Lloyds Forms Direct Lending Partnership With Oaktree Capital

Lloyds Bank and Oaktree Capital Management have teamed to support U.K. “middle-market sponsor-backed borrowers.”

The collaboration, announced Thursday (July 18), will see Lloyds’ structured debt finance team work with Oaktree’s European private debt platform to provide clients with a solution for new buyouts and refinancings with term debt, acquisition and working capital facilities, along with agency and full ancillary product services.

“Providing financing solutions to sponsor-backed companies in the UK remains a significant long-term opportunity,” Nael Khatoun, managing director and portfolio manager with Oaktree’s European private debt strategy, said in a news release. “We believe Oaktree’s Partnership with Lloyds Bank will be a compelling proposition to meet this demand, providing borrowers with certainty of execution and an expedited transaction process.”

According to the release, the  partnership removes the need for multiple funding parties, reducing complexity for clients and giving them access to follow-on capital and Lloyds Bank’s various banking services.

Oaktree’s European private debt platform, part of its performing credit group, has deployed more than $3.9 billion in the last two decades. The companies say this partnership will have a “combined single name hold capacity” of 175 million pounds ($225 million) per transaction.

Oaktree and Lloyds will look to originate loans to U.K. middle-market sponsor-backed companies with 10-75 million pounds in earnings.

Coming into this year, PYMNTS examined the appeal of private lending, which can offer companies a capital lifeline to sustain operations as banks tighten their lending.

And as noted here last month, recent research by the Federal Reserve Bank of New York has found that non-bank financial intermediaries (NBFIs) have grown through the past decade, holding about 49% of assets as of 2021, while banks’ share has dropped from 45% to 38%.

However, the Fed wrote in a report titled “Banks and Nonbanks Are Not Separate, but Interwoven,” nonbanks depend on banks for the crucial lifeblood of funding and liquidity.

“The common view is that banks and NBFIs operate in parallel, performing different activities, or they act as substitutes of each other, performing substantially similar activities, with banks inside and NBFIs outside the perimeter of prudential regulation,” the report said. “We argue instead that NBFI and bank activities and risks are so interwoven that they are better described as having transformed over time rather than as being unrelated or having simply migrated from banks to NBFIs.”