Several consecutive businesses have gone public. But another group has been raising money cautiously – by selling more debt.
Big business corporations raised at least $ 9bn through a mortgage loan last year to stabilize their purchasing power, grow capital or provide dividends to their peers, according to industry executives and a report obtained by the Financial Times. They include Warburg Pincus, Bain Capital, General Atlantic and Vista Equity Partners.
Businesses have been willing to pay for their services by borrowing from the company. But the loans taken by the consumer companies themselves, unlike their own companies, reflect a change in the past. They make a lot of money by selling small shares to investors or by providing public startups, as TPG did counting $ 10bn this month.
Borrowing avoids owning the property and offers tax advantages by delaying other profits. Deploying private loans does not require registration by the US Securities and Exchange Commission.
“If, as a general agreement, I want money for any reason, there are more options than publicity,” said Saul D Goodman, chief executive of other financial institutions at Evercore.
Several companies said they took out a new loan ahead of the expected Federal Reserve interest rate. Many are able to borrow for a decade or more of about 3 percent to spend their purchases that have been repaid 16 percent a year, according to Bain & Co’s calculations on long-term repayment by the companies.
Companies find differences.
“It helps them raise money without having to go out of their way,” said Joseph Lombardo, chief financial officer at Houlihan Lokey Bank. “They can make money on rent at a lower rate than expected.”
These activities can also help businesses control the amount of money that goes into business ventures.
By 2021, a record $ 1.2tn in transactions was affected and another $ 300bn was raised in new funds to be used to buy companies, according to PitchBook. But what comes in can be a waste of money. Pension fund funders are asking business owners to provide at least 2 percent of each fund, which can exceed $ 400m while capital expenditures grow to more than $ 20bn in size.
“It’s easier to commit to 3 percent if you have a $ 100m wallet, as opposed to a $ 20bn wallet,” Lombardo said.
Such large loans were $ 1.5bn made by Warburg Pincus in September and Bain Capital from Boston in February. Global Infrastructure Partners sold a $ 1bn loan in November.
In October, Vista Equity Partners borrowed $ 930m using a secret loan that they sold to a U.S. insurance company, raising money at lower prices that the company would invest in with its smaller sellers, according to FT’s findings. and well-known sources and contributions that have never been mentioned before. The loan had AA-ratings from Kroll with a fixed interest rate that increased by about 3 percent over 10 to 15 years.
Vista’s first loan came a year after the founder, Robert Smith, stability A criminal investigation into October 2020 by the US Department of Justice revealed that it had evaded $ 43m tax evasion.
Other loans of less than $ 1bn in size include US depositors from US General Atlantic, Stone Point Capital and Audax Group, a loan manager GoldenTree Asset Management and Investor real assets I Squared Capital, which spent $ 300m on payments. part for partners.
Insurers and asset managers such as AIG, MetLife, Voya, Allianz, Prudential and Legal & General are just some of the many lenders who are willing to make a profit with a small loan agreement.
Athens, on arm of insurance of Apollo Global Management’s secret organization, has also become a major lender. He was one of the lenders who bought a $ 1bn loan sold by Global Infrastructure Partners between the ages of 10 and 20 that carried coupons ranging from 2.7 to 3.25%.
The market may cool down as prices rise. When Warburg Pincus closed its $ 1.5bn debt at the end of September, Treasury’s 10-year yield was only 1.37 percent. Since then it has risen by about half a percent.
The work, however, shows that even privately held companies are being taken over by credit card buyers as organizations with A’s.
“What people are realizing is that there is more power in the private sector than their founders or important men,” said Lombardo’s Houlihan Lokey. “It will not be possible to bring down a secret credit card or business wallet in two or three years.”
Additional reports of Kaye Wiggins in London
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