Lending: Dry powder could push debt funds into revolving credits
Product diversification high on agenda; bank fund relationships could change.
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.
“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.