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PDI London Forum: Bank partnerships could boost origination

Forming partnerships with banks could be the key to deploying private debt’s record amount of capital raised.

Private debt funds are working with banks as a way of originating loan opportunities, a panel told the PDI Capital Structure Forum 2017 in London this week.

A session on intersectionality with the banking industry heard from several debt fund managers who have formed relationships with traditional banks to enable both parties to do better business.

Joseph Buckley, director of private debt and CLOs at Hermes Investment Management, revealed his firm is working closely with several banks, including Royal Bank of Scotland (RBS) as a way of accessing deal opportunities.

“By partnering with banks, we benefit from their origination teams and see a high volume of opportunities, and we can then choose the best ones to lend to,” Buckley said.

“You’re probably wondering, what’s in it for the banks? These partnerships allow them to better address their customers borrowing needs at a time when their cost of capital is high. They can maintain their market share and make money through other aspects of their banking relationship.”

Other managers have a less formalised approach to dealing with banks but still look to the banking industry to support their activities.

Martin Wheeler, co-founder of ICG-Longbow, described his more ad-hoc dealings with the banks.

“We do sometimes work with banks, usually in a senior-junior arrangement. We like to focus on speed of delivery so we usually do the whole loan and then look to securitise with the banks afterwards,” he explained.

Shelley Morrison, director of financial institutions UK at RBS, said the bank is looking to develop further relationships covering a number of strategies to help it provide more options to its business clients.

“We see the future in this market as being based around partnerships and have various agreements in place with managers,” she said. “We support a wide range of strategies including real estate and infrastructure.”

While much of the day was focused on discussion of private debt funds finding opportunities to step into areas where banks have withdrawn, this session showed that banks could be helpful in providing funds with origination opportunities and help deploy the industry’s large volume of dry powder.