Blackstone, Apollo and Others Sell Bonds Backed by Private Credit at Fastest Pace Ever

Blackstone, Apollo Global Management, and Golub Capital are driving a record pace of private credit-backed Collateralized Loan Obligations (CLOs) sales, significantly expanding this segment within the $1.7 trillion private credit market. This trend marks a notable shift as private credit firms increasingly securitize loans to smaller companies, moving beyond traditional bank-originated broadly syndicated loans, and presents evolving investment opportunities and risk profiles for institutional investors.

Analysis

A significant structural evolution is underway within the $1.7 trillion private credit market, characterized by the record-setting pace of Collateralized Loan Obligation (CLO) issuance backed by private credit loans. Major alternative asset managers, including Blackstone (BX), Apollo Global Management (APO), and Golub Capital (GBDC), are at the forefront of this trend, securitizing their portfolios at an unprecedented rate. This development marks a notable expansion from the traditional CLO market, which has historically been dominated by broadly syndicated loans originated by banks. The new wave of private credit CLOs is collateralized by loans extended to smaller firms, indicating that these asset managers are successfully creating a secondary market for their direct lending activities. The description of these securities as among the 'hottest financial products' on Wall Street, corroborated by a strongly positive sentiment score (0.6), signals robust investor demand and a growing institutional acceptance of private credit as a securitizable asset class.

Key Decisions for Investors

• Investors should assess the potential for increased fee-related earnings and balance sheet velocity for leading private credit managers like Blackstone, Apollo, and Golub Capital, as this securitization trend could enhance their capital efficiency and profitability.
• Before investing in these new private credit CLOs, it is crucial to conduct deep due diligence on the underlying collateral, as loans to smaller companies may carry different risk profiles compared to the broadly syndicated loans that traditionally back CLOs.
• Monitor the spread, liquidity, and performance of these new private credit CLOs versus traditional CLOs to gauge market acceptance and identify potential relative value opportunities or signs of market saturation.