Barclays goes direct with BlueBay

Barclays and BlueBay will together provide unitranche loans of up to £120m, with Barclays able to provide ancillary products (such as overdrafts and credit cards). Cash will be derived from both Barclays and BlueBay Asset Management's Direct Lending Fund and will be lent to financial sponsor-backed mid-market companies as a single-term loan, at a single rate of interest, with common terms and essentially one lender or counterparty.

The partnership marks a significant development for the UK lending market, as in recent years, traditional lenders have been increasingly reluctant to finance deals due to more risk-adverse credit committees. This has created a financing gap that has more recently been filled by unitranche providers such as BlueBay, Ares and Alcentra.

However, the partnership between Barlcays and BlueBay signals the prominence of unitranche loans over more traditional senior loans provided by banks. Indeed, unitranche providers are keen to stress that they are not hampered by long chains of command and bureaucracy, and that they can write bigger cheques against less amortisation.

The new partnership will enable the pair to deploy loans more quickly, as well as being able to tailor loans to each business, including committed acquisition or capex facilities to support growth plans, alongside the everyday banking services of a UK clearer.

According to Antony Fobel, partner and head of private lending strategies at BlueBay, the direct lender had been approached by a number of UK clearing banks struggling to compete with unitranche loans due to the higher leverage on offer. In order to move away from clubbing with other traditional lenders, Barclays and BlueBay were keen to create a product providing one single loan, crucially coming from one provider.

In order to comply with Barclays' risk-reward criteria, the bank will take a lower risk portion of the loans in return for a lower margin.

According to Fobel, Barclays was selected as a partner because of its commercial outlook and streamlined lending process. Furthermore, Barclays has a strong origination network that will ensure strong dealflow.

Private equity practitioners may have concerns over what will happen if something goes wrong; if the portfolio company doesn't perform as expected. According to Fobel, the advantage of the new structure is that there is only one set of covenants, which are entirely agreed before the loan is supplied.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• UK / Ireland
• Financing
• United Kingdom
• Barclays