Private credit’s dancing in the streets gets wilder

ASKED how tighter regulations affect banks’ business models, JPMorgan Chase chief executive officer Jamie Dimon commented that it was great news for hedge funds and private equity (PE) firms. “They’re dancing in the streets,” he said about his non-bank rivals on Friday (Jul 14) during an earnings call with analysts.

These days, when companies want to borrow money or dealmakers need to finance a buyout, they often bypass public markets and investment banks and go straight to private lenders. Already, private credit as an asset class has grown to US$1.5 trillion, bigger than high-yield corporate bonds or leveraged loans.

Some of the biggest PE firms, including Apollo Global Management and Blackstone, have developed massive private-credit operations. In June, KKR agreed to purchase as much as 40 billion euros (S$67 billion) of buy now, pay later loan receivables from PayPal for its funds. It was a watershed moment for an industry that has been keen to diversify into debt financing.