AllianceBernstein Holding LP (AB) raised $500 million and hired a team from a Barclays Plc unit that was divested last year to start a middle-market lending business.
The investment-management firm hired five people, led by Brent Humphries, from the British bank to expand its alternative-assets business, according to Matthew Bass, chief operating officer of that group. Investments will primarily be made in secured loans in middle-market companies with earnings before interest, taxes, depreciation and amortization of as much as $50 million, according to Humphries.
“Banks have been exiting and divesting certain businesses, while the underlying borrowers still need that credit,” Bass said in a telephone interview. “That creates opportunities for non-bank lenders to step in and fill that void.”
Interest in middle-market lending has been increasing as investors seek new ways to generate higher returns with the Federal Reserve’s near-zero interest rate policy in its sixth year. There are more than $8 billion in outstanding loans for middle-market companies, according to data from Standard & Poor’s Capital IQ Leveraged Commentary & Data.
Jay Ramakrishnan, Patrick Fear, Shishir Agrawal and Wesley Raper are the other members joining Humphries from Barclays. The team was part of Barclays Private Credit Partners LLC, a registered investment adviser for Barclays Private Credit Partners Fund LP, which was sold in December, according to Humphries.
Brandon Ashcraft, a spokesman for Barclays, declined to comment. The group oversaw about $1.5 billion of commitments across 48 transactions, according to Humphries.
“There are fundamental long-term enduring features of U.S. middle-market lending,” Humphries said in an interview. “These loans offer attractive downside protection because of the secured nature and the fact that they are directly originated, which generally provides for better documentation and terms.”
New York-based AllianceBernstein is starting the business amid signs that investor appetite for leveraged loans to large corporate borrowers in the U.S. is beginning to temper.
Investors pulled $160 million from funds that purchase the floating-rate borrowings made to U.S. companies last week, according to a Bank of American Corp. report. The withdrawal followed $320 million of redemptions in the prior week that snapped a run of 95 straight weekly inflows, according to the Charlotte, North Carolina-based bank.
Middle-market lending won’t be directly affected by the volatility in the broader syndicated-loans sector, according to Humphries.
“It’s a very large and fragmented market with a stable base of transactions that is not tied to the vagaries of the capital market,” he said.
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