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Specialists eye a killing as banks retrench

US non-bank financiers have secured a lucrative chunk of their home market. Now their sights are set on Europe.

Specialist credit fund asset managers now setting up to profit from the retrenchment of European banks honed their skills in the US, where companies are much more used to raising funding from investors than from banks. Even in the US, investors see further opportunity to benefit from the withdrawal of banks.

At the start of August, the $149 billion assets under management Babson Capital, a unit of the MassMutual Financial Group, hired a team from GE Capital to run a lending group to provide senior secured financing solutions to middle-market companies, mostly ones owned by private equity sponsors. The asset manager is taking a next step beyond its traditional provision of mezzanine finance and equity co-investment to these sponsors into bank territory. It sees a chance to make good returns for its own investing clients. Michael Hermsen, managing director and head of Babson Capital’s global private finance group, points out: "From an investor’s perspective, middle-market senior secured loans represent a stable asset class offering an attractive return while providing downside protection owing to their position in the capital structure."

Ares Capital Europe, a unit of Ares Capital Corporation, a US business development company, has a European portfolio of $1 billion across 36 companies.

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