When Barclays Corporate Banking signed a partnership agreement with Ares Management in December 2015, it looked like a blueprint for future relationships between banks and direct lenders in the mid market.
The non-exclusive deal saw Ares buy a £500 million portfolio of loans from the UK bank. It also looked like a trend: at the same time RBS was busy signing a series of similar partnership agreements with AIG Asset Management, Hermes Investment Management and M&G Investments.
The expected flourishing of bank and fund partnerships has, however, been slow to take off in mid-caps.
The logic behind such deals is pretty straightforward: the funds, which do not face the same capital constraints as the banks, can do the lending while the banks pick up all the other business associated with the deal.
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Benoît Durteste, |
“The relationship with the banks is an interesting one because the leveraged finance team will see us as competition – and we are. But the CIOs of the banks actually view us as quite useful,” muses Benoît Durteste, chief executive at UK-based alternative lender ICG.
“They like having specialized lenders who are doing the long-term financing, which, by the way, they are better suited for, because they have better asset liability matching than the banks do for these long-term loans because they are illiquid by definition.
