GE and Ares joint ventures continue lending

GE Capital and Ares Management continue to assess opportunities and lend into deals from their joint ventures, as the sale of GE Capital gets underway.

The two firms announced an anchor investment in $114 million senior term facilities extended to Bridgepoint-owned LGC, a UK-based life sciences company, to fund its acquisition of Biosearch Technologies last week.

The financing is the second deal from the duo’s third joint venture, the €3 billion European Loan Programme, and the first deal completed from the vehicle since industrial company General Electric revealed it was selling the majority of its lending unit GE Capital on 10 April. Terms of the facility were undisclosed.

GE and Ares provided a substantial proportion of the $114 million and the remainder was provided by a number of smaller contributions predominately from existing lenders, Dan Matthews, managing director at GE Capital, told PDI. An outstanding GE loan to LGC has been increased, he added. GE Capital was a mandated lead arranger on a previous LGC financing in 2012 and refinancing in April 2014.

GE and Ares established the ELP to do very large anchor tickets, Matthews continued. “The ELP fund has been well received by private equity owned firms which are looking for one lender who can take large anchor tickets to backstop raising new money,” he said.

“This transaction demonstrates the ELP’s ability to provide scaled financing solutions across a variety of currencies,” Mike Dennis, partner in the direct lending group at Ares Management, commented in a statement announcing the deal.

Ares and GE have two other partnerships, the US-based $11 billion Senior Secured Loan Program (SSLP) and the €1.75 billion European Secured Loan Programme (ESSLP), which provide unitranche loans to mid-market companies in the US and Europe. As of 31 December 2014, all three joint ventures had committed capital of €14 billion, a statement read. The ELP made its first investment in March 2015 with an anchor investment in a £205 million senior term loan to fund KKR’s acquisition of the Trainline.

The firms continue to look at opportunities for both of their European joint ventures, PDI understands. The stock price of Ares Capital Corporation (ARCC), the NASDAQ-listed business development company which is a counterparty to the Senior Secured Loan Program, has dropped slightly since the GE announcement, signalling that investors are holding steady with the strategy at present, a market source commented.

The stock for the BDC, which co-manages the SSLP, priced at $17.26 on 9 April and fell marginally to a low of $17.06 on 20 April. It was trading around $17.13 on 27 April.

Both GE and Ares declined to comment on any speculation around the planned sale. Wells Fargo, SunTrust, Apollo and Ares have been mentioned in reports as being interested in acquiring GE Capital’s US commercial lending and leasing business. Blackstone and Wells Fargo have already bought the majority of the firm’s real estate lending business.

Private equity firm Bridgepoint bought LGC from LGV Capital for £257 million in early 2010. GE Capital along with ICG, ING and Commerzbank provided £80 million in financing.