Converse to nearly any main agency energetic within the finance house and also you’ll hear about non-public credit score. The trade matured as banking laws tightened within the wake of the 2008 crash, and has surged since banks pulled again on lending after the rate of interest hikes from early 2022.
Based on service provider banking, world advisory, and asset administration agency M Capital Group, the general dimension of the non-public credit score market has grown from $1trn 4 years in the past to $1.7trn in 2023.
The market is large, and rising – and legislation companies desire a piece of it.
Following the current hires of Philip Bowden (pictured) – the previous co-head of legacy A&O’s world banking follow – former A&O acquisition finance associate Megan Lawrence, Cahill Gordon & Reindell finance duo Jake Keaveny and Warren Newton (each of whom are A&O alumni), and Cahill vertical rent Courtroom Tisdale, Proskauer argues that it’s uniquely nicely positioned to capitalise on the increase.
As non-public credit score grows it overlaps ever extra with different types of banking and lending. The place different companies search to layer non-public credit score experience on high of present banking and finance practices, Proskauer is including banking and finance experience to enhance a longtime non-public credit score providing.
‘It’s simpler to construct a follow round non-public credit score if you have already got the relationships’, says Bowden. ‘And we have already got 20-30 years’ expertise doing non-public credit score work, whereas a variety of the opposite outlets, definitely in London, have been doing it for 5 years or much less.’
World finance follow co-head Justin Breen concurs: ‘Everyone seems to be making an attempt to unravel this drawback, however they’re making an attempt to unravel it from totally different locations. Quite a lot of companies are attempting to return into non-public credit score from extra of a pure designation financial institution house, whereas we’re approaching it from the opposite finish.’
For Keaveny, the important thing distinction is within the nature of the shoppers. ‘It takes time to construct relationships and acquire the belief of personal credit score shoppers’, he says. ‘To be the primary name for them actually takes years. There are a variety of fund shoppers who’re energetic within the LBO market. Within the financial institution house, there’s actually solely a handful of gamers which can be main the larger offers who you could have credibility with, so it may be extra simple to get your arms round that a part of the market.’
Proskauer’s play is rooted in a perception that the non-public and public lending markets will grow to be ever extra tightly certain. Final month’s announcement that Citigroup and Apollo had partnered to offer a minimal of $25bn in direct loans, with Cravath performing for Citi and Paul Weiss for Apollo, gave sturdy assist to this view.
Breen feedback: ‘We consider the current information referring to the Citi and Apollo three way partnership is proof of idea of what we recognised just a few years in the past, which is that the non-public credit score and syndicated lending markets are utterly converging.’
Crucially, non-public capital is now about way over non-public fairness buyouts. ‘When most individuals consider non-public credit score, they sometimes consider the sponsor LBO house, which is what will get all of the headlines’, says Breen. ‘However there’s much more to our technique – it goes past bread-and-butter acquisition finance. It’s single asset financings, securitised financing, actual property financing, infrastructure financing – all that stuff our shoppers are getting closely concerned in. We’re actually targeted on all issues finance.’
With a view to do that work, Proskauer realised that it wanted broader banking and finance experience. ‘Philip’s group is vital to my follow and our group is vital to his’, says Keaveny. ‘I definitely couldn’t get the work achieved I must do on the agency with out a very assured and respected English legislation leveraged finance group.’
Based on Bowden, the market is already taking discover: ‘What’s struck me since I landed right here lower than three months in the past is the variety of structured finance legal professionals within the European market who’ve been reaching out to us. They’ve historically been extra targeted on financial institution shoppers, however they’re coming to us and making enquiries. A really senior lawyer from a US agency mentioned to us the opposite day, “non-public credit score are the brand new banks”. In case your agency isn’t specializing in all issues financing round that consumer base, you’re going to overlook out.’
Keaveny echoes this level: ‘We’re beginning on a really sturdy footing, The response from shoppers has been nice, and we have been in a position to get a brand new excessive deal into the market on the brand new platform instantly.’
The deal, introduced yesterday (10 October), noticed the agency advise financing sources on high-yield bond issuances by parking infrastructure supplier ABCOA Group totalling €685m, in addition to on an modification to ABCOA’s €110m revolving credit score facility. Keaveny and Tisdale led on the high-yield bonds, whereas Bowden and Lawrence led on the revolving credit score facility.
Trying forward, Proskauer has its eye on additional hires. ‘If you wish to cowl the complete vary of gamers within the European market’, says Bowden, ‘you want scale. And there’s solely a small handful of gamers who’re actually constructing issues at scale. You’ve received some very large gamers within the US who, whenever you take a look at their methods in Europe, are attempting to do one thing very constrained.
‘You want scale in London. You’ll be able to’t be too slim. The asset supervisor shoppers have all gone multi-strategy, they usually all need the identical factor – they need to go to a small variety of companies who can do all the pieces for them.
‘That’s one of many large traits I’ve seen in the previous couple of years, and it’s solely going to proceed. We’ll doubtless see extra change on this market within the subsequent 4 or 5 years than within the final 20.’
Reaching this form of scale will little question be pricey. However Breen argues the agency is absolutely dedicated to its growth push: ‘I’d like to spin a narrative that concerned me working some magic to get individuals within the agency on board with the technique, however the fact is that everybody was already on board. It simply makes a lot sense to us.
‘We don’t need to be all the pieces to everybody, however we do need to be in a very powerful geographies and a very powerful product traces. So for us this was an entire no-brainer.
‘This was one thing we consider we would have liked: this wasn’t one thing that was simply good to do. This convergence and consolidation we’ve talked about is completely taking place, and constructing this form of scale throughout our follow is completely obligatory if we need to keep on high of the market.’
alexander.ryan@legalbusiness.co.uk
