(Bloomberg) -- Oaktree Capital Management is partnering with Lloyds Banking Group Plc to provide the banking giant’s private equity clients with loans to fund their buyouts, the latest sign that traditional lenders are trying to find creative ways to get into private credit.
Oaktree will provide the bank’s buyout fund customers with loans of as much as £175 million ($227 million) as part of the deal, according to a statement. The two are planning to deploy £1 billion in the coming years.
“Sponsor clients will be able to finance larger transactions without needing to bring on board additional lenders,” James Ranger, head of structured finance and syndicate at Lloyds, said in the statement.
With the move, Lloyds joins a slew of rivals that have sought to muscle in on the $1.7 trillion private credit industry. Banks including Goldman Sachs Group Inc., Citigroup Inc. and Wells Fargo & Co. have announced plans to cobble together more than $50 billion to plow into private credit in recent months, according to a Bloomberg analysis earlier this year.
For years, banks complained that direct lenders would unseat them by luring away clients and siphoning off corporate-loan business. Now, though, many banks have found it more profitable to earn fees by taking money from investors to fund the loans, rather than agreeing to put up money themselves.
With the Oaktree deal, Lloyds is planning to contribute a portion of its own capital to fund the loans. The Financial Times earlier reported on the partnership.
At Oaktree, the partnership will be handled by the European private debt platform, which has deployed over $3.9 billion in the last two decades. Lloyds’ end will be handled by the bank’s structured debt finance team.
“Providing financing solutions to sponsor-backed companies in the UK remains a significant long-term opportunity,” said Nael Khatoun, portfolio manager within Oaktree’s European private debt strategy.
©2024 Bloomberg L.P.