Loan Note: KKR drives forward in auto loans; Tikehau posts record fundraising period

KKR's asset-based finance strategy buys auto portfolio. Plus: Tikehau celebrates fundraising success; and Bain reports strong dealflow. Here’s today’s brief for our valued subscribers only.

They said it

“The July ECB Bank Lending Survey showed a significant drop in firms’ demand for lending, due to higher debt service costs and lower fixed investment spending”

Taken from BlackRock’s Global Credit Weekly, published on 28 July

First look

Going through the gears: KKR adds auto portfolio (Source: Getty)

KKR buys auto loans portfolio
Auto finance appears to be increasingly attracting the attention of private debt firms. In Loan Note two weeks ago, we reported Carlyle’s purchase of Evolution Funding, the UK’s largest used auto finance platform. Now it’s the turn of KKR to climb into the driving seat with the $373 million acquisition of a portfolio of prime auto loans from Synovus Bank.

The deal comes from KKR’s asset-based finance strategy, which accounts for around half of the firm’s private credit assets under management. KKR has made 65 asset-based finance investments since 2016 through portfolio acquisitions, platform investments and structured investments and has around $42 billion in asset-based finance assets under management.

“There is an immense opportunity for scaled private capital investment across the ABF space, especially as traditional lenders increasingly focus on optimising their balance sheets and increasing liquidity,” said Avi Korn and Chris Mellia, managing directors at KKR, in a statement.

Tikehau bucks fundraising trend
Against a backdrop of rising rates, fears of recession and talk of increasing pressure on borrowers, Paris-based investment manager Tikehau Capital revealed its best ever six months of fundraising in the first half of this year.

As part of the firm’s H1 2023 results presentation, Tikehau said it had raised net new money of €3.3 billion, bringing its assets under management to €40.5 billion – up 14 percent on a year-on-year basis.

Fundraising outpaced capital deployment of €2.5 billion during the period. “Discipline remained a core focus for the investment teams in a market which has not yet stabilised,” the firm said.

Tikehau’s fundraising experience was in contrast to the overall environment in the first half. According to our data, private debt funds globally collected the lowest amount in the first half of this year since the equivalent period of 2016 – and European funds had a particularly tough time of it.

Tikehau also had a balance sheet investment portfolio worth €3.6 billion at the end of June. The portfolio is 78 percent invested in the firm’s own investment strategies.

TPG reports earnings as AG acquisition nears
Fort Worth-based investment manager TPG reported that its assets under management rose to $139 billion as of 30 June 2023, from $127 billion the year before.

The numbers were part of its unaudited Q2 2023 results, which it reported on Tuesday.

Second-quarter net income swung to a profit of  $27 million, or $0.32 per share of Class A common stock, from a loss of $10 million in the like quarter a year ago. The corresponding number for Q1 was $25 million.

Jon Winkelried, the company’s chief executive officer, said in a statement: “As we’ve been working towards closing the Angelo Gordon acquisition, we’ve also been very active in our core business. The pace of activity across our investment platforms has continued to accelerate in the current environment.”

TPG has been at its core a PE firm, especially since its separation from Sixth Street in 2020, but its interest in Angelo Gordon is part of a broader move to build up its credit and real estate platforms.

TPG announced its agreement to acquire Angelo Gordon, an alternative investment firm focused on credit and real estate investing, in May. The parties expect the deal to close in Q4.

TPG’s fee-related earnings for Q2 2023 were $125 million, a year-on-year increase of 23 percent. This produced a fee-related earnings margin of 44 percent. The margin represents an increase from 37 percent in Q1 and from 40 percent in Q2 2022. TPG declared a quarterly dividend of $0.22 per share of Class A common stock to holders of record at the end of 18 August 2023, payable on 1 September 2023.

The firm’s real estate platform raised $204 million in Q2 and now has more than $8.6 billion in available capital.

As noted in affiliate publication Private Equity International, TPG expects to raise between $5 billion and $6 billion by early next year to fulfill its revised fundraising targets (registration required). The company’s chief financial officer, Jack Weingart, said in the earnings call that there is a “pronounced barbell effect across the industry where the middle period of campaigns has been elongated,” so TPG expects the rest of its flagship fundraises to be weighted near the end of the barbell.

Including its real estate credit fund, TPG has raised or has visibility on more than $2.6 billion for first-time funds.


Prolific first half for Bain
Boston-based fund manager Bain Capital Credit has hailed a strong pipeline of deals in the first half of this year, despite the challenging macroeconomic backdrop.

The firm’s Private Credit Group invested $1.3 billion in the first six months of the year across 15 industries and backing 16 new platform companies. It was majority lender on around 80 percent of commitments made.

Over the last 25 years, the firm has invested around $20 billion at an average of around $800 million per year during that timeframe. Thus, the $1.3 billion invested in the first half of this year was significantly ahead of the firm’s historic investment rate.

“As many traditional lenders continue to curtail financing activities, it has opened up a greater opportunity set for private lenders as borrowers value certainty of capital, especially during periods of increased volatility,” said Michael Ewald, a partner at Bain Capital Credit and global head of the Private Credit Group.

Precede co-founder departs real estate lender
London-based real estate development lending platform Precede Capital Partners has announced that Daljit Sandhu, one of the firm’s co-founders, is stepping down from her role as chief operating officer “to explore new opportunities”. Precede says it has agreed terms with a new COO who will be announced in due course to start the role in early 2024.

Having co-founded Precede (then Précis Capital) in 2021 alongside Randeesh Sandhu and Karen Dunstan, Sandhu has helped build a platform that has secured the backing of two blue-chip institutional investors, as well as assembling a team that has arranged £1.7 billion in development loans to date.

She also led Precede’s ESG strategy, designing proprietary ESG screenings for borrowers and assets, and an innovative green loan offering to incentivise sustainable construction. She will retain her shareholding in the business.

LP watch

Institution: Quincy Retirement System
Headquarters: Quincy, US
AUM: $810 million

Quincy Retirement System has committed $4 million to Torchlight Debt Fund VIII, according to recently published meeting minutes.

The fund launched in May 2022 and held a first close in December 2022 on $858 million. The real estate sector-focused fund has a senior debt strategy that covers the North American region.

Platinum subscribers may click here for the investor’s full profile, including key contacts, allocation strategy and fund investments.

Today’s letter was prepared by Andy Thomson with John Bakie, Christopher Faille and Robin Blumenthal contributing