Private Credit’s Dancing in the Streets Gets Wilder

When asked about how tighter regulations affect banks’ business models, JPMorgan Chase & Co.’s Chief Executive Officer Jamie Dimon commented that it was great news for hedge funds and private equity firms. “They’re dancing in the streets,” he said about his non-bank rivals on Friday 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 $1.5 trillion, bigger than high-yield corporate bonds or leveraged loans.

The Rise of Shadow Lenders | Private credit has a lot more room to expand, as regulators tighten bank capital rules

Some of the biggest PE firms, including Apollo Global Management Inc. and Blackstone Inc., have developed massive private-credit operations. In June, KKR & Co. agreed to purchase as much as 40 billion euro ($45 billion) of buy-now-pay-later loan receivables from PayPal Holdings Inc. for its funds. It was a watershed moment for an industry that has been keen to diversify into debt financing.

Private Equity, or Private Credit? | The biggest private equity firms have diversified into private debt

The stock market is certainly rewarding those with private-debt exposure. Shares of Apollo, where credit accounts for more than 70% of its assets, have hit an all-time high. By comparison, the stock price of Bank of America Corp., which sits at the top of the US leveraged loans league table, is languishing.

A Tale of Two Lenders | Apollo's shares hit all-time high while Bank of America's languish