Ares forms UK partnership with Barclays

The direct lending group at the alternative investment firm has acquired a £500 million portfolio of UK mid-market loans from the British bank and entered into a non-exclusive partnership with Barclays for origination of future UK transactions.

Ares Management and Barclays Corporate have signed an agreement forming a partnership to lend to sponsor-backed mid-market companies in the UK. The British bank and the US-headquartered direct lender described the agreement as a “non-exclusive bank and asset manager partnership” that should benefit clients by offering a wide suite of financing solutions including senior and unitranche term debt, revolving credit facilities (RCFs) and capital expenditure facilities.

Ares is kicking off the relationship by acquiring a £500 million ($741 million; €675 million) book of leveraged loans from the bank. Barclays and other banks have been shedding longer-term assets to de-risk their portfolios and meet new and increasing capital adequacy requirements laid down by regulators. 

Ares plans to partner with Barclays on future UK deals where the bank will focus on providing revolving credit facilities in conjunction with term loan transactions originated by Ares. Revolving credit transactions do not suit equity-funded alternative lenders who prefer to deploy capital once and many often team up with banks to arrange any revolving portion of a deal.  

Ares could also form other such partnerships for lending in other European countries, an executive familiar with the firm said. Though there is no specific deal currently on the table. 

Ares’ European direct lending business was launched in 2007 with the appointment of two senior executives from Barclays’ Financial Sponsor Group, Michael Dennis and Eric Vimont. The firm has since launched three European-focused direct lending funds. Ares is currently in the process of raising money for Ares Capital Europe III fund. The vehicle had gathered €1.4 billion by this fall towards its €2 billion target. The firm has $8.4 billion in direct lending European assets and was the first to bring unitranche financing options to the UK market in 2007. 

“Our clients want financing options that bring together the best of the direct lender community and the flexibility provided by banks like Barclays,” Karl Nolson, head of debt at Barclays Corporate Banking, said in a statement. 

“For almost a decade, Ares has been providing one-stop financing solutions for UK mid-market companies and their sponsors. This partnership enhances our ability to meet the credit needs of our clients, which continue to expand in a changing market and regulatory environment,” commented Ares’ Dennis. 

Ares is a publicly-traded alternative investment firm with about $92 billion in assets under management across its private equity, real estate, direct lending and tradable credit businesses. The firm is headquartered in Los Angeles, while its US and European direct lending heads are located in New York and London.