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Monday, May 20, 2024

Banks triumph over private credit firms in ‘buyout’ deals

Investment banks are reclaiming ground in the buyout financing market after a year dominated by direct lenders. Recent successes include a $9.4 billion debt financing for GTCR’s majority stake acquisition of Worldpay Inc, the largest buyout financing since Elon Musk’s takeover of Twitter. Banks are shedding their previously stuck debt commitments and are now eager to earn fees and pursue more deals this year.


The return of risk appetite among banks is fueled by more favorable market conditions, making it easier to sell debt. With rising leveraged loan prices in the secondary market and signs of life in the collateralized loan obligation (CLO) market, banks are gaining confidence in undertaking deals.

For private equity firms, financing from banks offers advantages such as a more diverse lender base and greater flexibility in loan terms.

While the resurgence of banks is evident, it remains to be seen if it will be sustainable if market conditions turn unfavorable again. Rising interest rates could also pose challenges for highly indebted companies and may affect banks’ ability to offload their debt.

Nevertheless, the private credit industry, valued at $1.5 trillion, is expected to remain a significant player in the market, especially as it has gained popularity as a fast and effective funding option for buyout deals.

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