Investcorp Co-CEO Seeks More Credit Deals Amid 3i Unit Takeoverby and
Co-CEO Kapoor says acquisitions part of push into credit
Investcorp has agreed to buy 3i unit for 222 million pounds
Investcorp Bank BSC, the Bahraini money manager that’s buying 3i Group Plc’s debt-management arm, is looking for more credit deals as it seeks to boost its assets under management to $25 billion, Co-Chief Executive Officer Rishi Kapoor said.
The Manama-based finance firm will consider more acquisitions as it pursues the “sheer opportunity” of providing credit to businesses, an area where banks have pulled back because of new regulations, Kapoor said in a phone interview. The debt-management unit at London-based 3i, which Investcorp agreed to buy for 222 million pounds ($275 million) last month, oversees credit funds and collateralized loan obligations, or CLOs securities that bundle high-risk loans.
“Some element of inorganic or acquisition-led growth coupled with a largely organic development agenda internally is a reasonable expectation,” Kapoor said. “In a yield-starved environment, the risk-return profile of private credit is very attractive, particularly with muted return expectations from other traditional asset classes.”
Investcorp, the Gulf’s largest private investor in U.S. real estate, is embarking on a new growth plan under Executive Chairman Mohammed Al Ardhi, after a generational shift in the management of the company last year. The company is seeking to invest in European and U.S. property while expanding investment products and rebuilding its hedge-fund business. The 3i deal will take assets under management to about $23 billion.
Hedge- and private-equity funds have moved into providing credit to businesses in the wake of the financial crisis that hobbled some of the world’s biggest banks. Regulators seeking to prevent another crash have made it costlier for banks to lend, providing an opportunity for non-traditional lenders that don’t face the same rules.
“The asset class has become very deep,” Kapoor said. “Private credit has become a major contributor to the overall provision of credit to businesses, certainly in the developed world and increasingly globally.”
The “private debt industry” had $523 billion of assets under management in 2015, compared with $483 billion a year earlier, according to financial data firm Preqin.
While the 3i unit is focused on CLOs, it also runs a number of credit funds, including one targeting mid-sized corporations in Europe, according to its website. The operation will provide a “strong nucleus” for building a “multi-dimensional, multi-faceted credit investment capability,” Kapoor said.
“It’s something that others among our peers have embraced successfully and built upon,” Kapoor said. “We’re not really inventing a completely new wheel.”