ells Fargo has announced a strategic partnership with private equity firm Centerbridge Partners to establish a lending fund with a substantial lending capacity of over $5 billion, targeted at North American middle-market companies. This collaboration underscores the growing convergence of private capital providers and traditional banks in the realm of corporate and consumer credit, a trend that has been evolving since the global financial crisis. The increased regulatory scrutiny and operational costs have compelled banks to reevaluate the scope of their lending and financial services.
The fund, christened “Overland Advisors,” will be fueled by investments from Centerbridge, alongside participation from prominent entities such as the Abu Dhabi Investment Authority and British Columbia Investment Management Corporation.
Wells Fargo, not only a partner but also a minority investor in this venture, will be able to offer these loans to its existing customer base as an alternative financing option. The anticipated utilization of these loans is expected to support significant corporate initiatives, including financing acquisitions and facilitating shareholder buyouts, as outlined by David Marks, Executive Vice President at Wells Fargo Commercial Banking, in an interview. He emphasized that this collaboration had been in deliberation for over a year, emphasizing the bank’s strategic commitment to its clients over the long term.
The loans from Overland Advisors will be directed towards businesses with earnings before interest, tax, depreciation, and amortization (EBITDA) ranging from $25 million to well over $100 million. These loans will be structured as senior secured debt, in accordance with regulatory filings.
Jeff Aronson, Co-Founder of Centerbridge, stated, “We knew that if you could marry Wells Fargo’s network and its sourcing engine with an experienced private credit investor like ourselves, you would create something special.”
Direct-lending funds typically carry higher interest rates compared to traditional bank loans, making them an attractive proposition for private capital providers. However, in response to the evolving credit landscape and rising interest rates, banks like JPMorgan Chase & Co (NYSE:JPM) have also entered the direct lending arena, allocating a substantial sum of at least $10 billion, as reported by Reuters earlier this year, citing a source familiar with the matter.
