Private Debt Firms Roil Asset-Based Loans as Liquidity Heroes

Private credit firms are extending their reach into the more than $260 billion global asset-based lending business, seizing on a pause by some traditional Wall Street banks to take on more corporate debt.

(Bloomberg) — Private credit firms are extending their reach into the more than $260 billion global asset-based lending business, seizing on a pause by some traditional Wall Street banks to take on more corporate debt.

Asset-based loans, or those that companies secure with collateral such as inventory, accounts receivable or equipment, grew in popularity in the past 18 months amid rising US interest rates, questions on economic growth and lenders’ desire to curb losses. Non-bank lending in the market is up almost 43% from four years ago, according to Clark Griffith, chief executive officer of Legacy Corporate Lending.

Direct lenders like KKR & Co., FS Investment, Sixth Street Partners and White Oak Global Advisors are making so-called ABLs to support asset-rich companies in need of liquidity. While private credit firms once saw demand mainly from more-distressed firms, companies across the credit rating spectrum now are knocking on their doors.

“There has been a more-active pipeline for asset-based lending because companies are focused on shoring up liquidity,” said Dan Pietrzak, global head of private credit at KKR. “Regional banks and what’s going on there has been a tailwind for us as we are willing and able to take a little more risk,” he added, referring to the crisis in March among lenders like Silicon Valley Bank.

Read more: Private Credit Firms Fight for Asset-Based Loans 

The surge in demand comes as other forms of corporate financing, such as high yield bonds or leveraged loans, have ebbed and flowed in 2023. New junk bond offerings are up compared to last year, though it’s still among the slowest years since the financial crisis. Launches of fresh leveraged loans are down 20% this year compared to last, according to data compiled by Bloomberg News, with the biggest buyers of the debt, collateralized loan obligations, slowing down dramatically.

Liquidity Needed

So-called direct lenders say more companies that are unable or unwilling to take on traditional debt are instead monetizing their assets.

Bausch Health Companies, for example, received $600 million from KKR backed by accounts receivables, according to a recent filing. Bed Bath & Beyond Inc. over the past year got several rounds of financing, including an asset-based loan and rescue liquidity, from Sixth Street.

Other firms such as Cleveland-based distributor of steel products Majestic Steel USA obtained an almost $300 million facility this month from White Oak, and pharmaceutical firm Covis Finco Sarl drew a roughly $50 million commitment from KKR in a loan against receivables, as part of its recent restructuring, according to people familiar with the matter. 

In stressed scenarios, FS Investments is also finding juicy opportunities with companies in need of liquidity with loose, broadly syndicated term loan documents that give borrowers the flexibility to access more capital by carving out assets, said Brian Gerson, the firm’s head of private credit.

In a process called up-tiering or priming, existing senior lenders’ payment priority can be superseded on a set of assets by a new lender. 

To be sure, private credit firms are engaging in more asset-based lending as their traditional clients — companies they expect will have reliable, recurring cash flows — are borrowing less. Meanwhile, asset-based loans have become a viable avenue for funds tied to the private firms to deploy capital if Wall Street banks decline. 

FILO Deals

Sometimes private lenders may do these deals in conjunction with the banks, such as in FILOs — first in, last out term loans. Earlier this year, First Eagle said it participated in a $30 million FILO to West Marine Inc., a retailer of water sports equipment and services, according to a statement seen by Bloomberg.

In these structures, the bank typically receives first priority and lower pricing, while the private credit fund will be a subordinate lender and receive higher interest.

“We’ve done deals where a company needed additional liquidity that their existing lenders weren’t willing to provide,” said Larry Klaff, head of asset-based loans at First Eagle Alternative Credit Direct Lending. “However, the existing lenders were willing to allow non-working capital assets under their secured documents to be pledged to the term lender or allow for a FILO to be put in place.”


  • Lenders are working on debt financing of as much as €850 million ($953 million) to back a potential acquisition of Carlyle Group Inc.’s glass-bottle maker Saverglass, according to people familiar with the matter
  • Ares Management Corp. is set to provide £237 million ($310 million) of direct loans to support Searchlight Capital Partners LP’s buyout of asset manager Gresham House Plc, according to documents laying out the financing
  • Restaurant chain Crystal Jade is looking to refinance a $26.5 million loan from Indies Capital Partners, according to people familiar with the matter
  • Direct lender Sixth Street is backing CapVest Partners’ acquisition of Kerridge Commercial System Ltd. with a private debt package worth as much as $500 million, according to people familiar with the matter
  • Track the largest deals in the industry with our Private Credit Loan Monitor


  • Apollo Global Management Inc. is launching its first-ever fund dedicated to asset-based financing, laying the groundwork for what the firm is telling investors could be the largest vehicle of its kind in the market
  • Jefferies Financial Group Inc. is expanding deeper into private credit by raising its first private business development company focused on providing first-lien senior secured loans to private equity-backed US companies
  • Oaktree Capital Management-backed 17Capital is looking to raise around $10 billion across two new funds, as the specialist lender capitalizes on buyout firms raising money in increasingly unorthodox ways
  • Alternative investment firm Angelo Gordon & Co. has reached final close in an over $1 billion fund for consumer debt and other asset-based credits, according to a statement seen by Bloomberg

Job Moves

  • Nomura Private Capital has hired Steve Kavulich as head of opportunistic private credit, according to a memo seen by Bloomberg

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(Adds leveraged loan data in fifth paragraph. An earlier version of this story corrected the time frame on Bed Bath financing in seventh paragraph)

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