KKR is ready for a “large private credit fund”, says Evercore

The private debt market is on the mend, at least for non-traditional private lenders, according to KKR.

The research arm of investment bank Evercore said in a summary released Monday that its analysts recently traveled with KKR co-CEO Joe Bae to meetings with investors. Among the highlights, Evercore noted that the current economic environment is a “big private credit fund” for KKR, mainly due to banks becoming more risk averse and reducing lending. For KKR and other private lenders, this moment marks an opportunity to push debt to competitive rates.

While the private equity firm is prepared for possible credit rating downgrades and increased overall pressure in this market, Evercore said KKR’s management is “ready and nimble” for potential opportunities, armed $12.5 billion for credit and liquid strategy.

“The funding void has provided KKR and other private lenders with the ability to step in and lend at attractive rates and terms, with some calling it the best terms ever to be a private lender,” they said. wrote Evercore analysts in the note to clients.

Over the past few months, the economic environment has been challenging for private credit funds. In September, Bloomberg reported that direct lending giants including Apollo Global Management, Blackstone, Ares and Owl Rock Capital have become more cautious in their financial packages, pricing in higher yields and requiring more equity per transaction.

Despite this backdrop, Bae expects credit markets to heal, as the majority of the company’s private debt AUM bears interest at a floating rate and will therefore benefit from higher interest rates, according to Evercore.

Private equity firms are already finding opportunities in the dry market. For example, Blackstone announced on Monday that it would acquire a majority stake in Emerson Electric’s Climate Technologies business with $4.4 billion in equity and $5.5 billion in debt.

Other highlights from Evercore’s summary include KKR’s strong fundraising momentum and the continued expansion of the company’s infrastructure business from $2 billion in assets to 2011 to $49 billion in the second quarter of 2022. According to Evercore, KKR expects this platform to grow “several times” bigger over the next decade.

Featured image by SFIO CRACHO/Shutterstock

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