Wells Fargo and Centerbridge target $5bn in new relationship

In the latest foray into private credit by a big bank, Wells Fargo and asset manager Centerbridge Partners have said they are teaming up to form a strategic partnership that will focus on direct lending to mid-market non-sponsor companies in North America.

Centerbridge – a private asset manager with offices in New York and London with approximately $36 billion in assets under management as of 30 June – plans to launch Overland Advisors, a business development company, to focus primarily on senior secured loans, according to a news release. Overland is targeting a minimum of $5 billion in investible capital, including $2.5 billion in equity commitments for the strategy, the statement said.

The Abu Dhabi Investment Authority and British Columbia Investment Management Corporation are providing nearly $2 billion of initial equity commitments, with Wells Fargo also contributing to the initial equity investment.

The announcement comes as big private credit lenders have begun edging out banks in making larger and larger loans. Earlier this month, a private credit group led by Oak Hill Advisors provided an industry record $5.3 billion refinancing for Finastra, a financial technology firm and portfolio company of Vista Equity Partners.

At the same time, a growing number of big banks have been making inroads into the $1.5 trillion private credit arena, some of them by partnering with asset managers. Earlier this month, Societe Generale and Brookfield Asset Management announced a partnership, while JPMorgan Chase and Barclays are using cash from their own balance sheets to compete on deals.

The Wells Fargo partnership with Centerbridge will access “differentiated origination sourcing” from the San Francisco-based bank’s “extensive mid-market base”, the release said.  Overland, in addition to expanding access to the non-sponsor segment, will also pursue other strategies including traditional sponsor-backed direct lending.

Overland “represents a new paradigm” in direct lending with a “relationship approach” and offering “a much-needed capital solution in the large but underpenetrated non-sponsor US mid-market”, said Jeff Aronson, co-founder and managing principal of Centerbridge.

Wells Fargo’s CEO, Charles Scharf, said his bank – which is already well established in US mid-market and asset-based lending – can now offer its banking clients through Overland “options for alternative capital structures that can be used to pursue a broader set of growth and value-creation initiatives across a variety of market conditions”, and that its partnership with Centerbridge under Wells’ sourcing relationship would help it “elevate” its support of its mid-market clients. Wells Fargo, one of the largest US banks, has approximately $1.9 trillion of assets.