Key Takeaways
- • Wells Fargo and private equity firm Centerbridge Partners are launching Overland Advisors, a direct-lending fund with capacity to lend more than $5 billion to North American middle-market companies, according to Reuters.
- • Abu Dhabi Investment Authority and British Columbia Investment Management Corporation are among the investors providing cash for the fund, with Wells Fargo as a minority investor.
- • Target borrowers have EBITDA between $25 million and more than $100 million, with loans structured as senior secured debt, per a regulatory filing.
- • Wells Fargo will offer the fund's loans to existing customers as an alternative financing option, potentially for acquisitions or shareholder buyouts.
- • The deal reflects the growing convergence of private credit providers and banks, as tighter regulation and rising rates push banks to rethink lending; JPMorgan Chase earlier this year committed at least $10 billion to direct lending.
Summary
Wells Fargo (WFC.N) is teaming up with private equity firm Centerbridge Partners to launch a direct-lending fund with capacity to lend more than $5 billion to North American middle-market companies, the groups said on Tuesday, September 26, 2023. The fund, named Overland Advisors, is backed by Centerbridge and investors including the Abu Dhabi Investment Authority and British Columbia Investment Management Corporation. Wells Fargo is also a minority investor in the venture.
The arrangement gives Wells Fargo a way to offer loans to existing clients as an alternative to other financing options. David Marks, executive vice president at Wells Fargo Commercial Banking, said in an interview that the loans will likely fund major initiatives such as acquisitions or shareholder buyouts. He described the move as part of being more strategic to clients over the long term, and said the collaboration had been under discussion for more than a year.
Per a regulatory filing, the fund will lend to businesses with earnings before interest, tax, depreciation and amortization (EBITDA) between $25 million and more than $100 million, structured as senior secured debt. Centerbridge Co-Founder Jeff Aronson said combining Wells Fargo's network and sourcing capabilities with an experienced private credit investor would "create something special."
Reuters notes that the deal highlights the increasing intertwining of private capital providers and traditional banks since the global financial crisis. Direct-lending funds often charge higher interest rates than traditional bank debt, and as credit conditions have tightened and rates have risen, banks have sought ways into the market. Reuters reported, citing a person with knowledge of the matter, that JPMorgan Chase earlier this year entered direct lending by setting aside at least $10 billion.
The arrangement gives Wells Fargo a way to offer loans to existing clients as an alternative to other financing options. David Marks, executive vice president at Wells Fargo Commercial Banking, said in an interview that the loans will likely fund major initiatives such as acquisitions or shareholder buyouts. He described the move as part of being more strategic to clients over the long term, and said the collaboration had been under discussion for more than a year.
Per a regulatory filing, the fund will lend to businesses with earnings before interest, tax, depreciation and amortization (EBITDA) between $25 million and more than $100 million, structured as senior secured debt. Centerbridge Co-Founder Jeff Aronson said combining Wells Fargo's network and sourcing capabilities with an experienced private credit investor would "create something special."
Reuters notes that the deal highlights the increasing intertwining of private capital providers and traditional banks since the global financial crisis. Direct-lending funds often charge higher interest rates than traditional bank debt, and as credit conditions have tightened and rates have risen, banks have sought ways into the market. Reuters reported, citing a person with knowledge of the matter, that JPMorgan Chase earlier this year entered direct lending by setting aside at least $10 billion.
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