Blackstone backs Brigade with $300 million investment for private credit, CLOs
Summary
- Blackstone's Multi-Asset Investing unit to invest $300 mln with Brigade
- Blackstone's Strategic Alliance Fund IV allocates $150 million to new private credit strategy
- $150 mln to support Brigade's existing CLO business
NEW YORK, Nov 12 (Reuters) - Hedge fund Brigade Capital is receiving a $300 million investment from Blackstone (BX.N), opens new tab to help build its new private credit strategy and expand its collateralized loan obligations (CLO) platform, two people familiar with the matter said.
Brigade, an established credit investment specialist that made headlines earlier this year with a joint bid for department store Macy's (M.N), opens new tab, is building expertise in the hot private credit market where some $2 trillion in loans are being made to corporations by non-banks.
The Multi-Asset Investing unit of Blackstone will allocate $150 million to the new Brigade strategy. Brigade raised some $500 million this year for the strategy and plans to focus on opportunities in the lower middle market, where companies generate between $10 million and $50 million in earnings before interest, taxes, depreciation and amortization, one of the sources said.
Blackstone and Brigade representatives declined to comment.
The lower middle market is full of lending opportunities with higher spreads and yields because there is less competition. Some examples of lower middle market borrowers include vacation rental company Awayday and mattress and bedding retailer Saatva.
Brigade's efforts in private credit began in earnest when it poached Jenny Lee from JPMorgan Chase and Jim Wolf from Whitehorse Capital two years ago to spearhead the strategy. Their strong networks and years of experience are expected to help source smaller deals that are often tougher to find, one of the sources said.
Blackstone is also allocating $150 million to support Brigade's existing CLO business with dedicated equity commitments for new CLOs globally. The capital is coming from the Multi-Asset Investing unit's Absolute Return platform, which is also run by Ben-Ur. The Brigade CLO business currently has some $11 billion in assets across 25 deals in the U.S. and Europe.
CLOs offer a diversified exposure to the broadly syndicated loan market and CLO equity is structured to take advantage of volatility in the loan market given non-mark-to-market leverage and term financing.