The Credit Crunch #53
Blackstone says it's Time to Lean In and Deploy. Fundraising from GoldenTree Asset Management, Cheyne Capital, Blackstone, Partners for Growth and The Emerging Africa Infrastructure Fund
Welcome to the 53rd Credit Crunch.
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Scroll to the bottom, if you’re here for the fundraising news.
Blackstone’s President, Jon Gray, has announced that it’s “Time to Lean in and deploy”. Below is a summary of his interview:
Time to Lean In
2024 is going to be a year of reacceleration. We had been in an environment where central banks had been raising rates, but now, with inflation really coming down, the Fed has air cover to lower rates.
My gut is they will not cut rates as quickly and as deeply as the market hopes.
We're seeing resilient growth in our companies. If the Fed leaves rates at an elevated level for an extended period of time, it will put more pressure and we do expect some incremental slowdown.
We think this moment in time is when you want to lean in and deploy capital after a downturn.
Investment Activity
All the signs are pointing to 2024 being a more active year at Blackstone.
We announced six private equity deals just in the last six weeks of 2023.
In real estate, three large multi billion dollar transactions.
In our credit business, we've seen a two and a half times increase in terms of deal volumes originations to borrowers.
Real Estate
We think real estate values are bottoming. This doesn't mean it's going to happen overnight, some sort of B shaped recovery. There are still plenty of assets in the market that may run into trouble because they were financed at a time when rates were much lower. And while you're in this period, bouncing along the bottom, this is when we want to deploy capital. This is where you can see that light at the end of the tunnel, but it's not yet priced into the market.
Focus areas
Private credit - Because base rates are still elevated, spreads are wide by historic standards. You can earn equity like returns taking debt like risks.
Capital solutions - A lot of folks need liquidity or need to deleverage.
Sectors -We are focussed on sectors where there are real tailwinds, like energy transition, technology , life sciences, travel and leisure.
We expect this will be a much busier year for our investors at Blackstone.
You can see the Jon’s full interview here
💰Fundraising news
GoldenTree Asset Management, a New York-based asset manager, closed a $1.35 billion Private Credit Fund. The fund invests across the capital structure in any industry where GoldenTree sees opportunity. The Fund has invested in ~30 companies drawing nearly 50% of commitments and delivering a net IRR of 22%. GoldenTree focuses on large companies with more than $250 million in EBITDA.
Cheyne Capital, a London-based investment manager, announced funding from ADIA for its latest Real Estate Credit fund. The Capital Solutions strategy aims to help European real estate transition away from increasingly obsolete assets supported by low-interest rates towards productive, sustainable assets for the long term. Cheyne has invested over £5 billion in European Real Estate during 2022 and 2023 alone. Abu Dhabi Investment Authority has committed £650 million to Cheyne’s Capital Solution strategy to date.
Blackstone launched its European Private Credit Fund to retail investors in Finland. The launch is an exclusive partnership with S-Bank. The fund allows Finnish retail investors to invest in middle market private credit. Since launching in October 2022, it has achieved annualized net returns of 12.0% (Class I). It currently has a loan portfolio of €500 million. 87% of the portfolio is invested in software, IT services, and healthcare, “historically lower default rate sectors”. Portfolio companies have an average loan-to-value of 38% and an average EBITDA of €159 million. Blackstone launched a similar partnership with BNP in France last month. More here and here
The launch is another example of managers fighting for wealthy European investors. Goldman Sachs Asset Management and Carlyle also launched similar funds recently.
Partners for Growth, a California-based venture debt manager, raised funds from Jada (A unit of the PIF) for its $266 million Fund VII. The fund provides custom loans to high-growth technology businesses. It lends up to $50 million to companies with revenue between $5 million to $150 million. It can invest across sectors and across the capital structure. PFG has invested in more than 225 companies across 20+ companies.
Private Infrastructure Development Group raised $294 million for its Emerging Africa Infrastructure Fund. The fund provides long-term debt to private sector companies building or expanding infrastructure in Africa. The Fund has committed over $2.1 billion to 96 projects, since EAIF’s establishment in 2001. These projects were across 20 African countries.