Loan Note: PGIM deploys $6.5bn in H1; Real estate deals see strong Q2

PGIM has reported its second highest H1 deployment of the past decade in 2021 as economic reopening boosts origination. Also: CBRE reports strong deal activity in real estate lending in the second quarter. Here's today's brief for our valued subscribers only.

They said it

“The willingness of shareholders to support their companies has been greater than in past cycles – perhaps driven by the fact that it was caused by a virus, so it was assumed to be temporary.”

Guiseppe Naglieri, deputy chief investment officer at Värde Partners, tells the Financial Times (paywall) why private equity funds are less likely to walk away from portfolio companies in trouble.

First look

PGIM deploys $6.5 billion of senior debt and junior capital in H1 2021
PGIM Private Capital, the private capital arm of PGIM, has deployed nearly $6.5 billion of senior debt and junior capital during the first half of 2021 to more than 100 mid-market companies globally, according to a news release.

The $6.5 billion marks the firm’s second-largest origination in any first half of the past decade.

“Our global investment pace accelerated in the first half of 2021, demonstrating our unwavering commitment to supporting the financing needs of companies through any economic environment,” said Allen Weaver, senior managing director and head of PGIM Private Capital, in the release.

“As the global economy continues to reopen, we look forward to maintaining our investment momentum and strong origination activity through the balance of the year.”

PGIM Private Capital’s direct lending business surpassed its origination targets, it said, with more than $400 million in 12 transactions both new and follow-on. Of the $6.5 billion deployed, $5.5 billion flowed to investment grade investments, with $808 million going to below-investment grade investments and $209 million to mezzanine and private equity investments, the firm reported.

PGIM Private Capital handles more than $20 billion in outside non-affiliated assets including direct lending, as well as a $97.7 billion portfolio of private placements and mezzanine investments.

CBRE: Commercial real estate lending ends second quarter strong
The commercial lending market has ended the second quarter stronger than the first, reaching a value of 256, according to The CBRE Lending Momentum Index, which tracks the pace of CBRE-originated commercial loan closings in the US. The strength of the lending market mirrors a wider economic recovery, CBRE said.

The second quarter index value is up 10.8 percent from the first quarter reading and is 1.8 percent below the February 2020 pre-pandemic closing, according to CBRE.

“Borrowers’ growing risk appetite has fuelled demand for transitional financing, such as bridge loans,” said Brian Stoffers, global president of debt and structured finance for capital markets at CBRE. “As a result, alternative lenders led Q2 non-agency commercial mortgage origination activity.”

Compared with the same quarter last year, which is when CBRE said lending activity fell sharply due to the pandemic, the index is up 47.3 percent. The lowest point lending activity hit was in September of last year at 160.


Allspring hires Kate McKinley from State Street as chief legal officer
Allspring Global Investments, the newly rebranded name of Wells Fargo Asset Management, has announced that Kate McKinley will become the firm’s chief legal officer. She will join after the firm is acquired later this year by GTCR and Reverence Capital Partners, which was agreed upon in July.

“Kate has one of the most respected legal minds in the asset management industry and will bring her vast experience, energy and exceptional judgment to Allspring,” said Joseph Sullivan, who will serve as chairman and chief executive officer of Allspring after the takeover, in a release.

McKinley previously spent 11 years at State Street Global Advisors, where she was the managing counsel and oversaw the company’s entire legal function. Prior to State Street, she was the assistant general counsel in the wealth and investment management department of Bank of America.

LP watch

Institution: Minnesota State Board of Investment
Headquarters: St Paul, US
AUM: $89.5 billion
Allocation to alternatives: 17.4%

Minnesota State Board of Investment approved a $75 million commitment to Sixth Street Structured Credit Opportunities Fund V at its August 2021 investment board meeting.

At the meeting, Minnesota SBI also approved contract renewals with investment consultants Aon Investment USA and Meketa Investment Group. The contracts cover a period of five years.

Institution: Florida Agricultural and Mechanical University
Headquarters: Tallahassee, US
Total AUM: $124.9 million
Allocation to Alternatives: 8.18%

Florida Agricultural and Mechanical University has agreed to issue a request for proposal for an outsourced chief investment officer, according to the pension’s 2021 RFP document. The pension is looking for the OCIO to provide discretionary investment management services. The due date to submit the responses is 16 September.

Florida A&M University Foundation currently allocates 2.26 percent of its full investment portfolio to private credit. Ronald Henry II is the pension’s chief investment officer.

Today’s letter was prepared by Andy Thomson with John BakieRobin Blumenthal and Michael Haley.

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