Partnerships with regional banks could provide a “strategic advantage” for private credit firms in sourcing deals, according to a new report by Deloitte.
The Big Four auditing firm said that partnerships between banks and private credit firms should “continue to grow” as both sides “seek the benefits of cooperation”, with banks expanding their service offerings while reducing balance sheet exposure, and private credit firms securing lending opportunities.
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“The continued growth of private credit and accumulation of dry powder, that is, uninvested commitments from limited partners, have led to more competition among private credit firms, resulting in reduced spreads for loans,” it said in the report.
“Regional banks may be well positioned to create opportunities for private credit firms by providing access to relationships with mid-market companies that are too small for public markets and do not already have relationships with the largest banks.”
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Deloitte said that in the future, deal sourcing, and deal sourcing with optional co-investment, appear to be popular partnership models between banks and private credit firms.
Meanwhile, it said joint venture model-based partnerships could also see increased adoption and the strategy may “continue to grow”.
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