Private credit's rising profile with LPs; plunging PE transportation investment

S&P Global Market Intelligence offers our top picks of global private equity news stories and more published throughout the week.

Earlier in 2023, Blackstone Inc. President Jonathan Gray said we were in a "golden moment" for private credit, an asset class that has steadily accumulated investor capital in the decade-plus since the 2008 global financial crisis.

Rising interest rates and a pullback by traditional lenders have created an opening for Blackstone's private credit funds to deploy capital, and limited partners (LPs) have warmed to the asset class. Speaking on the firm's first-quarter earnings call, Gray said LPs were showing the "greatest demand" for Blackstone's private credit strategies.

"Coupled with the pullback in regional bank activity, this is a golden moment for our credit, real estate credit and insurance solutions teams, which accounted for 60% of the firm's inflows in Q1," Gray said on the call April 20.

The question now is whether this golden moment will drive private credit investment trends over the long term.

A higher-for-longer scenario for interest rates is likely to boost prospects for the asset class. And alternative asset managers' developing plans to partner or even compete with regional banks as lenders are laying the groundwork for additional growth.

Read more about the potential for private credit to capture a larger share of LP portfolios, one entry in the S&P Global Market Intelligence series "Past Due: Debt Reckoning," an exploration of how higher borrowing costs are playing out across business sectors and economies.

Also check out Market Intelligence's new biweekly newsletter covering private credit.

CHART OF THE WEEK: PE transportation sector investment tumbles in H1 2023

⮞ Private equity (PE) deals in the transportation sector declined massively in the first half of the year, with just $600 million deployed across 81 deals through June 13 compared with $11.28 billion across 175 transactions in the first half of 2022, according to Market Intelligence data.

⮞ A pullback by lenders is "the primary driver for the trend," Aethlon Capital LLC Vice President Adam Palmer said.

⮞ Only two of the PE-backed deals in the transportation sector between Jan. 1 and June 13 topped $50 million.

TOP DEALS AND FUNDRAISING

– CVC Capital Partners Ltd.-managed CVC Capital Partners Fund VIII agreed to acquire Brazil-based food distributor OESA Comércio e Representações SA from Patria Investimentos Ltda, according to Market Intelligence data.

– An affiliate of Blackstone unit Blackstone Infrastructure Partners LP is set to buy a 19.9% equity interest in Northern Indiana Public Service Co. LLC from NiSource Inc. The deal, valued at $2.15 billion, includes a $250 million equity commitment by Blackstone Infrastructure to support capital requirements.

– Illuminate Financial Management LLP raised $235 million at the close of its third fund, which will back early-stage companies in the financial services industry.

– Stone-Goff Partners secured $175 million for Stone-Goff Partners IV LP, which held a final close June 15. The fund will make majority investments in founder-led companies focused on business-to-business services.

MIDDLE-MARKET HIGHLIGHTS

– Actis LLP will divest BTE Renewables Pty. Ltd. to Engie SA and Meridiam Infrastructure Finance SARL in a transaction valuing the enterprise at $1 billion. On deal closing, Engie will acquire the South African portfolio and team of the renewable energy company, and Meridiam will take over the Kenyan portfolio and team.

– Summit Partners LP acquired a minority stake in TradingHub Group Ltd., a London-based provider of risk-based software solutions to financial markets.

– Nordic Capital signed a deal to purchase a majority interest in Foxway AB, a Sweden-based circular IT service provider, and expects to close the transaction during the third quarter.

– Edwards Capital LLC, doing business as Flexpoint Ford, will acquire banking technology company Baker Hill Corp. in a deal with lower-middle-market investor The Riverside Co.

FOCUS ON: HEALTHCARE EQUIPMENT

– Novo Holdings A/S will buy Denmark-based validation and monitoring solutions provider Ellab A/S from EQT Partners AB's EQT Mid Market Europe Fund. The deal is scheduled to close by the third quarter.

– SV Health Investors LLC bought a majority stake in Robling Medical Inc., an outsourced manufacturing partner to the medical device and pharmaceutical markets.

– An investor group including Paris-based private equity firm Vatel Capital SAS agreed to sell a 64.4% stake in French medical device manufacturer Biocorp Production to Novo Nordisk A/S.

For further private equity deals, read our latest In Play report, which looks at potential private equity-backed M&A, including rumored transactions, each week.