Private credit managers are increasingly looking to offload battered funds, drawing interest from rivals like Ares Management Corp., Apollo Global Management Inc., Barings LLC, BC Partners, and Churchill Asset Management. These firms are exploring acquisitions of underperforming Business Development Companies (BDCs) amid a turbulent period for the $1.8 trillion market. Publicly traded funds such as BlackRock’s TCP Capital Corp., White Horse Finance Inc., and Investcorp Credit Management BDC Inc. are weighing strategic options, including potential sales.
The surge in interest stems from prolonged underperformance, record investor withdrawals, and declining share prices. BDCs traditionally offered attractive fee structures and perpetual capital, but once trading below net asset value, they lose the ability to raise equity and grow. With direct lending volumes shrinking, managers face limited options for turnaround.
Transactions may involve mergers, purchasing fund management contracts, or buying assets to consolidate or return cash. For large firms, underperforming funds can become distractions, especially as they seek to expand into retirement accounts. TCPC, for instance, sold half its portfolio to Pantheon in August to reduce leverage.
Analysts note that consolidation is common in direct lending, with firms like Ares and Blackstone historically growing through acquisitions. Smaller BDCs with less than $1 billion in assets are increasingly seen as merger targets.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing