Polus Capital Management has obtained a capital commitment from Abu Dhabi’s sovereign wealth fund to invest in stressed and distressed corporate credit.
19 September
Sycamore Tree kicks off captive equity fund
CLO manager Sycamore Tree Capital Partners secured a USD 75m commitment for its second captive equity fund, Sycamore Tree CLO Fund II, from the San Diego County Employees Retirement Association.
23 September
European CLO debuts stall as lack of loans cuts into deal arb
After a bumper year for new European CLO managers in 2023, the market has notched up just a single debut manager this year.
26 September
Polus debuts as US CLO manager
Polus Capital Management priced its first US CLO, Polus US CLO I, becoming the first new US BSL CLO manager of the year. The US platform is headed up by Goldman Sachs alumnus David Kim.
27 September
Pearl Diver launches first investment grade CLO fund
Pearl Diver Capital began expanding up the stack with the launch of its first investment grade CLO bond fund. The fund will operate as open-ended and evergreen. It has raised USD 100m from a single investor.
1 October
Hintze’s hedge fund Deltroit bolsters CLO investing with new hire
Lord Michael Hintze’s hedge fund Deltroit Asset Management moved to strengthen its CLO team with the hire of Emeric Chenebaux from Federated Hermes.
4 October
JPMorgan negotiates to expand roster of private credit partners
JPMorgan has signed partnership agreements with asset managers FS Investments, Shenkman Capital Management and Cliffwater.
Past returns
Getting used to triple Cs
Five years ago Creditflux was full of CLO managers fretting about their triple C buckets. At the time, US triple C buckets were running at an average of 4.1% (and with B3/B- loans included, made up 25% of the portfolios of 50 US CLO managers).
Changing macroeconomic conditions (an inverted yield curve and trade disputes) caused a change in attitude, and de-risking. Rather than just focusing on reducing triple C exposure, some CLO managers were even selling lower-rated single Bs to move into flat or higher single Bs or double B-rated loans.
Wait a minute, panicked de-risking at 4.1%? The average triple C bucket for a US BSL CLO last month was 5.88%.
Points up front
Trees explained to stumped trustees
One of the few joys available for a journalist watching US pension plan board meetings is the range of ‘interesting’ questions that trustees come up with, especially when confronted with the complexities of CLO funds.
Still, we never expected to see the San Diego County Employees Retirement Association deputy CIO explaining to their board that Sycamore Tree has nothing to do with Oaktree, despite their shared arboreal monikers.
If that’s a point of confusion for the board, let’s hope they never have to face the other woodland-inspired US CLO managers, such as Elmwood, Oak Hill, Golden­Tree, Birch Grove, Starwood, Brightwood and, of course, one of the newest entrants, Willow Tree.
Sycamores are members of the Acer family; Oaktree is an alternative investment firm
Getting noticed in the CLO ETF crowd
Is there anyone who isn’t launching a CLO ETF at the moment? Bank of America launched or announced seven in the past few weeks alone.
But how do you stand out against an increasingly crowded landscape? A couple of managers have decided to add some extra buzzwords and launch private credit CLO ETFs. We’re sure there will be no problems sticking assets that carry an ‘illiquidity premium’ into a structure famous for volatile inflows and outflows.