Welcome to Private Debt Investor.
The debt markets are going through fundamental structural changes. Investment banks are responding to regulatory and political pressures with greater circumspection. The role they play in the markets is changing, and the volume of debt they’re able to provide is reduced, at least for the moment, as they endeavour to delever.
The departure from the European market of most current CLOs over the next year or so also leaves a sizeable hole.
Yet demand for debt still exists, from investors as well as the end users. Private equity, real estate, and infrastructure sponsors still have sizeable amounts of equity to deploy, but they need debt to underwrite their deals.
Into this breach steps a new breed of credit supplier. A geographically, structurally and strategically diverse array of private debt providers are poised to capitalise on the dislocation in the credit markets.
We believe that this cohort of managers, together with the advisory community and investors in their products, needs a publication focused on their world. We also think investment banking professionals should take an interest in how the new players interact with the established credit ecosystem. Just look at the role Microsoft is playing in the buyout of Dell, committing $2 billion in debt to complement a ‘traditional’ senior debt package from four banks (page 8).
Many in this rapidly evolving industry began their careers in banking. Our keynote interviewee, GSO’s Tripp Smith, served his apprenticeship at DLJ during the mid-1980s (together with his co-founders at GSO). His current firm is further along the road than most, having been launched in 2005. It’s now the second biggest part of The Blackstone Group by assets under management. Turn to page 22 to read about the development of a private debt powerhouse.
We also chart the challenges facing managers on the fundraising trail (page 28), and talk through typical fund structures and terms (page 32).
A key theme this month is the schism between the European and North American markets. Nowhere is this more pronounced than in the CLO industry, although there are promising signs of resurgence in Europe (page 10). From a leveraged finance perspective, the US continues to lead the way in issuance, as we discuss on page 34.
Tracking the ever more diverse group of debt professionals out there and giving them a forum for debate is one of our key objectives. We’ll be hosting a dedicated conference, The Capital Structure Forum 2013, in London this July which we encourage you to attend. And our website, www.privatedebtinvestor.com, will bring you breaking news of deals, fundraising and people moves as they happen, together with analysis and commentary. We hope you enjoy the magazine, and welcome your feedback.