Prudential Capital Group, the private capital arm of Prudential Financial, expects to lend $12 billion this year, after lending $11.3 billion to companies and projects globally in 2014. The firm’s business dropped marginally year-on-year, it executed $12.1 billion of new originations in 2013, said Allen Weaver, the head of the division.
Prudential is basing its 2015 expectation on the amount of capital the firm has available, but “it will ultimately depend on how the markets act and how willing the issuers are to sell loans,” Weaver said.
The firm, which invests the insurer’s own money, as well as external LP capital via fund structures, has four different origination groups; North American corporates, an energy business in Dallas, infrastructure equipment finance and an international business. Weaver told PDI there are no specific targets for each group to achieve in a given year and that it will depend on market opportunities in each segment.
The firm invested $2.2 billion in energy in 2014 and has a $14 billion energy portfolio overall. Weaver said that holdings there are either in the power category, which consists of utilities and project finance, or an oil and gas group. The decline in the oil prices has affected the latter portfolio more, though he doesn’t expect to see material losses, as most of the holdings are in investment grade loans. “We’re very careful around oil and gas,” he said.
He also sees opportunities in energy investing and drilling programs going forward because of the market dislocation following the drop in oil prices.
Most of the Prudential’s portfolio is in investment grade corporate loans. “The majority of the money we have put out is in investment grade private placement. It’s long-term private debt, with maturities of five to 10 years,” Weaver said, adding that the business will continue investing along these lines. The firm invests in a variety of debt instruments, though it tends to eschew unitranche loans. “I find it to be a very inflexible capital structure, we have not been big advocates of unitranche structures or buyers,” Weaver told PDI.
When it comes to industries, Prudential tends to avoid technology. Weaver said he prefers good cash-flowing, stable businesses that can sustain themselves through market cycles, whereas tech companies, and especially new startups, tend to be more of a hot dot. “I don’t think it’s appropriate for our investor profile. It’s more of an equity type industry with a lot of short-term product cycles and new product risk,” he said.
Prudential’s 2014 investments included $9.5 billion of investment grade transactions; $1.2 billion of sub-investment grade deals, as well as $613 million of mezzanine and private equity investments. The firm realized $369 million from full and partial exits in 17 mezzanine private equity investments in 2014.
About $4.4 billion worth of transactions were made in North America, while approximately $3 billion was invested outside of the US: primarily in the UK, Europe and Australia. The company expanded its portfolio by adding 82 new clients across a range of industries.
The Chicago-headquartered group now manages $71.6 billion. Prudential Capital offers senior debt and mezzanine capital, leveraged leases, credit tenant leases and equipment finance to companies worldwide. Its other offices are in Atlanta, Dallas, Frankfurt, London, Los Angeles, Milan, Minneapolis, Newark, N.J., New York, Paris and San Francisco.