MBO one option being considered for EQT Credit

Sources close to the strategic review say a number of different ways forward for the business are possible, including a spinout led by management.

A management-led spinout of private equity firm EQT’s credit business, EQT Credit, is one of a number of options being considered as part of the strategic review announced in late January, according to sources.

First reported by Bloomberg, the spinout of the credit business is a possibility but does not appear to have emerged as the clear front-runner, with a number of options still on the table. It is understood that a decision on the future of the business will not be made for at least a couple of months and that a progress update is unlikely when EQT releases its year-end report next week.

Stockholm-based private equity firm EQT announced that EQT Credit was the subject of a strategic review, which is being advised by JPMorgan, on its fourth-quarter earnings call. “We need to focus our resources, whether it’s management time or capital,” said the firm’s chief operating officer, Caspar Callerström, hinting that the business may now be considered non-core. “We can’t do everything.”

Private credit accounted for roughly 10 percent of the firm’s AUM, or €3.9 billion, and contributed 6 percent of fees as of end-December, according to EQT’s latest earnings report. Its private credit team employs around 40 people headed by London-based partner Andrew Konopelski. The business spans senior debt, direct lending and special situations.

The firm’s second mid-market debt fund, EQT Mid-Market Credit II, closed on €2.3 billion in December 2018, more than double its €1 billion target and more than four times bigger than the predecessor fund, which closed on €530 million in 2016. Investors in Fund II include the likes of Houston Firefighters’ Relief and Retirement Fund, SITRA, South Yorkshire Pensions Authority and Worcestershire County Council Pension Fund, according to Private Debt Investor data.