Royal Bank of Scotland (RBS) has signed an agreement with three institutional asset managers to partner on mid-market leveraged loans.
The investment arms of AIG, Hermes and M&G Investments will lend up to £100 million ($150 million; €139 million) to mid-sized private equity portfolio companies in deals arranged by the UK bank.
Deals totalling around £250 million for three UK businesses have already resulted from the partnership, the bank said.
RBS will lend around £15 million-£30 million into each of the deals it sources and offer the transaction to the asset managers. How much each manager invests into the deal will be at their own discretion, PDI understands.
The financings will be standard five- to seven-year leveraged loans of up to £100 million.
The agreement gives the asset managers access to RBS’s infrastructure and network, while giving the bank’s sponsor finance unit greater access to funding for its clients.
“It makes borrowing on this scale simpler for our customers and our ability to structure competitive lending packages in this way enables us to support our private equity clients and in turn continue to help UK companies expand, create more jobs and invest more in the British economy,” said RBS’s head of financial sponsors, Richard Roach.
There are no immediate plans to expand the pool of investment partners beyond the three insurance and pension investors, PDI understands.
RBS is majority-owned by the UK government which acquired the bank in the wake of the financial crisis. It has cut its stake to 73 percent and overseen a massive shrinking of the lenders’ balance sheet and reduction of its investment bank from a large global business, to a UK and Europe-focused financial institution.
Its leveraged finance unit has also reduced in size. The lender sold its US debt capital markets business, including leveraged finance, to Mizuho this year.
Even as it has cut the business, RBS has been under political pressure to increase domestic lending.
GSO Capital Partners and Italian lender Intesa Sanpaolo announced a similar partnership this year, whereby GSO would have access to Intesa corporate customers seeking loans.