HSBC Holdings Plc is assembling a team of bankers to connect its corporate clients with the rapidly expanding world of private credit.
(Bloomberg) — HSBC Holdings Plc is assembling a team of bankers to connect its corporate clients with the rapidly expanding world of private credit.
The British lender will tap into the many relationships it has with mid-sized companies around the world to link them up with private debt funds, arranging and sometimes taking part in the financing deals that ensue, said Vinay Raj, a managing director at HSBC who is helping spearhead the effort.
By doing so, HSBC will be working with firms that have been been muscling in on the business of banks by pushing to lend directly to their clients. It’s the latest big financial company to conclude that one way to adapt to the rapid growth of private credit funds is to try to grab its own slice of a global market that’s now worth $1.5 trillion.
“Private credit as an asset class is growing in importance and applicability and there is clear recognition at HSBC to adapt to the new world where it is an important part of the market structure,” Raj said.
One example of the sort of deal HSBC is trying to stitch together is the $300 million financing it arranged last month for Prax Group, an energy firm.
The bank teamed up as a lender on the transaction alongside private-credit specialists Chimera Investments LLC and Orchard Global Asset Management. Robbie Harris, a managing director at HSBC based in London, led the transaction for the bank.
“We have thousands of bankers globally that cover corporates of a size that would be appropriate for private credit solutions,” Raj said.
Dermot Murphy, global head of private credit within HSBC’s Markets & Securities Services unit, and Mehmet Mazi, head of global debt markets, are helping to lead the drive to originate and distribute private credit deals at the bank.
HSBC isn’t alone among major banks trying to find a foothold in direct lending.
JPMorgan Chase & Co. has set aside at least $10 billion so that it can directly compete for deals with direct lenders. Goldman Sachs Group Inc. and Morgan Stanley are raising money for private credit through their asset management units, while Societe Generale SA and Wells Fargo & Co. have struck up partnerships with prominent credit funds.
That’s been their way of responding to the gauntlet thrown down by the specialist-lender businesses at firms including Ares Management Corp. and Blackstone Inc. By lending to companies directly, such operators can chip away at the commissions that banks earn from arranging financing deals in public debt markets.
Read more: Brookfield, SocGen to Start $10.7 Billion Private Debt Fund (1)
HSBC is taking a different tack with its own private credit strategy that’s been in the planning stage for more than four years.
The bank has a roster of about 1.3 million commercial banking relationships, ranging from small companies to larger corporates. The aim is to find viable prospects from that pool of contacts and seek private debt financing on their behalf — an originate-to-distribute model, according to Raj.
The biggest chunk of the deal-flow for direct lenders still comes from private-equity firms that need financing for their buyouts. A firm with a huge pool of contacts outside of the buyout industry such as HSBC can help direct lenders expand their financing options, he said.
“Deals for non-sponsored companies are less competitive and harder to find, and HSBC has a clear advantage in serving those clients,” said Raj.
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