UK-based private equity firm Bridgepoint Advisers has agreed to buy the € 3.9bn credit arm of rival buyout group EQT Partners, according to two people familiar with the matter, increasing its firepower in lending just as the coronavirus crisis leaves hard-hit businesses looking for new financing.
Bridgepoint will merge the unit, which finances leveraged buyouts and provides loans to distressed businesses, with its own lending business.
The deal would create a lender with around € 7 billion in assets under management, once more than € 1.5 billion of non-drawn capital from Stockholm-based EQT was released. added to the total, said one of the people. Terms of the transaction were not disclosed.
EQT will add a “special situations” platform – which lends to over-leveraged companies and those with limited access to capital, and buys corporate debt when traded at low prices – to Bridgepoint’s operations. This was created in 2017 and focuses on direct loans.
Bridgepoint and EQT did not immediately respond to requests for comment.
Private credit funds have grown in recent years, stepping in as lenders as banks have withdrawn from middle market lending due to tighter regulations.
Some of the largest US pension funds are looking to pay money into private credit in an effort to capitalize on the fallout from the pandemic, the Financial Times reported last month, as companies around the world seek new funding to keep their operations afloat.
However, the industry is also exposed to the risk of default of existing borrowers affected by the crisis and will have to compete with a revived leveraged loan market which benefited from a market rally.
The credit arm of EQT also finances acquisitions of small and medium-sized enterprises by private equity firms. In February, he financed the purchase by Mayfair Equity Partners of the Luxembourg online classifieds company atHome Group.
EQT said in January that it had appointed JPMorgan to review options for the credit business, including a sell. The “avenues of growth that we see in credit lie in areas further from the core strategy of EQT,” added the company’s chief operating officer, Caspar Callerstrom, in a earnings call at the time. “When we are in less influential and more commoditized products, we see that our advantage is not as strong.”
The credit unit represents around 10% of EQT’s total assets under management and 6% of revenue, and invested around 2.3 billion euros last year, according to its 2019 annual report. It has offices in London, Stockholm, Munich and New York. Bridgepoint’s credit activity has teams in London and Paris.
It is the latest private equity firm to part with its lending business after TPG parted ways with its Sixth Street Partners lending platform last month.